The shelter (rent) component of the monthly CPI inflation report continues to cool, even as the other combined inflation categories ticked up a bit in July.

Year-over-year shelter inflation has cooled in 25 of the past 27 months, from a peak of 8.8% in March 2023 down to 3.8% this month.

That means rent inflation is back around pre-pandemic levels again. However, the way the BLS measures rent/shelter inflation is deeply lagged and a heavily modeled dataset based on a tiny sample size. Private sector data providers show far more cooling than the BLS does.

If you use real-time rent data from Zillow and ApartmentList, shown in WisdomTree’s graphs below, headline and core inflation are already running well below 2.0% (the Fed’s target):

Source: Wisdom Tree & Jay Parsons

The QCEW employment report includes nearly all U.S. jobs covered by state and federal unemployment insurance programs, over 95% of total U.S. employment, and includes actual payroll filing reports. It covers workers in private industry, as well as federal, state, and local government jobs.

The BLS employment report released on the first Friday of every month (the popular one you hear about on the news) is based on a survey covering about 1% of all businesses.

While the BLS data reports monthly, the QCEW report is released to the public on a large time delay. What did the most recent QCEW report say?

The number of jobs the BLS reported for the 9 months ending December 2024 was likely overstated by about 800,000. The BLS reported the U.S. adding 1.4 million jobs during that period, while the QCEW showed only 607,000.

57% lower. Jobs were overstated by about 88,000 per month during March 2024 – December 2024.

If the Federal Reserve was looking at this (accurate) data back in 2024, interest rates would be lower than they are today.

Source: The Kobeissi Letter

If tariffs remain where they are today, the chart below shows JLL’s estimated increase in construction cost (8%). This would be on top of the 30% COVID spike and the potential labor cost increases due to immigration policies.

Source: Gavin Campbell

The average 10-year treasury rate since 1871 is 4.46%.

The latest MSCI report showed multifamily property prices were down 0.4 percent month-over-month in May and down 1.12 percent year-over-year.

It appeared multifamily prices had finally bottomed in late 2024, however, they have been falling for the last 4 months and are now at prices last seen in April 2021, down 19.7% from the peak.

Source: Yield PRO

Cap rates do not move on a one-to-one basis with the 10-year US Treasury. The spread narrows and widens based on other factors such as investor perceptions of risk, relative market liquidity and growth in property income. The lines below:

• Purple: 10 Year Treasury
• Orange: Apartments
• Green: Industrial
• Red: Retail
• Dark Blue: Office (Central Business District)
• Light Blue: Office (Suburban)

Source: MSCI

209,000 new market-rate apartment units started construction across the U.S. year-ending 1st quarter 2025. There were 708,000 units were rented over the same period, marking the highest demand-to-starts ratio since 2010.

Source: RealPage

Have been at historic lows for multifamily since 2022 (yellow line below):

Materials make up only 20% of total costs, limiting the impact tariffs have on new construction.

Source: Jay Parsons and Avalon Bay

Though operational expenses in multifamily assets continue to grow and sit roughly 39% above where they were prior to the pandemic, the pace of increase has slowed to the lowest level since early 2021. Across nine operational expense categories, all but two – utilities and payroll – moderated over the last 12 months.

The most significant decline has been in insurance growth, which fell to just over 7% on an annualized basis in 1st quarter 2025. That compares to an incredible increase of 33.5% just one year prior. Taxes, another pain point for property owners as they account for roughly 30% of total OPEX costs, also registered a substantial drop. This time last year, taxes were growing by nearly 4% annually on average. But through the end of March 2025, the cost of taxes per unit on a national level have fallen 50 basis points (bps) year-over-year.

This theme of moderation has been seen across the country. All regions of the U.S. have seen expense growth fall below the change rates reported annually at the beginning of 2023 and 2024, albeit at varying levels. In total, two-thirds of regions registered an annual average expense growth in 1st quarter 2025 below their average growth in the five years ending 2019.

Source: RealPage