September Inflation and Housing Trends: What You Need to Know

Even with Delays, Key Economic Updates Arrived

Even with the government shutdown delaying some reports, key updates arrived on inflation and housing. Here’s what you need to know.

Consumer Inflation Better Than Expected

Inflation edged up modestly in September, with the Consumer Price Index (CPI) rising 0.3% for the month and 3% year-over-year, both slightly below forecasts. The increase was largely driven by higher energy costs, particularly gasoline prices, which jumped 4.1%.

Core inflation, which excludes food and energy, rose 0.2% for the month and eased from 3.1% to 3% annually, also coming in below analysts’ expectations.

Shelter costs continue to be a key driver of inflation, making up 35% of headline CPI and 44% of core CPI. Because of this heavy weighting, shifts in housing costs have a major impact on overall inflation. Cooler shelter readings in September helped keep inflation below expectations.

Bottom Line: The Fed continues to walk a fine line, inflation is still above target, but the economy and job market are showing signs of slowing. Markets anticipate another quarter-point rate cut at the Fed’s October 29 meeting, following a similar move in September. The goal: support growth amid softer labor conditions and lingering inflationary pressures.

💡Quick reminder: When the Fed adjusts rates, it’s targeting the Federal Funds Rate, the short-term rate banks charge each other for overnight loans. This influences overall borrowing costs but doesn’t directly set mortgage or other long-term rates.

September Existing Home Sales Tick Higher

The National Association of REALTORS® (NAR) reported that existing home closings rose 1.5% from August to September, slightly below expectations but still 4.1% higher than a year ago. Inventory increased to 1.55 million units, matching a five-year high, though still below pre-COVID levels.

Bottom Line: Since this data reflects September closings, most buyers were shopping in July and August, before mortgage rates began easing more notably. This suggests upcoming reports could show stronger sales activity.
As NAR Chief Economist Lawrence Yun noted, lower mortgage rates and improving affordability are helping to boost demand.

What to Look for This Week

The Federal Reserve beings its two-day policy meeting on Tuesday, with a rate decision and press conference scheduled for Wednesday afternoon. Markets widely expect another 25-basis-point cut to the benchmark Fed Funds Rate.

On the housing front, keep an eye out for:

• Case-Shiller Home Price Index (Tuesday)
• September Pending Home Sales (Wednesday)

Technical Picture

• Mortgage Bonds remain between support at the 25-day Moving Average and resistance at 101.31. The upcoming Fed meeting could be the catalyst for a move.
• 10-Year Treasury Yield ended last week test the 4% ceiling, a key level to watch. Staying below 4% could push yields lower (toward 3.92% or even 3.80%), while a break above could lift them to around 4.085%.

Bottom Line: Economic data continues to trend in a cautiously positive direction. While inflation shows signs of cooling and housing demand strengthens, all eyes are on the Fed this week for cues on what’s next.

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