Housing rents post biggest drop in fifteen years—Is U.S. October inflation about to crash?

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A series of unofficial data points show that US inflation in October may be undergoing an unexpectedly sharp cooling, mainly driven by the largest monthly drop in housing rents in fifteen years. This trend challenges previous market expectations of persistent price resilience and may provide new grounds for the Federal Reserve to adopt a more dovish policy stance.

With the official Consumer Price Index (CPI) report from the US Bureau of Labor Statistics (BLS) possibly delayed due to a government shutdown, investors are closely monitoring various alternative data. The most notable is a report from real estate data company CoStar, which shows rents fell by 0.31% month-over-month in October, the biggest drop in the past fifteen years.

Meanwhile, inflationary pressures in other areas also appear to be waning. According to price tracking data from OpenBrand, as retailers ramped up discounts, inflation rates for durable goods and personal items slowed significantly in October. Signs of cooling inflation are becoming more widespread, introducing new uncertainty to market expectations for the Federal Reserve's December meeting.

These real-time data paint a picture of deflationary pressure building up, especially in the housing sector, which accounts for about a third of the CPI basket. If this trend is confirmed in official data, it will have far-reaching implications for financial markets, particularly for investors betting that interest rates will remain high for a longer period.

Commodity Price Gains Slow, Retailers Increase Discounts

Latest price data indicate that US retailers may be losing their pricing power. According to OpenBrand, due to increased discounts, the rise in US consumer goods prices slowed noticeably in October. Prices of major commodities and personal care products tracked by the agency rose by 0.22% last month, much lower than the 0.48% increase in September.

Specifically, price growth in multiple categories has slowed for several consecutive months, and some have even turned negative. For example, the price of hair dryers rose 1.15% month-over-month in August, slowed to 0.82% in September, and turned to a 1.27% drop in October. Appliance categories including washers and dryers showed similar trends, with prices rising by 0.90% in August but falling by 0.86% in October.

Part of the price retreat is due to retailers increasing promotions to maintain market share. The average discount in October rose to 20.4%, nearly matching the highest level since July last year. State Street Macro Strategy Head Michael Metcalfe, commenting on PriceStats data, said that "the upward trend in inflation stalled in October," and believes that inflation is currently "stubborn but not alarming."

Core Inflation Pillar Unstable, Rental Market Sends Warning

The variable with the biggest impact on inflation outlook is undoubtedly housing rents, which carry the highest weight in the CPI. Since BLS statistics on this data lag significantly, real-time market data offer investors a more forward-looking perspective. The current real-time data are sending strong warning signals.

Nick Gerli, CEO of Reventure, pointed out that "the current weakness in the rental market is worrying and indicates more deflationary pressure in the housing and economy than people realize." This view is supported by several data points:

Record Rent Decline: According to CoStar data, rents fell 0.31% month-over-month in October, the largest single-month drop in over fifteen years.

Significant Pullback in Some Markets: RealPage data shows that effective apartment rents (after deducting incentives) in major markets saw large year-over-year declines, with Denver down 8.1%, Austin down 7.4%, and Phoenix down 5.9%.

Single-family Home Rents Also Weaker: Invitation Homes, the largest listed single-family home landlord in the US, reported negative rent growth on new leases in Q3 2025, the first time the company has had negative Q3 growth since its IPO in 2017.

Lower Future Expectations: Zillow has lowered its 2026 rent growth forecast for single-family homes to 2.0%, and for multi-family homes to -0.4%, with an overall growth rate of only about 1.0%.

Since rent prices are the long-term “anchor” for overall housing prices, a cooling or deflationary rental market signals that a rebound in the overall real estate market is unlikely, and even that further downward pressure may be ahead.

As for the reasons for the sudden drop in rents, some analyses directly link it to decreased rental demand. According to Nick Gerli citing Brookings Institution data, a key indicator is "immigrant work application count", which has dropped by 60% in the past four to five months. Historically, this indicator correlates strongly with rental demand. The weakening of demand is considered the core reason behind the market's shift in supply and demand, ultimately triggering rent declines.

Goldman Sachs Model Shows Core Inflation Remains Resilient

Although rents and some commodity prices show obvious signs of cooling, not all data point to an "inflation collapse." Goldman Sachs' model, constructed on alternative data, offers a milder forecast.

Goldman estimates that core CPI rose 0.24% month-over-month in October, roughly matching the official September figure of 0.23%. The model forecasts that used car (+0.5%) and new car (+0.3%) prices will rise, while airfares (+1%) and hotel prices (+1%) will continue moderate increases. However, the bank expects auto insurance prices to decline (-0.3%).

Goldman's analysis suggests that although some areas are cooling, certain components of inflation remain resilient. The overall complexity of the inflation outlook requires investors to remain cautious. The market is currently waiting for potentially delayed official data to finally determine the true inflation trajectory.

Risk Warning and DisclaimerThe market is risky; please invest cautiously. This article does not constitute individual investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any views, opinions, or conclusions in this article suit their particular circumstances. Investments made based on this information are at one's own risk. ```