An 'open house' flag is displayed outside a single family home on September 22, 2022 in Los Angeles, California.An ‘open house’ flag is displayed outside a single family home on September 22, 2022 in Los Angeles, California.

There are signs that inflation may fall in the coming months.

The consumer price index rose in October. The yearly reading was the smallest since January.

Hope that high inflation and the negative impact it has on consumers' pocketbooks may be easing was given by the smaller monthly increase.

The cost of shelter increased in October for the first time in 32 years. It may seem odd at a time when people are saying the US is in a housing recession.

Shelter inflation is likely to stay elevated for several months to a year given its importance in household budgets and the dynamics of rental and housing markets.

As the housing market cools, this category will also ease, but we may have to wait until next year before it meaningfully reduces headline inflation.

Rent, lodging away from home, tenants' and household insurance, and owners' equivalent rent are included in the shelter category.

The most important are rent and owners equivalent rent.

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Homeowners are trying to put them on a level playing field with renters. It shows how much homeowners would pay to rent their house.

Spending on housing is the largest part of the average consumer's budget. Shelter accounts for the most of all categories. Shelter has an outsize effect on inflation.

In the last year, the shelter category has increased.

Home and rental prices have fallen in many areas of the U.S. due to rising demand.

In the month of November, new US home listings were down by more than 15% compared to the same period a year earlier. The average sales price was $359,000, down from its peak of $392,000.

Mortgage demand has fallen as rates have climbed to a recent peak.

Egg prices are going up, but chicken prices are going down if you lose your job.

Rental inflation has slowed from last year's fast pace, according to the data.

The average American paid $2,040 in market rent in October.

The rent price went up in September. Growth has slowed for four months. Rents increased by 1% in the month from May to June. Rental inflation went up 2% a month in July and August.

According to deRitis, shelter will continue to put upward pressure on overall inflation through the first half of next year.

The lag effect is caused by the length of time it takes for a lease to be rolled over into a new contract. Current price dynamics won't be reflected in new contracts for a year because landlords typically renew their lease every year.

Housing is a bit of an outlier. For example, consumers don't agree to pay the same price for eggs for a year.

There are some unique aspects to housing.

Rent tends to remain the same or increase with each new lease according to economists.