Last week the government reported an increase in headline inflation to 3.4% over the year ended 2023. Both energy and shelter costs saw an increase during the month of December. At the same time, core inflation continued to cool, down to 3.9% in the 12 months ended December. This suggests most consumer prices, excluding food and energy, remain on a steady downward path since reaching highs in June of 2022.

There was a lot to parse from the report, including the question of how it might affect the Fed's plan to cut interest rates this year. Digging a little deeper, Marcus & Millichap also identified some CRE-specific trends of note.

For instance, shelter costs are still elevated, as the demand for housing remains strong and the affordability gap for homes increasing. Due to a supply increase, the rental market will start cooling to a below average 1.5% throughout the year. More stable rents should help level the core inflation metric.