Is there a solution to America’s housing crisis?
Will there be affordable housing in 2026, or will high prices become the new normal for buyers and renters?
December’s Consumer Price Index report will cap off a year in which inflation has been gradually easing on paper, even though many Americans still feel pressured by high prices.
Gasoline prices fell through 2025, but electricity prices rose. Although asking prices for rent had slowed, most households still found it difficult to cover the cost of groceries.
Economists expect a report on January 12 to show that prices rose about 2.8% in the 12 months to December. Although inflation remained well below the highs reached in 2022 and 2023, 2025 turned out to be more robust than many forecasters expected, as price increases remained above the Federal Reserve’s 2% target throughout the year.
“It’s not where the Fed wants to be, but it’s not the end of the world either,” said David Stubbs, chief investment strategist at AlphaCore Wealth Advisory.
According to a consumer expectations survey conducted by the New York Fed in December 2025, consumers believe that prices will continue to rise in 2026. Respondents expect short-term inflation to rise to 3.4%, making debt servicing more difficult over the next three months.
Some economists say these expectations are likely shaped by affordability pressures and a K-shaped economy in which higher-income households have increased assets and continue to spend, while lower-income households struggle as wage growth lags behind productivity gains.
For some, the tax refund could lead to a cash boost in 2026. This year, in addition to raising the standard deduction and expanding deductions, it is expected that withholding taxes will remain unchanged, resulting in larger refunds.
More clarity is expected once normal data collection resumes.
December’s CPI report is expected to provide a clearer picture of inflation than the Bureau of Labor Statistics’ previous release, after data collection was disrupted by the longest government shutdown in U.S. history late last year.
“Most, if not all, of these distortions should be resolved in the December report,” Wells Fargo economists said in a Jan. 8 report.
They expect a stronger rebound in goods prices than service prices after holiday discounts, but they also expect a rebound in higher service prices, especially in seasonally sensitive sectors such as suburban accommodation and airfares.
What is influencing inflation?
Trade concerns affected inflation throughout last year as consumers rushed to buy cars, electronics and other items before tariffs went into effect, said Mike Scordeles, head of U.S. economics at Trust. He said this consumer behavior drove up prices when supply was tight.
“The three key areas to watch are housing, wages and energy prices,” Bankrate financial analyst Stephen Cates said in a note to USA TODAY. “These categories are key components of the CPI and have spillover effects on the prices of other goods and services.”
Cates added that “all three factors point to continued slowing inflation through 2026,” including slowing housing inflation across the country, wage growth lagging behind productivity growth, and low gas prices.
Will the Fed cut rates again in January?
Fed policymakers will analyze the release of the December CPI report ahead of their next meeting at the end of January.
Skorderes said the Labor Department’s December jobs report, released on Jan. 9, showed that the unemployment rate fell from November to December, reducing the likelihood of another rate cut this month.
After cutting interest rates three times in a row late last year, forecasters do not expect another rate cut. Rather, he expects rate-setting committee members to want to know how their moves will affect the economy.
Contact Rachel Barber rbarber@usatoday.com X Follow her at @rachelbarber_
