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Why it matters: Home prices are a major component of inflation. For instance, housing is almost 35% of the Consumer Price Index (CPI).

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Details: According to the Case-Shiller national index, home prices are now up 2% on an annual basis as of February.

• Contrast this to April 2022, when they were up almost 21% on an annual basis.
• They have fallen because of higher interest rates. Those higher interest rates reduced demand for housing and forced sellers to lower prices to attract interested buyers.

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Be smart: It takes time for housing prices to fully translate into inflation data. Inflation is only now reflecting the enormous run-up in prices over the previous two years.

• That means it will take some time for the recent sharp downturn in prices to work its way into the inflation data.

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Looking ahead: Once housing falls below the overall inflation rate it will exert downward pressure, but that might not happen until later this year.

• When it does it will put strong downward pressure on inflation.