According to the latest report from the federal government, the Consumer Price Index rose by 0.1% in March compared to the previous month. This was the smallest increase in three months and was lower than usual due to easing energy costs.

Annual inflation slowed to 5% from 6% and touched its lowest level since May 2021.

Economists said the latest CPI data indicated a slowdown in housing inflation, which will ultimately benefit homebuyers.

Housing continues to be the biggest driver of monthly growth. Housing costs increased by 0.6 per cent from the previous month, slightly lower than the 0.8 per cent increase in February. rents and the landlord's equivalent rent index both rose by 0.5 per cent in March.

"Calmer inflation means lower mortgage rates, ultimately," Lawrence Yun, chief economist for the National Association of Realtors, said in a statement.

Yun noted that inflation has slowed in the past year, which is progress.

While "the desired inflation rate of 2 per cent is probably a year away," Yun said, "this improvement in direction is a clear signal for the Fed to change its tight monetary policy, especially given that many regional banks remain on the verge of blowing up with further interest rate risk."

Yun said it seemed "very likely" that mortgage rates would fall below 6 per cent by the end of the year. US consumers are slightly more pessimistic, as they expect rates to be in the 8 per cent range.

Rents are up 8.8 per cent from a year ago, but only 0.5 per cent this month, compared with monthly increases of 0.7 to 0.9 per cent over the past year, which Yun described as a "significant turnaround".

"Given the strong flat construction, a slowdown in rental growth is inevitable," he said.

Private data sources, such as those from Apartment List, show that the rental index grew by just 2.6 per cent year-on-year, compared to the federal government's estimate of 8.8 per cent, as shown in the chart below.

These indices reflect different aspects of the rental market, but Apartment List's index is four quarters ahead of the government's measure, according to the Cleveland Fed.

Lisa Sturtevant, chief economist at Bright MLS, said in a statement that tinkering with interest rates alone would not reduce housing costs.

"The challenge with housing is that there are many factors beyond the Fed's control that keep housing costs high," she said.

More supply is the solution to lowering home prices, she said.

The Fed is not going to solve this problem, no matter how much some people want it to," she added.