How The Presidential Election Could Shape The Housing Market
By CHUCK GREEN
Federal Reserve Chair Jerome Powell often vigorously asserts that members of the Federal Open Market Committee don’t give two hoots who’s President.
When he’s asked, Powell says they operate as an independent body that does not take politics into account.
As Powell remains unmoved by political pressures, leaders in every industry are breaking down how the 2024 elections will affect them. The Mortgage Note reached out to professionals who follow the housing market and presidential elections to find out what they think.
Sherwood Clements, collegiate assistant professor of real estate at Virginia Tech’s Pamplin College of Business, says that the housing market impacts elections.
His team’s research found that county-level housing performance impacts county-level voting.
“In particular, if housing price performance is positive, then it’s more likely voters are going to vote for the incumbent — or switch to the incumbent,” Clements noted.
For every 1% positive change in return, there is a 0.59% to 0.86% chance voters will choose the incumbent.
“So, if house prices rose 20% over four years, then voters are 12% to 17% more likely to vote for the incumbent,” he explained.
When checking quartiles of house price returns, the highest 25% of county returns were 26% more likely to vote incumbent and the top 50% of county returns were 55% more likely to vote incumbent.
But Clements cautions politicians to “be careful what you wish for as ‘return chasing’ behavior doesn’t appear to be rewarded.”
If the incumbent wins a second term, there doesn’t appear to be any abnormal positive returns for house prices. “In fact, the best returns found were for counties where a challenger won, and those counties switched parties to the challenger.”
Roger Valdez, director at the Center for Housing Economics, argues that the presidential election cycle has little effect on the housing market.
“What did have a big effect was the pandemic’s change on work and living: unit sizes started going up, people moved to random and remote places, cities saw violence and chaos and empty offices,” Valdez said.
Historically, Democratic administrations have focused on the cost of housing and protections for renters, “often implementing policies aimed at increasing the supply of affordable housing and ensuring fair housing practices,” Kateryna Odarchenko, political consultant, partner of the SIC Group Ukraine, and member of the International Association of Political Consultants, told The Mortgage Note.
“Republican administrations, on the other hand, have tended to emphasize deregulation and market-driven solutions, promoting construction and homeownership through incentives and reduced regulatory burdens,” she said.
Stephon Martin, an attorney and real estate finance professional in New York, added: “Typically, Democratic presidents think of the housing market from the perspective of increasing housing and homeownership and not from a market perspective. Saying that they increased housing stock for the disadvantaged and made homeownership easier endears them to their base.”
What about the potential influence of Vice President Kamala Harris and former President Donald Trump?
Valdez said, “a Harris win might keep a trajectory back toward pre-pandemic norms.”
If interest rates fall, unemployment stays low, and inflation is under control, the country might see a return to some typical patterns like in-migration to population centers and an end to working from home.
“This would push people back into the housing and condo market, bring back some of the overbuilt office market, and generally have things looking like they used to: renters saving for their first home, settling on a condo, and generally wanting to be in a bigger city with lots of amenities,” Valdez said.
Martin said since Trump has already served one term as president, voters can more easily predict how he would tackle the industry’s top challenges.
“We do have examples of how Trump would make decisions as a president and they tend to be context-dependent. I think he will look to lower inflation and mortgage rates early in his term to garner popularity, but his long-term view of rates will be harder to predict,” Martin said.
Trump recently said that the president should have a say in monetary policy, arguing that as a businessman, he thinks he has a better instinct than Powell and the people serving on the FOMC.
Odarchenko provided what she described as a detailed analysis based on the presidential candidates’ current positions and historical policies.
Harris, as part of the Biden-Harris administration, “is positioning herself within the more progressive wing of the Democratic Party. Her approach to housing policy is heavily influenced by key principles and proposals aimed at increasing affordability, reducing homelessness, and promoting sustainable housing solutions.”
Odarchenko said these are the current administration’s key initiatives and messages:
1. Affordable Housing and Homelessness: “Harris has consistently emphasized the need to boost the supply of affordable housing,” she explained. The administration has announced substantial investments aimed at addressing these issues.
2. Removing Barriers to Housing Development: Odarchenko said one of Harris’s significant policy thrusts is the removal of local barriers that hinder housing development.
This includes tackling restrictive zoning laws and outdated land-use policies, “which often inflate housing costs and limit supply.” The administration, she added, has proposed innovative solutions, such as the PRO Housing funding program, to support communities in addressing these challenges.
3. Support for Renters and Homebuyers: Policies such as the Blueprint for a Renters Bill of Rights are central to Harris’s agenda. “These policies aim to enhance renter protections and expand access to homeownership for low- and middle-income families. By addressing systemic issues like racial bias in home appraisals and promoting fair housing practices, Harris’s policies seek to create a more equitable housing market.”
Odarchenko described Trump’s approach to housing policy as “markedly different,” focusing on deregulation and stimulating the market through tax incentives.
“His policies tend to favor economic growth strategies that indirectly affect the housing market,” she said.
These are Trump’s key initiatives and messages:
1. Deregulation: During his previous term, Trump prioritized reducing regulations to encourage housing development.
“This approach aims to lower construction costs and increase the housing supply. By rolling back regulatory constraints, Trump believes that market forces will naturally balance supply and demand,” Odarchenko said.
2. Tax Incentives: Trump’s housing strategy often includes providing tax cuts and incentives for homebuilders and homeowners. These measures are designed to stimulate investment in the housing sector, promoting new construction and renovation projects.
“While this can boost overall housing activity, it might not directly address affordability issues for low-income families,” Odarchenko said.
3. Economic Growth: Trump’s broader economic policies, focused on job creation and tax reduction, indirectly impact the housing market.
“Economic growth can lead to increased incomes and employment rates, thereby enhancing the ability of individuals to afford homes,” Odarchenko said.
What are voters saying?
According to a Redfin-commissioned survey of roughly 3,000 U.S. homeowners and renters conducted by Qualtrics in February 2024, 91% of adult Gen Zers say housing affordability is important when considering who they will vote for in the upcoming presidential election, making it the top issue for that generation.
Millennials, Gen Xers, and Baby Boomers were more likely to say the strength of the overall economy was an important factor in their presidential pick.
Harris and Trump are scheduled to participate in a debate on Sept. 10 which will be aired on ABC.
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