In the upcoming US presidential election in November, economic issues have always been a focal point of contention. Despite the robust US economy since inflation, many Americans may not feel the economic resilience and wonder how it benefits them. One of the main reasons for this is the housing market!
The soaring house prices and high-interest rates have made it difficult for many, especially the younger generation, to afford homes. A recent survey indicates that the younger Generation Z prioritizes housing affordability when considering the US presidential election.
According to a new Redfin survey, young American voters are most concerned about finding affordable housing rather than issues like abortion legality by state. Due to the housing demand surge triggered by the pandemic, housing affordability in the US has deteriorated rapidly, with housing shortages, skyrocketing prices, soaring rents, and rising mortgage rates. Many cannot afford homes, and some can barely afford rent, affecting how US voters cast their ballots.
From the survey of 3,000 American homeowners and renters, we have seen a clear picture: 91% of adult Generation Z members consider housing affordability their primary concern when thinking about the presidential election in November.
Housing has become a critical issue for this generation, surpassing overall economic issues, education, gun control, and abortion rights. Concerns about housing affordability outweigh concerns about democracy preservation, immigration, student debt, foreign wars, or geopolitical conflicts. It’s not surprising that housing is taking the spotlight as it’s currently the most challenging time for the housing market in thirty years.
Redfin experts found that the cost of new homes is rising twice as fast as young people’s incomes. While young people care about various economic, educational, and political issues, today they are more likely to consider housing problems when voting because it directly impacts their housing, lifestyle, and wealth accumulation.
Last year was the worst year for housing affordability in US history. According to Redfin data, only 26% of Generation Z adults own homes, with the majority renting and facing high rental costs. Most young adults aged 18-27 lack previous homes to trade for new ones, have insufficient savings, with median rents in the US increasing by over 20% since 2019.
For young people entering the stage of buying homes and starting families or those entering the workforce and needing to rent, housing remains a big problem!
This survey also found that Millennials, Generation X, and Baby Boomers prioritize overall economic strength as the top influencing factor or concern for the presidential election. Housing affordability concerns are less prominent for older individuals, with Millennials placing it in third place (87%), Generation X in fourth place (83%), and Baby Boomers ranking it sixth (80%) in consideration. However, housing concerns remain a significant consideration for over 80% in each generation, making it a crucial factor.
Earlier this year, Redfin conducted a broader survey on the entire election scenario, revealing that over half (53.2%) of homeowners and renters feel housing affordability is affecting their voting decision in the upcoming presidential election. Furthermore, almost two-thirds (64.2%) of them stated that housing affordability has given them a negative outlook on the economy.
Economist Daryl Fairweather believes that housing affordability is the top concern for voters as mortgage rates and housing prices soar, exacerbating the housing shortage and hindering many Americans from realizing homeownership dreams.
Although the economy appears strong on the surface, many families are not reaping the benefits. They work hard, save to buy a home, only to find that either homes are unaffordable or there are limited housing options.
In past elections, several studies related to real estate have been conducted. Aziz Sunderji, a former analyst and housing economic writer at Barclays Bank, found in an independent analysis this year that homeowners are twice as likely to identify as staunch Republicans, while renters are more likely to identify as staunch Democrats.
This study aligns with reality as homeowners in Republican states often receive more protections, whereas tenant rights are more emphasized in Democratic states.
Another study called “Housing Performance and Voters” analyzed the relationship between housing prices and election results in each US county over the past six presidential elections. The research discovered that swing counties where housing prices surged significantly in the four years before the election are more likely to vote for the incumbent candidate, while counties with poorer housing price performance are more likely to support the challenging party’s candidate.
“Swing counties” in the study referred to 641 counties in the US between 2000 and 2020, accounting for 23% of all counties that had at least one party change.
According to this study, President Biden should fare well as real estate prices surged by 40-50% during his term, with some areas even reaching 60%. For every 1% increase in house prices in the final year before the election, there is a 0.36% higher likelihood that swing county voters will vote for the incumbent candidate, strengthening the correlation between housing prices and voting behavior.
However, the researchers note that in areas that are not swing counties, voters tend to stick to the same party regardless of economic factors. They caution that while these findings provide a reference point on how voters view elections and the broader economy, several factors must be considered.
Currently, a significant portion of voters are dissatisfied with the Biden administration’s economic decisions. A Gallup poll in early May revealed that less than 40% of Americans believe Biden has made correct decisions for the overall economy. Moreover, for the second consecutive year, only 21% of respondents viewed it as a good time to buy a home, reaching a historic low, while 70% anticipate further housing price hikes.
Overall, high housing prices are more bad news than good news for Biden. Compared to pre-pandemic times, potential homebuyers need to earn an additional $50,000 annually to afford a house, with a housing shortage of approximately 2 to 7 million resulting in sustained high prices. The aforementioned surveys highlight that housing concerns significantly impact voters’ direction.
Nonetheless, there is some good news for prospective homebuyers as buying homes may become more affordable! Senior investment strategist Brian Nick from the Macro research institute predicts a potential decline in home prices in the near future. Experts suggest that the surge in available inventory entering the real estate market combined with cooling demand could alleviate the long-standing imbalance between supply and demand.
According to the National Association of Realtors data, home sales awaiting finalization in April this year decreased by 7.4% annually. Concurrently, unsold housing inventory increased by 16% compared to the same period in 2023.
Why has the number of available homes on the market increased? The primary reason is the currently high-interest rates, which have hovered around 7% for a 30-year fixed-rate mortgage since the beginning of the year, leading to dwindling buyer confidence and a sluggish market. However, this downturn in buyer activity has resulted in increased market supply.
Though the national median home price is steadily rising, Nick predicts that prices may soon decline over the next three to six months, owing to the rising supply of homes on the market!
In May, realtor.com recorded a 0.3% year-over-year increase in the median list price to $442,500 across the US, up from $430,000 in April. The slow rise in home prices is attributed to the increasing availability of affordable homes. In May, the Southern region saw a 47.2% increase in housing listings growth, leading all regions, followed by 34.5% in the West, 20.5% in the Midwest, and a minimal 9.4% in the Northeast.
Economists believe that the inventory growth of affordable homes surpasses that of mid to high-priced markets, with a 46.6% increase in homes priced between $200,000 and $350,000, offering hopeful prospects for budget-constrained buyers.
Improvements in housing affordability over the next few months would favor Biden, though the lack thereof may cause him concerns. ◇