How Will the Election Impact Housing?

As the fall elections near, a host of issues important to renters, homeowners, and the nation’s housing economy await attention. So far the focus has been on other national priorities, but a number of major problems confront the housing sector.

Important Housing Issues

The housing industry was a major contributing factor in the recession, and even now it remains essential to the health of our economy. Here are some of the most pressing needs:

• Rising demand and inadequate inventories are driving up rents and home prices simultaneously, leaving consumers with few choices for affordable housing in the nation’s hottest housing markets.
• Most homeowners still live in houses that are worth less than they were worth in 2006. Millions of homeowners are still recovering from the worse housing crash since the Great Depression, especially those who live the heartland where prices are rising slower than costs and in foreclosure-ravaged states like Florida and Nevada.
• Crippling levels of student loan debt, the legacy of soaring college costs, have postponed or ended the homeownership dreams of millions of educated young adults.
• Soaring land prices and restrictive zoning and siting laws are making it nearly impossible to build affordable high-density rental or condo housing in the core cities and inner suburbs.
• Homeownership is lower than it has been in 50 years.
• The housing sector should be an engine of economic growth, averaging at least 1.6 million units a year over the next decade but so far it has accounted for just 2.8 percent of annual GDP so far this decade, significantly less than the 4.3 percent share averaged in the 1980s and 1990s,
• Taken over by the government in 2009, the huge companies that own half the nation’s mortgages, Freddie Mac and Fannie Mae, are still in limbo., In seven years, the Congress nor the White House have not been able to agree on what their roles should be. One result is the lack of a vibrant private label secondary mortgage market to provide much-needed credit for housing expansion.

Where We Stand Now

Some of these issues have lingered for years; some are new. All of them are taking their toll on the national standard of living.

Though the politicians who win elections may or may not be good for housing, there is new evidence that elections themselves are a good thing for home sales.

In an analysis of home sales dating back to 1990, the California Association of Realtors found that the sales growth is usually positive during an election year. In fact, C.A.R. found that growth in home sales at the end of an election year actually outperforms non-election years by 7.1 percentage points.

During the past five election cycles, sales in the final months of the year picked up, rising by 5.3 percent on average compared with -1.8 percent during non-election years. With the exception of December 2004, every single month of the final quarter saw robust growth in home sales during election years.

The pattern for California home prices is similar. C.A.R. also found little evidence of a negative effect on home prices during an election year. In fact, home price growth in California during the past five election cycles was slightly better than the long-run average of 5.6 percent.

Again, the effects were most pronounced during the final months of the year when demand—and therefore, upward pressure on prices—were boosted by roughly 5.6 percentage points following the elections.

The Verdict?

Too soon to tell. Candidates need to address housing issues before we can make guesses about the future. On the bright side, though, election season may give parts of the country a small boost.

from Total Mortgage Underwritings Blog http://ift.tt/2cpvZWN