- Younger voters are more likely to be impacted by high housing costs, especially renters.
- Older voters have fewer concerns about housing affordability since they own homes in higher percentages.
- A pre-election interest rate cut would help voters view the housing market—and the economy in general—in a more positive light.
Before the June presidential debate became a referendum on President Biden’s candidacy, the first question posed to candidates focused on the economy, referencing skyrocketing home prices. With the campaign in full swing, Redfin’s economists dive into a range of questions about the impact of housing on the election, including whether voters could be swayed by a potential interest rate cut or housing prices in swing states.
How much of an impact do you think the housing affordability crisis will have on the presidential election in November?
Chen Zhao, Redfin Economics Research Team Lead: The answer depends on which group of voters are being asked. Younger voters—especially renters—are more acutely impacted by higher housing costs. Many renters don’t think they will ever own a home. Overall though, people have jobs and they’re earning a lot of money. Wages are rising and asset prices are increasing a lot. If you’re focused on housing, 66% of Americans are homeowners. The percentage of likely voters who own homes is even higher, with older generations more likely to vote than their younger counterparts. They have an asset that just keeps appreciating in value. During the 1992 election, Democratic strategist James Carville said “it’s the economy, stupid.” I think that’s true when the economy is bad, but the economy is really good right now.
Elijah de la Campa, Redfin Senior Economist: I don’t want to downplay the importance of housing affordability, but there are a lot of things on voters’ minds right now — there are wars and natural disasters. Housing affordability touches the lives of all Americans, but it is also a crisis that’s more acutely felt by the renting population. For homeowners, they have seen their home values skyrocket over the past few years and they have really low mortgage rates. You might argue that the housing market has been pretty good to them overall.
How would the potential nomination of a different Democratic candidate impact the economy, and therefore the real estate market?
CZ: Economic markets could be thrown into chaos—impacting decisions on things like interest rates, which would in turn have implications for the housing market, which is so dependent on mortgage rates.
Until recently, Wall Street was looking at the election as a toss up. I think the first debate elevated the chances of Trump becoming president, meaning everyone has to take his economic policies more seriously—and those policies are inflationary, which would likely cause mortgage rates to go up. If there is general political chaos and we don’t know where economic policy is headed, businesses, including in real estate, will be very reluctant to invest.
Daryl Fairweather, Redfin Chief Economist: I think whoever would potentially replace Biden would inherit all of his housing policies. It’s not like an outsider like Bernie Sanders would replace him. They would probably select an insider—an ally of Biden—who would essentially act like a successor. So I think the Democrat housing plans would stay largely intact. There could be some change if the successor is from California, like Kamala Harris or Gavin Newsom, as they may focus more on housing affordability issues.
Do you think the impact of housing affordability will be greater in major swing states (Michigan, Pennsylvania, Wisconsin, Georgia, North Carolina, Arizona and Nevada)?
DF: In swing states, renters in cities like Milwaukee and Detroit are most impacted as rental prices rise. But people in cities like those tend to vote Democrat and I don’t think they are likely to change their vote from Biden to Trump, even if they thought he would lessen their rent pain.
CZ: Typical swing voters are young families living in the suburbs–people who are less likely to be worried about housing affordability. They may be stuck in a starter home, locked into a low mortgage rate, but in general I think most homeowners are sitting pretty.
ED: Swing states—especially those in the Midwest—have some of the highest homeownership rates in the country. For example, Michigan’s homeownership rate is nearly 75%, so a large majority of the state’s voters may feel like they’ve done pretty well as their homes have appreciated in value and they have a nice low mortgage rate.
How are voters from different generations likely to differ in how they assess the impact of the affordable housing crisis?
CZ: The older you are, the more likely it is you’ve secured a really low mortgage rate and bought a home that has appreciated a ton. Maybe you own two homes, or more. Baby boomers are less likely to see housing affordability as a problem. But I think it’s probably pretty stressful right now for anyone who’s Gen Z, or a younger millennial who hasn’t gotten into the housing market.
ED: Our survey research has shown that housing affordability is more important as an issue for younger generations. This makes sense, as they are less likely to be homeowners. But do I think housing affordability is weighing more heavily on a Gen Z voter’s mind than some of the other things going on in the world? I’m not sure.
Would an interest rate cut in advance of the election impact voters?
DF: It would be good for Biden. Imagine someone who listed their home for sale in June, and they have no offers by September. If rates drop, all of a sudden they receive an offer and can finally move on with their life. People would be optimistic about their ability to spend. Now imagine rates hold steady and their house is still sitting on the market on election day.
As for buyers, they would see potential monthly mortgage payments becoming more affordable and start looking at the housing market in a more positive light. Those people are marginal voters and it does shift their perception of the economy in a big way. The unemployment rate would probably level off, or maybe even start to improve. It would be very good timing.
CZ: Let’s say we get a 25 basis point rate cut on September 18. The perception might be meaningful because it’s a pivot in Fed policy, but a 25 basis point cut by itself does very little. It will move markets only a little bit because the cut is already largely expected. Mortgage rates may go from 7% to somewhere in the high 6% range—maybe 6.5% if the outlook for more rate cuts is really great. For the housing market in general, we would likely get a pop in demand and possibly in supply as well that could boost sales and possibly boost price growth, but the size of the changes won’t be game-changing. I agree a rate cut would help Biden. I just don’t think the Fed has enough time to change voters’ perceptions of the economy. If they had started cutting rates earlier this year, it would be a different story.
Who has the edge with voters who are upset about high housing costs: Biden or Trump?
ED: I would give the edge to Trump, solely because of recency bias. The average person sees mortgage rates are really high, they see home prices are really high, and they see Biden in the White House, not really helping prices or mortgage rates come down.
DF: The current state of the housing market can be seen as a point against Biden, but some voters will also fear Trump making the situation worse with his own economic policies, or lack thereof. It comes down to whether people are more afraid of what Trump could do, or whether they blame Biden more for the current state of affairs.
CZ: President Biden has released a plan to lower housing costs. Trump says he has a strategy to combat the expensive housing market. I don’t think either of them has really done all that much to improve housing affordability. I think the answer just depends on which side you’re on.
To what extent can presidential policies impact housing costs?
CZ: There are three places where the president can have an impact. One is in housing finance, like how mortgage products are structured and the way mortgage rates are subsidized. For example, the huge mortgage lock-in effect exists because the government incentivizes households to borrow via 30-year fixed rate mortgages rather than adjustable rate mortgages. The second area a president can impact is taxes, because the U.S. has heavily subsidized homeownership through its tax code. The third thing the federal government can do—and this is what Biden is trying to do—is incentivize states or cities to improve local housing policies like zoning regulations by tying federal funding or other things to them.
ED: The president is also responsible for appointing the head of the Federal Housing Finance Agency (FHFA), which can lead to the politicization of the Government-Sponsored Enterprises (GSEs) under its conservatorship, like Freddie Mac and Fannie Mae. When Trump was president, there was a real push to bring the GSEs out of conservatorship, which would definitely have an impact on the level of risk in the mortgage market and the types of mortgage products on offer.
