With the presidential election just under three months away, the anticipation is as intense and chaotic as ever. Four years prior, I authored an article for BiggerPockets Wealth magazine (which is no longer in publication) discussing the effects of presidential elections on the housing market for that particular year.
At the time, my research revealed little to no evidence that the housing market’s performance was significantly influenced by election years. While the stock market and bond yields often react to elections, the housing market seemed unaffected.
As we approach another election, housing issues have become more prominent due to factors such as mortgage rates, soaring prices, limited supply, costly construction, and homelessness. Vice President Kamala Harris recently visited Raleigh, North Carolina, advocating for a $25,000 down payment assistance program, developer incentives, and stricter regulations on corporate landlords. Conversely, former President Trump has criticized the Federal Reserve, with some of his supporters even proposing its dissolution.
Both candidates are focusing on housing in their campaigns, yet promises like “lowering prices” or “abolishing the Fed” remain vague without detailed plans. This raises questions about the feasibility of their proposals.
In light of this, I began to explore whether a president can genuinely influence the housing market. My research involved analyzing 30 years of data on housing trends and presidential policies, starting with President Bill Clinton, marking the beginning of the modern era of housing issues.
I reviewed key economic statistics, including median home prices and homeownership rates, from January 1993 to January 2024. The findings are divided into four sections, offering a clearer understanding of the housing market’s dynamics and the role of presidential policies.
The Core Story of American Housing
The housing market operates on basic supply and demand principles. Analyzing housing prices across different presidential terms reveals a generally upward trend, with minimal fluctuations. Apart from the 2008 financial crisis and a notably stable market under President Trump, home prices have consistently risen from Clinton through Biden’s terms, indicating that presidential influence on prices is minimal.
The current high housing prices are largely due to a shortage of new construction that began around the Great Recession. Housing starts align with price trends during each presidency, but this correlation reflects broader economic conditions rather than presidential actions.
Homeownership rates have remained steady from 1993, ranging between 63-69%. This stability challenges claims about the negative impact of corporate landlords. The data suggests that the influence of presidents on homeownership rates is minimal.
Rental vacancy rates have varied, influenced more by supply and demand than by presidential policies. For instance, the drop in housing starts under President Bush led to increased rental vacancies during Obama’s presidency as the shortage of new housing became apparent.
The Federal Reserve’s Influence
While supply and demand shape long-term housing trends, short-term fluctuations are affected by the Federal Reserve, adding complexity to the housing market’s dynamics. There are claims that the Federal Reserve might be controlled by the president, particularly with speculations about a possible rate cut before the election.
The Federal Reserve’s primary goals are to manage employment levels and price stability. It does so by adjusting the federal funds rate, which in turn affects mortgage rates. High inflation prompts rate increases to cool the economy, while rate cuts stimulate economic activity. Mortgage rates and, consequently, the housing market are impacted by these changes.
The president does not directly control the Federal Reserve but can influence it by nominating the Fed Chair, who is confirmed by the Senate. Although presidents can exert indirect pressure, the Fed remains an independent body.
The President’s True Power
President Theodore Roosevelt described the presidency as a “bully pulpit,” signifying its immense platform for influence. Despite the limited constitutional powers of the president, the role has evolved, and modern presidents have significant impact through various agencies.
The Federal Housing Administration (FHA), established in 1934 by President Franklin D. Roosevelt, marked a significant shift in housing policy by insuring mortgages and shaping the modern housing market. Other agencies, such as Fannie Mae and Freddie Mac, followed, with the Department of Housing and Urban Development (HUD) consolidating housing-related functions.
Presidents can impact housing through policies and appointments, yet their direct influence is limited. For example, President Clinton’s efforts to boost homeownership led to short-term gains but also contributed to the subprime mortgage crisis.
Recent policies from Presidents Trump and Biden, such as tax cuts and housing supply initiatives, show limited immediate impact. The fundamental issue remains: housing prices are driven by supply and demand, not by presidential policies alone.
Final Thoughts
The president’s influence on the housing market is relatively constrained. While they can implement policies and use their platform to advocate for changes, the core dynamics of housing—supply and demand—remain unaffected by political rhetoric. The challenge lies in addressing fundamental issues rather than relying solely on presidential actions or promises.
In previous post: "What are Trends in Real Estate Investment 2023?"
Komentarai