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November 5, 2012

Has the Health of the Housing Market Influenced the Election?

November 5, 2012

As November 6th approaches and the battle for 538 electoral college votes nears its end, the headlines have been dominated by job creation, FEMA, and foreign policy, with the state of the nation’s housing market taking a backseat. While recent news events may influence voters who are still on the fence, have the housing market crash and slowly developing recovery influenced President Obama’s and Governor Romney’s prospects, particularly in states where the race is tight?

Apparently they haven’t. In the few remaining swing states, identified by Nate Silver’s meta-polling blog FiveThirtyEight.com, housing market conditions don’t seem to matter for whether the electorate leans toward Obama or Romney. Although housing market performance varies across states, it generally serves as a barometer for changing economic conditions, so this indifference came as a bit of a surprise.

Consider a state like North Carolina, which didn’t really experience a housing market boom and where housing prices continue to sag. According to Zillow.com’s Real Estate Market Reports, home values declined by around 2 percent on average each year during the past 5 years in North Carolina and continued to sink over the past year by 0.3 percent. So it doesn’t come as a big surprise that Romney seems to have the advantage in this state. However, Pennsylvania—a state with fairly similar housing market conditions, where housing values declined by 1.4 percent annually during the past 5 years and by 0.2 percent during the past year—has moved from being a toss-up in earlier months to a surer bet for Obama, according to FiveThirtyEight.com.

So outcomes in North Carolina and Pennsylvania don’t seem to be driven by the housing market. But what about swing states like Florida and Nevada, where the housing crash was much more severe, and where housing was much more important to the regional economy before the crash? Housing values in Florida and in Nevada declined by 10 percent and 13 percent annually during the past 5 years, but are beginning to recover, increasing by 4.2 percent and 5.8 percent respectively over the past year. Even though (or maybe, because) the housing market arguably provides a larger share of jobs in Nevada than in Florida, Nevada voters seem to be rewarding Obama for recent housing market improvements more than they are penalizing him for the housing market crash. In contrast, the race in Florida appears to be a toss-up between the two candidates.

This inconclusive story extends to other swing states like Virginia and Ohio, where Obama seems to have the advantage despite anemic housing market performance. Housing values fell substantially during the crash—in one state as the result of a deflated housing bubble, in the other as the consequence of a faltering local economy—and grew by less than 1 percent over the past year in both states. In contrast, prices nationwide rose by 3 percent over the past year. In general, it looks like voters care less about house prices than one might expect. Maybe that explains why neither candidate has made his vision for a future federal role in housing and homeownership a central part of the campaign.

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