With Americans feeling “highly pessimistic” about the housing market going into the 2024 election, home prices appear to be tied to whether states are “red” or “blue,” according to new data from Realtor.com.
What the data shows
“Home prices and housing affordability are emerging as hot issues in the swing states that will decide the election,” as affordability has plummeted in the wake of the COVID-19 pandemic, said the site. Gallup polling from earlier this month found that 68% of Americans predict higher prices for homes and that 76% said it is a bad time to buy a house.
Realtor.com’s affordability score data showed that “red” states where voters lean Republican are more affordable than “blue” states where voters lean Democrat. This data covers home purchases, not home rentals.
To rank affordability, Realtor.com used the Cook Political Report as a guide for which states are expected to vote Republican or Democrat. It also analyzed where families making the median local income could afford to buy at least half of the homes for sale under current mortgage rates.
Those rates were expected to drop this year, but still increased in March. As of that month, the national average affordability score per Realtor.com sat at 0.65. Iowa had the highest state score at 0.93.
“The 24 red states had an average home affordability score of 0.70 in March, while the 19 blue states plus Washington, DC, averaged 0.59,” Realtor.com said.
Why are “red” states more affordable?
Since states that vote Republican tend to be more rural, the lower population density could contribute to lower mortgage costs. They are also more concentrated in the South, where incomes have historically been lower, according to Kenneth Chilton, an associate professor of public administration at Tennessee State University.
During the first quarter of this year, single-family home prices in 93% of metro areas in the U.S. increased, according to the National Association of Realtors.
“In the blue states, you're going to capture California and New York, and some of the states that have the highest housing prices in the country,” Chilton added.
Alex F. Schwartz, a professor of urban policy at The New School in Manhattan and chair of the master’s program in public and urban policy at the Milano School of Policy, Management, also said that “blue” states tend to be more economically vibrant. Therefore, there’s more demand for housing there.
However, this isn’t always the case.
“In fact, the states with the worst affordability scores in March were the ruby-red Mountain West states of Montana and Idaho, which are both grappling with an influx of wealthy newcomers competing for limited housing units,” said Realtor.com.
What about swing states?
Realtor.com identified housing price trends in seven swing states: Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania, and Wisconsin.
“The swing state average sits in the middle, slightly more affordable than the national average. Those relative trends have held even as affordability declined across the board,” said the site. Swing states had an average affordability score of 0.66.
Among the swing states, there seems to be an opposite trend compared to the national market, with Southern states faring better. That’s because the Rust Belt swing states of Michigan, Pennsylvania, and Wisconsin have been impacted by deindustrialization leading to lower than average population growth.
On the other hand, “Sun Belt swing states have experienced years of higher-than-average population growth, potentially straining the available housing inventory,” said Realtor.com.
What are the candidates saying?
Democrat President Joe Biden has proposed tax credits for some buyers and sellers and measures to boost construction.
“We know affordable housing has been a challenge for a long time. To solve it long term, we have to increase supply,” Biden said in a March speech in Las Vegas.
However, his GOP rival – former President Donald Trump – has accused Biden of attacking “the suburban lifestyle,” and said his policies could reduce home values.
“Our affordability data shows that, in a sense, the two candidates are speaking to two different worlds of voters,” said Realtor.com. “But in November, what will matter most is how they are received by voters in the toss-up states that will decide the election.”
For all Americans, affording a home became much more challenging in 2021 due to high mortgage rates that outpaced wage growth. Overall, the median national list price for homes was $409,500 in January, up 37% compared to January 2020.