Housing crisis casts shadow over US election

In the race for the White House, rising home prices are a headache for both Mr. Biden and potential Republican candidate Donald Trump.

The S&P National Home Price Index in the US rose 5.5% year-on-year in December 2023 and 5% from November, the highest increase since December 2022. Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, said US home prices face significant headwinds in the fourth quarter of 2023.

"The increase in house prices in 2023 is likely to exceed the average increase over the past 35 years," he said.

The United States is grappling with a housing affordability crisis. The root of the problem is not building enough homes as the population grows. According to the AP , the lack of supply has hit the American dream of homeownership, undercutting President Joe Biden’s pledge that the U.S. economy is strong. At the same time, it has also exposed how the Donald Trump era has ignored the crisis.

A shortage of homes has driven up prices and forced renters to spend a disproportionate share of their income on housing, while average mortgage rates have more than doubled, according to a Harvard University analysis.

The U.S. Census Bureau said homeownership fell slightly late last year despite a strong economy. If housing costs hadn’t risen, inflation — Biden’s biggest economic headache — would have remained steady at 1.8%. In fact, it’s hovering around 3.2%.

Shaun Donovan, former secretary of Housing and Urban Development under Obama, said he has worked in housing for 30 years. “The housing affordability challenge is the worst I have seen in my career,” he said.

Donovan said housing prices are an increasingly bipartisan challenge. As Democrats and Republicans race to take control of the White House in November, the housing industry is under pressure.

Home prices have been high in Democratic-controlled areas like New York and San Francisco. But now Republican states like Boise, Idaho, are also struggling with rising housing costs. "This is a top issue everywhere. It's changing politics in a way that's different than anything I've ever seen," he said.

Mark Zandi, chief economist at Moody's Analytics, said the outcome of the November election could hinge on trends in mortgage rates. The average rate is currently around 6.74%. If rates fall closer to 6%, Biden's odds of winning would increase, Zandi said. If they rise to 8%, Trump could have an advantage.

Moody's Analytics experts say that in the context of the current housing affordability crisis, higher interest rates will put home ownership completely out of reach for most first-time homebuyers.

“Because homeownership is such a key part of the American dream, if it becomes unattainable, it will have a profound impact on voters’ perceptions of the economy,” said Chief Economist Zandi.

The nation’s housing shortage grew 52% to 3.8 million units during Trump’s presidency in 2018-20, according to mortgage company Freddie Mac. Under Biden, the president has acknowledged that many people are finding homeownership difficult in his State of the Union address earlier this month and in his budget proposal released earlier this week.

He wants to spend money to build 2 million homes, as well as offering a tax credit of up to $10,000 per homebuyer. “The bottom line is we have to build more. That’s how we keep costs down,” Biden said in a speech Monday.

An American flag decorates a for sale sign at a house in the Capitol Hill area of Washington. Photo: Reuters — An American flag decorates a for sale sign at a house in the Capitol Hill area of Washington. Photo: *Reuters*

Rapidly rising home prices have been a major issue under Trump. As president, he called for curbs on suburban construction. He claimed during the 2020 election that Biden's policies aimed at boosting construction and affordability would "destroy your neighborhood."

Building more housing will take years and require new regulations from states and cities. The administration is trying to encourage zoning changes, but the key choices are outside the White House’s control.

Even if incomes rise, the economy improves and inflation falls, people still can't afford to buy a home, said Daryl Fairweather, chief economist at brokerage firm Redfin. "That's the biggest problem for Biden because he can't solve it alone," she said.

Despite bipartisan agreement on the need for more housing, no major plan has yet passed the House or Senate. Biden has proposed housing assistance throughout his time in the White House but has never delivered.

“If Congress had approved some of the investments that the president has called for since he took office and implemented three years ago, we would have additional affordable housing coming into the market right now,” said Daniel Hornung, deputy director of the White House National Economic Council.

Mr. Ky ( according to AP, S&P )

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