There’s been considerable media attention about how gas prices might affect the 2022 midterm elections. This was true when prices were rising and when they recently fell for 98-straight days. As The New York Times recently reported about the possible impact of falling prices and rising Democratic polling numbers:
Democratic fortunes have improved markedly over the last few months, with the party overtaking Republicans on the generic congressional ballot in the aftermath of the Supreme Court’s decision to overturn Roe v. Wade. But there’s another, simpler explanation for a Democratic turnaround, one that lines up nearly as well as abortion: gas prices.
The mechanism here seems to be that presidential approval ratings are a big factor in midterm elections, and gas prices can help or hurt presidential popularity. A recent analysis by Kyle Kondik of the Center for Politics at the University of Virginia finds “some association between higher gas prices and lower presidential approval, although the connection is not particularly strong” and that this “association has been weaker over the past decade than it was previously.”
But I wonder if more attention shouldn’t be paid to the housing market, and how it could impact the midterms, as well as the 2024 elections. Consider: In the past, you only had a rough idea of what your house was worth at any given time. Now, however, you can check sites such as Zillow and Redfin for a real-time estimate. My mortgage lender evens sends me a monthly update of whether I am above or below water and by what percent. I probably have as good a feel for the supposed value of my house as I do the specific price at the pump.
As you may have noticed, there’s a lot happening in the housing market right now. It was booming when rates were low, but now not so much with the Federal Reserve sharply raising interest rates to quash inflation. Here’s the sit-rep from economist Mark Zandi at Moody’s Analytics:
House prices, which had skyrocketed throughout much of the pandemic, are now quickly coming back to earth. Prices are down since peaking in June in approximately half the nation’s 400-plus metropolitan areas, and a lot more price declines are in train. Nationwide, house prices as measured by the Moody’s Analytics repeat sales index are expected to fall almost 10% peak-to-trough, with the bottom expected in summer 2024. And this assumes the economy is able to skirt a recession. If the economy suffers a typical downturn, peak-to-trough declines approaching 20% seem likely. This means that some of the previously highest flying areas in the South and Mountain West will see declines upward of 30%. This would only retrace one-year of price gains, and thus only those buyers who purchased their homes recently would be underwater—with home values below the amount due on the mortgages—but mortgage defaults and foreclosures are sure to rise. A scenario in which conditions become as dark as during the financial crisis is all but impossible. However, there is still room for significant economic damage.
Again: My theory here is that housing might play a bigger role in elections going forward than in the past because housing prices have become as easy to track as gas prices. As it stands, housing prices already have some impact, according to various studies and analyses (here, here, here, and here). I would certainly assume that the sort of economic scenario outlined by Moody’s would have a not insignificant impact on the 2024 elections, though obviously there’s a geographic component. Big declines in places Democrats typically win might not matter that much.
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