The recent midterm elections, which President Barack Obama described as “a shellacking,” gained the Republicans sixty seats in the House of Representatives and a few in the Senate. Clearly, two years after voting for change, the country was voting for change again. But what does this “throw the bums out” mentality mean—for the economy and for a real estate recovery? Bear in mind that the future of the real estate market impacts all of us, whether we’re looking for homes or not, since real estate is a fundamental part of the U.S. economy.
We can’t predict the future (anyone who says that they can is overpromising), but we’ll take a look at some reasons for the big landslide and make a few educated guesses about what the future holds:
1. Voters Are Mad About Unemployment
Unemployment is down from its peak of over 10%, but at the current 9%, it’s still way too high for voters’ taste. So, here’s one message to Congress: Deliver more jobs. If the Republicans can succeed in doing this, it should be good for real estate and the economy in general. (Check out this expert article for more on how the housing market follows jobs.) One challenge will be on the level of state government, where the Republicans won ten seats from the Democrats, making the majority of state governors Republican. Pressure there to balance budgets and cut spending may outweigh pressure to hire more teachers and cops, so this may be a mixed bag for unemployment rates.
Predicted effect on the real estate market: slightly positive.
2. Voters Are Mad About Health Care
There’s disagreement about how much Obama healthcare reforms, which aren’t really in place yet, hurt the Democrats—but Chris Cillizza of the Washington Post quotes sources saying it was a piece of the puzzle. Look for the Republicans to cut back Obamacare around the edges, but don’t expect that to have much real effect on the real estate market.
Predicted effect on the real estate market: neutral.
3. Voters Are Mad About Foreclosures
One of the big outcomes of this election is that chairmanship of the Financial Services Committee (which oversees housing giants Fannie Mae and Freddie Mac) is moving from the Democrats to the Republicans. Trouble is, it’s not yet clear whether the chairmanship will go to Rep. Spencer Bachus of Alabama or Rep. Ed. Royce of California, notes Jonathan Strong of the Daily Caller. Strong notes that Bachus was a supporter of big Obama bailout programs, like “Cash For Clunkers,” while Royce opposed them. It may be fair to bet that the Congressmen will lean the same way on giving money to Fannie Mae and Freddie Mac, which will need some $2 billion more in rescue money, according to Bloomberg News. (The situation isn’t actually as bad as it sounds, since lots of that $2 billion will go right back to the U.S. government in the form of dividend payments.)
Predicted effect on the real estate market: too early to tell.
4. Voters Are Mad About Taxes
Republicans want to extend the Bush tax cuts – which helped the very wealthy. The real estate industry doesn’t like taxes (though it does like very, very wealthy people), so optimism, and maybe even housing prices, might rise if the tax cuts are extended. Even better would be a different system of cuts that’s fairer, allowing taxes to rise somewhat on the gazillionaires while still letting the Republicans claim tax cut victory.
Predicted effect on the real estate market: positive.
Which way did you vote? Are there other factors that influenced your vote? Let us know