Housing 2024 - What's in store for housing's next generation

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52 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ANALYTICS the latest report Measures Housing concerns among red, Blue Markets The fundamental differences between Democratic- and Republican- leaning markets are seen in housing affordability. a recent study con- ducted by Trulia shows that while Democratic- and Republican-leaning U.S. markets were affected similarly by the housing crisis, the issues cur- rently pressuring housing seem to be more severely affecting the blue Democratic metros. Based on the 2012 presidential vote, Trulia categorized the larg- est 100 metros in the U.S. as ei- ther red or blue. The Republican candidate, Mitt Romney, received more votes than the Democratic candidate, Barack Obama, in 32 major metros. In 40 markets, termed "light blue," Obama beat Romney by less than 20 percent- age points. Trulia termed 28 mar- kets to be "dark blue," meaning Obama's margin of victory was more than 20 percent in those markets. Trulia found there was not a significant difference in price declines between red markets and blue markets following the housing bust in 2008, with peak-to-trough pricing averaging 16 percent in red markets, 25 per- cent in dark blue markets, and 26 percent in light blue markets. Likewise, according to Trulia, the recent recovery has been similar in both red and blue markets. Home prices were up 7 percent year-over-year in red markets in September, while dark blue and light blue markets saw gains of 6.3 percent and 6.2 percent, respectively. Trulia also reported there wasn't a huge gap between red and blue markets regarding the number of homes in foreclosure, another measure of housing recovery. The fundamental differences between red and blue markets can be seen in housing afford- ability, according to Trulia. In September, the 10 reddest markets all had a median asking price lower than $130 per square foot, while nine of the 10 blu- est markets reported a median asking price higher than $130 per square foot. The correla- tion between price-per-square- foot and the 2012 presidential vote margin was 63 percent, which is "statistically signifi- cant," according to Trulia. The only expensive red market as far as median asking price was Orange County, California, at $363 per square foot, and there was a huge dropoff to second on the most-expensive list among red markets, with Northport- Bradenton-Sarasota, Florida, at $150 per square foot. While Trulia found house- holds in blue markets tend to have higher incomes than those in red markets, the higher in- comes could not offset the higher home prices in those areas. Trulia's middle-class affordability measure, which calculates the share of homes for sale that a median-income household can afford, is lower in blue markets. Also, according to Trulia, blue markets have greater income inequality and lower homeown- ership rates than red markets. "Because blue markets are less affordable, have lower home- ownership, and have greater income inequality, political lead- ers in Democratic-leaning and Republican-leaning metros may push for different policies," said Jed Kolko, chief economist at Trulia. "Furthermore, these local differences in home prices mean that some national housing poli- cies favor red markets and others blue markets. For instance, the current system of conforming loan limits benefits red markets more because homes in those markets are likelier to fall within local loan limits." Due to higher home prices and more residents in higher tax brackets, however, the mortgage interest deduction currently benefits blue markets more, Trulia noted. Kolko concludes the differences between red and blue markets could potentially make it tougher to reform long- standing housing policies.

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