Soaring Home Prices Day by Day... The 'US Housing Crisis' Determines the Presidential Election Outcome

The steadily rising US housing rental prices are emerging as a key factor that could determine the outcome of the US presidential election to be held this November.

On the 17th (local time), the UK Financial Times (FT) reported that as voters' anxiety and dissatisfaction with the housing market have accumulated, both the Democratic and Republican parties have started competing with their pledges ahead of the presidential election.

Currently, the US housing market is significantly frozen due to the Federal Reserve's (Fed) ongoing high-interest rate policy aimed at curbing inflation. The 30-year fixed mortgage rate, which was only 2.65% in early 2021 before the Fed raised the benchmark interest rate, rose to 7.79% last October, the highest in 24 years. Although the rate has somewhat dropped to 6.47% now, it is still considered insufficient to revitalize the housing market.

While the high mortgage rates are causing genuine buyers to feel burdened and reduce demand for housing, the supply has decreased even more sharply, worsening the market. According to real estate brokerage Redfin, the number of homes for sale in the US housing market has dropped by 27% since August 2019. This is analyzed as a reduction in the 'trade-up' demand of single-homeowners selling their existing homes to buy new ones. To trade up, they must terminate their mortgage contracts with lower interest rates and enter new contracts with higher rates, increasing interest burdens. This market situation is also driving up housing rental prices. In March last year, the housing rental price increase rate reached 8.18%, the highest in 42 years.

Ultimately, this housing market situation is expected to be a major factor influencing voters' decisions in the upcoming November election. According to FT, in Arizona, one of the representative battleground states, an annual income of at least $70,000 (about 95.03 million KRW) is required to rent a two-bedroom apartment at an average price range. However, the median income in Arizona is $37,209 (about 50.51 million KRW), only about half of that. A poll by the non-profit Center for Popular Democracy (CPD) also showed that 84% of voters in battleground states consider housing issues a serious concern.

In response, Democratic presidential candidate Vice President Kamala Harris announced a pledge the day before to provide a $25,000 (about 33.94 million KRW) tax benefit to first-time homebuyers, along with tax benefits for homebuilders and a stance to eradicate unfair practices by housing rental companies and investors. She also stated that after winning the election, she plans to build 3 million homes during her first four-year term.

The Republican Party also announced a platform policy to build homes on federally owned land. The Trump campaign is expected to propose a tax benefit pledge for first-time homebuyers similar to the Democratic policy.