The Impact of Midterm Elections on the U.S. Housing Market

Two years after Donald Trump secured a second term, voters are returning to the polls for midterm elections. These elections are seen as a reflection on his presidency. The issue of housing remains significant due to persistent high costs, which causes frustration among Americans as they see little progress in tackling the affordability crisis.

Housing and Election Sentiments

Joel Berner, a senior economist at Realtor.com, described the U.S. housing market as being in hibernation. According to Berner, the market’s sluggishness stems from years of low sales figures. He identified two key points: a need for change and the significant impact mortgage rates would have. There is pent-up demand, as many potential buyers have been waiting since 2023 to enter the market.

Berner noted that voter frustration with the housing market might influence their decisions at the polls. Pete Carroll from Cotality echoed these sentiments, emphasizing how housing concerns are a part of a broader worry about cost of living, with inflation and economic issues being at the forefront.

According to a Pew Research Center survey, 66 percent of U.S. adults are worried about housing costs. This includes 76 percent of Democrats and Democratic-leaning independents, and 53 percent of Republicans and their independents. A Hometap survey of 1,000 homeowners found that 77 percent would consider a candidate’s platform on lowering homeownership costs.

Housing Market Dynamics

The condition of the housing market offers insight into American frustrations as these midterm elections approach. Predictions from last year suggested improved housing affordability by 2026, largely due to lower mortgage rates. However, mortgage rates have surpassed expectations, significantly affecting the housing market.

Mortgage rates rose unexpectedly after last year’s decline, impacting this year’s spring buying season. In October, Freddie Mac data revealed the 30-year fixed-rate mortgage increased to 7.32 percent from 6.19 percent the previous year. Existing-home sales saw a decline in pace.

Home prices and sales provide further data points. According to the National Association of Realtors (NAR), September’s national median existing-home price was $417,500, which is a 1.3 percent increase from the previous year. Despite rising home prices, sales continue to drop. September saw a 2.2 percent year-over-year decline in existing-home sales, although housing inventory increased.

Affordability diminished in many U.S. regions, with the Northeast experiencing the largest decline. Meanwhile, the West reported improved affordability. Prices for new homes fell, often cheaper than older properties due to developer incentives. The median new home price decreased by 3.9 percent to $400,400 due to low demand, according to the U.S. Census Bureau. New home sales fell by 5.3 percent.

Market Outlook for Buyers and Sellers

Berner suggests that it’s a favorable time for buyers with cash or equity. Falling prices and inventories make it a buyer’s market. However, buyers reliant on mortgages face challenges meeting their needs and budgets due to the rising cost of living and inflation.

Sellers are likewise struggling in this market. Higher mortgage rates have priced many buyers out, while competition among sellers grows. Builders are caught between rising costs and soft demand, causing a slowdown in new construction. Investors are also cautious, buying fewer homes than in previous years.

The housing market’s dependence on mortgage rates keeps potential buyers hesitant, impacting the broader economic landscape.