In October, Barack Obama and Mitt Romney will debate with each other three times: in Denver on the 3rd; in Hempstead NY (on Long Island) on the 16th; and in Boca Raton FL (in the West Palm Beach metro area) on the 22nd. The Denver, Long Island and West Palm Beach metro housing markets are just about as different as could be – and each would give the candidates a very different backdrop for a debate about housing. Let’s compare them in order of the debates.
Denver’s housing market is twice-blessed, relative to the rest of the country. First, the housing bust was mild in Denver: prices fell only 8% from the peak to the trough, which is 19th-best among the 100 largest metros. That means the housing crisis left only a modest number of vacant and foreclosed homes in Denver – its current vacancy rate of 2.5% and foreclosure rate of 10.6 per 1,000 units are both lower than the majority of large metros. Second, Denver’s housing market is now recovering strongly, with the 7th fastest asking-price gain in August, according to the Trulia Price Monitor, and a high level of construction activity that ranks 15th among the 100 largest metros. In fact, Denver is the only market with big prices increases today that didn’t suffer huge price declines during the bust. Strong job growth, not bargain-hunting, is driving Denver’s housing demand.
In Long Island, home prices have moved similarly to what’s been happening nationally overall, falling 20% (56th highest out of 100) during the housing bust and rising 1.3% (54th) year over year in August. Long Island, however, stands out in two ways: the 5th-lowest vacancy rate in the country, but also a very low rate (98th out of 100) of new construction. That’s surprising: low vacancies should encourage new construction because developers want to build where there are fewer empty homes to compete with. But Long Island, along with New York, San Francisco, Los Angeles and other Northeastern and coastal California metros, have both low vacancies and little new construction. How come? It’s hard to build new housing in these markets because of both geography – Long Island is surrounded by water – and restrictive regulations. The result is tight supply, which means that Long Island real estate, like that in other Northeastern and coastal California metros, is expensive.
Now on to West Palm Beach — technically, the West Palm Beach–Boca Raton–Boynton Beach metropolitan division, which is the same as Palm Beach County. (Who defines these metro areas? The federal government.) West Palm Beach bore the brunt of the housing bubble’s aftermath, with a huge 48% price decline from peak to trough (92nd out of 100 – almost the worst decline in the country). The price drop, along with the fact that Florida’s foreclosure process is very slow, means that West Palm Beach today has almost the highest vacancy rate (98th) and highest foreclosure share (96th) in the country. Prices have started to rebound: West Palm Beach home prices increased 10.4% year over year – 4th in the country and even faster than in Denver – but vacancies and foreclosures continue to hang over the West Palm Beach housing market.
|Debate Host City||Denver, CO||Hempstead, NY||Boca Raton, FL|
|Metro Area||Denver, CO||Long Island, NY||West Palm Beach, FL|
|% annual change in asking prices, mix-adjusted, Aug 2012 (Trulia)||8.9% (7th)||1.3% (54th)||10.4% (4th)|
|Construction permits, per 1,000 units, Jan-Jul 2012 (Census)||5.8 (15th)||1.0 (98th)||4.5 (33rd)|
|% cumulative change in home prices, peak-to-trough (FHFA)||-8% (19th)||-20% (56th)||-48% (92nd)|
|% housing units vacant, Sep 2012 (U.S. Postal Service)||2.5% (33rd)||1.4% (5th)||6.7% (98th)|
|Homes in foreclosure, per 1,000 units, Aug 2012 (RealtyTrac)||10.6 (47th)||15.6 (68th)||33.0 (96th)|
Ranking is more favorable for higher price changes, more construction, fewer vacancies and fewer foreclosures.
What, if anything, can the candidates say about housing in each of these cities?
- Denver doesn’t give the candidates much to say about housing: the housing bubble and bust were mild there, and strong job growth is fueling price increases and construction activity. It does show that economic recovery helps the housing market. Obama could point out that the 2009 economic stimulus ultimately prevented a worse recession and was therefore good housing policy. Romney, however, could argue that with strong economic growth, the housing market improves on its own.
- Long Island doesn’t give the candidates much to say about the housing crisis, either, as it, too, wasn’t especially hard-hit. But Long Island illustrates a long-term policy challenge for America’s big coastal cities: the high cost of housing, aggravated by the difficulty of building new housing in big, coastal cities. Of course, with the post-bubble price declines and low mortgage rates, homeownership is very affordable relative to renting, so affordability is far from issue #1 in 2012. Furthermore, the difficulty of building new housing is more about local regulations than national policy, so neither Obama nor Romney can score points by using Long Island to talk about housing.
- Boca Raton, in the West Palm Beach area, was one of the epicenters of the housing crisis. Huge price declines, persistent vacancies and continued foreclosures: it’s the perfect setting for the Obama to argue that the government needs to help the housing market or for Romney to argue that Obama’s efforts to help the market have failed.
It’s clear that the Boca Raton debate, in the West Palm Beach area, is where the candidates should duke it out over housing. But here’s the rub: Boca Raton is the one debate that’s going to focus only on foreign policy. Domestic policy – which includes housing – is fair game in Denver and Hempstead NY, but not in Boca Raton. Whoever’s calling the shots must really not want the candidates to talk about housing where it matters most.