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articles about “Housing Policy

Why There’s Nothing New About Housing in the State of the Union

Trulia's Chief Economist comments on what wasn't said about housing during President Obama's State of the Union address, and why.

Jed Kolko, Chief Economist
January 29, 2014

In tonight’s speech, President Obama mentioned housing twice. First, at the start of the speech, he included the “rebounding housing market” as part of his victory lap. Second, he called on Congress to “send me legislation” that would protect taxpayers from paying for another housing crisis while keeping alive the “dream of homeownership.” That line was vague, and it didn’t bring down the house. What he meant was made clearer in the companion policy fact-sheet: Obama was referring to the four principles for housing-finance reform legislation that he outlined last August.

Why nothing new or specific about housing? There are plenty of housing issues that President Obama might have talked about. Affordability is worsening, mortgage credit appears tight, and delinquencies and foreclosures are still too widespread. Why did none of these make the final cut? Four reasons. The housing policies that Obama might have talked about were either:

1) Not pressing enough. The housing market is in the best shape of Obama’s presidency. Construction and sales in 2013 were both at their highest levels since before he took office, and prices have bounced back to within range of their long-term norms. Two of Obama’s main housing initiatives during his first term are less essential today:

  • Refinancing is less of a financial slam-dunk for households now that mortgage rates have risen.
  • Loan modifications are less urgent because rising prices and a strengthening economy have lifted millions of borrowers back above water and reduced the share of mortgages in default.

2) Mostly settled. A key measure to prevent a repeat of last decade’s crisis is now in place: the most contentious elements of the qualified mortgage / ability-to-repay and qualified residential mortgage rules were hammered out last year, and QM is now in effect. While the impact and evolution of these rules is still to be seen, the main features of the rules themselves have been settled.

3) Too local. Affordability concerns are growing, as prices and mortgage rates climb up from low levels, but affordability is a local, not national, crisis. In San Francisco, just 14% of homes for sale are within reach of a household with median local income, versus more than 80% in some metros in the Midwest and South. One key solution to an affordability crisis is also local: more construction in markets where demand is strong but supply is held back by regulations and other constraints.

4) Too messy. The huge, looming housing question is how to reform or replace Fannie Mae and Freddie Mac. The “send me legislation” line repeated Obama’s call last August for Congressional action on Fannie/Freddie reform. But tonight he didn’t reveal any new thinking on the fundamental challenge: how to keep the 30-year fixed-rate mortgage relatively cheap and widely available while minimizing taxpayer exposure to the next housing meltdown. Any housing-finance reform that could achieve that would be too complicated, too dependent on Congress, and would take too long to succeed for a speech about a “year of action.”


Shutdown Hasn’t Hurt October Asking Home Prices So Far

Asking home prices in the first half of October are up 1% versus September. Prices changes are no different in metros more dependent on the federal government, like Washington DC, compared with metros less directly affected by the shutdown.

Jed Kolko, Chief Economist
October 16, 2013

How has the two-week shutdown of the federal government affected home prices? The main sales-price indexes won’t tell us until 2014: homes going under contract in October will close in November (or later), and November sales prices will get reported starting in January. But the Trulia Price Monitor shows how asking prices – a leading indicator of sales prices – are trending almost in real time, adjusting for both the mix of listed homes and for seasonality. This morning we analyzed asking prices between October 1 and October 15.

Finding the Effect of the Shutdown on Asking Home Prices
Nationally, asking home prices are up 1.0% between September and the first half of October, seasonally adjusted. This partial month-over-month increase is roughly in line with the month-over-month increases over the past few months. Before the shutdown started, several factors were already cooling down price gains, including expanding inventory, higher mortgage rates, and declining investor activity. Therefore, comparing how much prices have risen in October to date with previous months can’t, by itself, show whether the shutdown has affected asking prices.

Instead, to tease out the effect of the shutdown on asking home prices, we looked at price trends across individual metros. We compared price changes in metros where the local economy is more dependent on the federal government – like Washington D.C., of course, but other metros around the country as well – with prices changes in metros where the local economy is less dependent on the federal government. (Our measure of dependence on the federal government – and therefore likely impact from the shutdown – is the share of local wages coming from the feds.)

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Metros That Could Suffer Most from a Federal Government Shutdown

The Washington D.C. economy would suffer most in a federal shutdown, but other metros across the country could also be hit especially hard.

Jed Kolko, Chief Economist
September 30, 2013

The federal government could shut down tomorrow. Those who rely on certain government services and programs would be immediately affected, as would the federal employees who wouldn’t get paid. If it goes on for a long time, the shutdown could hurt the economy and therefore housing demand, particularly in the metros where people depend more on federal paychecks for their livelihood.

We looked at the share of total local wages going to federal employees. No surprise that Washington D.C. and its suburbs depend most on federal paychecks: 18.5% of Washington D.C.-area wages go to federal employees, and 12.6% in neighboring Bethesda-Rockville-Frederick, MD.

But other metros – even some that are thousands of miles outside the Beltway – are also very dependent on the federal government: more than 10% of total wages go to federal employees in Virginia Beach-Norfolk, Honolulu, and Dayton, OH.

Metros Where A Government Shutdown Could Hurt Most

# Metro % of Local Wages Going to Federal Workers
1 Washington, DC-VA-MD-WV


2 Bethesda-Rockville-Frederick, MD


3 Virginia Beach-Norfolk, VA-NC


4 Honolulu, HI


5 Dayton, OH


6 El Paso, TX


7 Colorado Springs, CO


8 Oklahoma City, OK


9 Albuquerque, NM


10 Bakersfield, CA


Data from Quarterly Census of Employment and Wages (QCEW). See note below.

At the other extreme, less than 1% of total local wages go to federal employees in Fairfield County (across the Connecticut border from New York), San Jose, and Allentown, PA-NJ.

Metros Where A Government Shutdown Could Hurt Least

# Metro % of Local Wages Going to Federal Workers
1 Fairfield County, CT


2 San Jose, CA


3 Allentown, PA-NJ


4 Lakeland-Winter Haven, FL


5 Charlotte, NC-SC


6 Orange County, CA


7 Akron, OH


8 New York, NY-NJ


9 Hartford, CT


10 Baton Rouge, LA


Data from Quarterly Census of Employment and Wages (QCEW). See note below.

But San Jose and New York aren’t completely immune from the shutdown, of course: people and businesses there, like everywhere, depend on federal government services. Furthermore, the harm from a government shutdown would be minimal compared with the damage that the government could cause later this month if it hits the debt ceiling, stops paying some or all of its bills, and triggers a financial crisis. Everyone – not just federal employees and people who want to sell their homes to them – needs to be watching Washington D.C. this month.

These data are from the Quarterly Census of Employment and Wages (QCEW), which reports total local wages for all employees and for federal workers, for the first quarter of 2013. The metro rankings and magnitudes are similar using the share of employment (instead of wages) from the QCEW or from the American Community Survey (ACS).


Better Off Than 4 Years Ago? Voters Didn’t Care

Obama got less, not more, of the vote in 2012 relative to 2008 in metro areas where unemployment fell and home prices rose during his first term.

Jed Kolko, Chief Economist
November 14, 2012

(After publishing this post, we got great feedback and decided to do a more technical and detailed follow-up, which is here — JDK.)

Why did Obama win? Throughout the campaign and in exit polls, voters said the economy was their #1 issue. But election data shows that voters did not reward the President in markets where the jobs and housing recoveries are strongest.

How Obama Fared In 2012 Versus 2008
To see how the local housing and jobs recoveries affected the election, let’s first compare Obama’s margin in 2008 with Obama’s margin in 2012, using county-level election results compiled by the U.S. Election Atlas. Nationally, the latest count shows that Obama won 50.6% of the popular vote in 2012 compared to 47.8% for Romney – a margin of 2.7% (the numbers don’t add up due to rounding). In 2008, Obama won 52.9% versus 45.7% for McCain – a margin of 7.3%. Nationally, therefore, Obama’s margin fell from 7.3% in 2008 to 2.7% in 2012 – a drop of 4.5 percentage points.

In general, in metro areas where voters  favored Obama in 2008, they favored him again in 2012. (The correlation between Obama’s margin in 2008 and Obama’s margin in 2012 across metro areas was 0.99.) But Obama’s margin grew in some metros between 2008 and 2012 while falling in most metros. Comparing the presidential votes in 2008 and 2012 among the 100 largest metros, Obama’s margin increased most in Miami and New Orleans. His margin also increased in New York and the upstate metros of Syracuse and Albany.

Where Obama’s Margin Increased the Most

# U.S. Metro

Change in Obama’s margin, 2012 vs 2008

Obama’s margin vs Romney, 2012

Obama’s margin vs McCain, 2008

1 Miami, FL




2 New Orleans, LA




3 New York, NY-NJ




4 Baton Rouge, LA




5 Edison-New Brunswick, NJ




6 Syracuse, NY




7 San Jose, CA




8 Albany, NY




9 Fort Lauderdale, FL




10 Columbus, OH




Among 100 largest metros.                               

In the other direction, Obama did worse relative to his Republican challengers in 2012 than in 2008 in most metros – and more than 10 points worse in Salt Lake City, Indianapolis, and Lake County – Kenosha County (just north of Chicago).

Where Obama’s Margin Decreased the Most

# U.S. Metro

Change in Obama’s margin, 2012 vs 2008

Obama’s margin vs Romney, 2012

Obama’s margin vs McCain, 2008

1 Salt Lake City, UT




2 Indianapolis, IN




3 Lake County-Kenosha County, IL-WI




4 St. Louis, MO-IL




5 Grand Rapids, MI




6 Kansas City, MO-KS




7 Omaha, NE-IA




8 Austin, TX




9 Ventura County, CA




10 Allentown, PA-NJ




Among 100 largest metros.    

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What Obama’s Re-Election Means for Housing

Refinancing, new mortgage regulations, and the mortgage interest deduction all won on Tuesday. But the best shot at more principal reductions might have been lost.

Jed Kolko, Chief Economist
November 8, 2012

Throughout the 2012 presidential campaign, both candidates were short on specifics about their housing policy, to put it very kindly. They ignored housing in the debates and acted as if the housing crisis were over. Neither their actions nor their policy statements gave a clear idea of what they might do about housing. But what the candidates DIDN’T do or say helps draw out the differences between what housing policy will look like during Obama’s second term and what housing policy would have looked like with a Romney administration. Here’s what Obama’s re-election means for housing:

1.  The refinancing push continues. The Obama Administration has made it easier for homeowners to refinance at today’s low mortgage rates and plans to make refinancing available to even more borrowers. Refinancing is economic stimulus since it gives homeowners with mortgages more spending money, but it doesn’t help most people on the verge of losing their homes. Although refinancing has been a priority for Obama, Romney made no mention of refinancing in his housing plan – despite strong support for refinancing from one of his economic advisors.

 2.  New mortgage regulations are coming. The Consumer Financial Protection Bureau, established by the Dodd-Frank Act, will set new mortgage standards by January 2013. These standards will define which mortgages are judged to be beyond a borrower’s ability to repay and would therefore trigger legal and financial implications for lenders. These standards, yet to be established, will need to strike a delicate balance between protecting consumers from high-risk loans and giving lenders the incentive to expand mortgage credit. Romney blamed Dodd-Frank for holding back mortgage lending, pledging to “repeal and replace” it. But with Obama’s re-election, Dodd-Frank–and the coming mortgage regulations–is a reality.

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