Housing Misery Index: Final 2012 Election Edition

In our last update of Trulia’s Housing Misery Index before the election, we look at which states have the highest housing misery. The top two – Nevada and Florida – are both swing states. However, both have also seen prices rise sharply in the last year, so their misery is mixed with some relief.

We also look beyond the election to see whether the candidates will prioritize housing issues if elected, based on how miserable their most loyal states are. Presidents may campaign on the issues that matter most in swing states, but, once elected, their policies favor the states that voted for them. Here’s what it all means for the election homestretch.

The Most Miserable Housing States

Our Housing Misery Index takes two important indicators of a state’s housing market and adds them together. These are:

1. The percentage change in home prices from each state’s own peak during last decade’s bubble until today, from FHFA. Big price drops lead to more underwater borrowers and less household wealth, which hurt the housing market and hold back economic recovery.
2. The percent of mortgages either severely delinquent or in foreclosure, from CoreLogic. Defaults and foreclosures damage consumer confidence in the housing recovery, and foreclosures hurt not only the people who lose their homes but also their neighbors.

Nevada, Florida, California and Arizona have the highest housing misery in the country, thanks to big price declines and – especially in Florida – a very high share of homes in delinquency or foreclosure. In all four of these states, though, prices are rebounding: asking prices are up year over year (Y-o-Y) 4.5% in California, 6.9% in Florida, 7.0% in Nevada and 18.1% in Arizona according to the September 2012 Trulia Price Monitor.

Misery in the Swing States

The two most miserable housing states – Nevada and Florida – are “swing states” in the election; so says RealClearPolitics as of October 15. These are states that could still go either way in next month’s Presidential election, and so the issues that matter most in these states are the issues the candidate will – or at least should! – focus on. There are now 11 swing states, which are bolded and enlarged in our chart. (Several organizations track “toss-up states”, “swing states” or “battleground states” – they mean the same thing and come up with pretty similar lists.) If and when the candidates decide to campaign on housing issues, they’ll do it in Nevada or Florida. Another swing state, Michigan, also ranks high on housing misery. But the other eight swing states have moderate or low housing misery: Ohio and Pennsylvania, for instance, are critical to this election, but housing policies aren’t what the candidates should talk about in those lower-misery swing states.

The Map of Misery

The housing crisis took its greatest toll in the Sunbelt. Even today, six years after the housing market started to tank, prices there remain far below their peak, and many homes are delinquent or in foreclosure. But the misery is localized. The West and Florida have it worst; the Midwest and the Northeast still feel the pain, too. But much of the center of the U.S. escaped the misery: Texas, Oklahoma, the Dakotas, and other Plains and Mountain states have among the least misery in the country.

It’s November 7 and the Election Is Finally Over. Now What?

Even though candidates focus on swing states during the campaign, election winners often end up rewarding those who got them elected – and punishing the states that voted against them. (This applies to cities, suburbs and rural areas, too: Democrats favor policies that especially help cities – which, after all, tend to vote Democratic – more than Republicans do.) If a re-elected President Obama or a newly elected President Romney rewards the states that voted for him and punishes the states that didn’t, what would that mean for housing policy?

Again, we turned to the election predictions at Real Clear Politics, and divided states into three groups: those “solid” or “likely” to vote for Obama, like California and New York; those “solid” or “likely” to vote for Romney, like Texas and Georgia; and those in the middle, which include the 11 swing states plus a few more than are only “leaning” (but not “likely” or “solid”) one way or the other.

The differences are stark. Obama’s loyal states need housing policy much more than Romney’s loyal states do. Let’s start with the Housing Misery map. Most of the low-misery states in the center of the country are strong Romney supporters. The “solid” or “likely” Obama states have an average Housing Misery Index of 32, compared with just 12 for the “solid” or “likely” Romney states. Furthermore, Obama’s base states saw price gains of just 0.9% in the past year, slower than 2.3% for Romney’s base states. It goes on: not only do Obama states have more Housing Misery and a weaker recent price recovery: they also are much less affordable. The median home price per square foot is $168 in the “solid” or “likely” Obama states – almost twice as much as the median price per square foot of $87 in the Romney states. Obama is strong in the expensive coastal states of California and the Northeast, while Romney’s strength is in the lower-cost South and center of the country. Finally, the homeownership rate is lower in the Obama states (60%) than in the Romney states (67%).

Note: state election predictions from RealClearPolitics, as of Monday, October 15. Housing data for each group of states is weighted by electoral votes for each state.

That means every type of housing pain – post-bubble housing misery, a slow price recovery, lack of affordability and barriers to homeownership – is more severe in Obamaland than in Romney Country. If the next President rewards those who voted for him, he’ll focus on the issues that are most pressing in the states that elected him. That would make housing a higher priority for President Obama than for President Romney.