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Americans are preparing to vote on Tuesday for the midterm elections which could cost the Democratic camp dearly. As often, the economic situation will guide the choice of voters. According to a recent Ipsos-ABC News poll, the state of the economy and inflation are the top issues that will determine the vote of citizens. And one of the major concerns of the moment, in addition to inflation, is the real estate crisis that the country has been going through for several months.
What better sums up the “American dream” than home ownership? maybe the car. As for the real estate market, it has turned around in the United States at a speed not seen for a long time. In September, the buyer confidence index fell to its lowest level since 2011. The same goes for real estate developers, their confidence index is at its lowest since 2020. However, the homes are there and the potential buyers too !
What’s happening in the market ?
The increase in the Fed’s key rates, the US Federal Reserve, since last spring has caused the cost of credit to soar, which largely explains the current downturn. During the health crisis, we witnessed an explosion in purchases favored by historically low borrowing rates.
Today, it’s quite the opposite: for a 30-year loan, current rates are around 7%, whereas last year it was half that. A serious indicator of the direction the market is currently taking: sales of new homes slowed sharply in September.
The proportion of first-time buyers, those who buy for the first time, is only 26%, unheard of for 40 years. Even on the secondary market, many owners are reluctant to sell their property because it would be tantamount to abandoning the rather favorable conditions of their credit.
How do promoters react? ?
During the health crisis, they could not build fast enough to meet the explosion in demand. Today, they multiply commercial gestures to sell their goods. Some put them up for rent, for lack of being able to sell them, in order to generate income.
These professionals cancel or renegotiate land purchases. Traumatized by the 2007-2008 crisis, which had forced half of them into bankruptcy, they did not fire up during the pandemic to build more than necessary. And this, so as not to risk ending up with expanses of empty houses, the images of which went around the world some fifteen years ago.
► Read also : Why the real estate market is booming in the United States
What consequence for the vote of the midterms ?
For many commentators in the American press, the youngest, who can no longer have easy access to housing, risk not going to vote or voting against the Democrats. The Republican camp does not hesitate to overwhelm the administration in place.
But this is forgetting a little too quickly that, on the one hand, the current government does not necessarily have control over the FED’s monetary policy, which is leading to the rise in rates. And on the other hand, that the housing crisis in the United States is protean and has deep roots. For years, we have observed the high cost of certain land. And for a long time now local town planning rules, sometimes very strict, have prevented the construction in the heart of towns and not in the distant outskirts of new housing at affordable prices.
Republicans could reap some of the benefits of this crisis. The irony is that one of the measures that could be sacrificed when they arrive in the chamber is the ” First-time buyer tax credit “. The Democrats had succeeded in passing this text last year via an agreement with the Republicans to avoid the paralysis of federal services, the famous ” shutdown “. Its objective: to help young Americans in the purchase of their first home.
► To read also: United States: in the county of Northampton, the Republicans are betting a lot
► And bref : the fall in exports to China
For the first time in two years, Chinese exports are down 0.7% year on year, according to customs. They had jumped almost 6% in September, which was not surprising given the context. There is the tightening of health restrictions still fully assumed by the Chinese government, the rise in energy prices, but also the drop in international demand, considering the gloomy economic outlook for American and European customers. Chinese imports have also slowed with the health context. The Chinese trade surplus is therefore “only” 85.64 billion euros against more than 100 billion last July.