It appears that, with the exception of building permits, Democrats were more right about feeling pessimistic about 2017 than Republicans were right about being optimistic. First, let’s look at the bright spots: building permits are performing nearly equally as well in blue counties and red. For example, blue counties have seen an increase in building permits from 5.5 to 6.6 permits per 1,000 households – an increase of 19.6%. Red counties have fared nearly as well at 18.2%, increasing from 4.8 to 5.7 permits per 1,000 households. When it comes to the valuation of those permits, however, blue counties saw a decrease in average valuation from $73.6 million to about $70.6 million – a drop of 4%. Similarly, red counties saw a decrease of 3.3%, moving from $40.2 million under Obama to $38.9 million under Trump.
Across our other three housing market indicators, red vs. blue housing market performance under Trump has been mixed. Red counties and blue counties alike have seen a decrease in home value gains, but the decrease was larger for blue counties (8.2% to 6.9%) than it was for red counties (8.1% to 7.9%). Rent growth has declined similarly in both red and blue counties, by 2.6 and 2.5 points, respectively. But while the decrease was nearly the same, red counties are actually seeing year-over-year declines in rents by 0.5%. Last, the change in vacancy rates in red and blue counties between the Obama and Trump administrations was small and not statistically significant, at 0.02 and -0.02 points for blue and red counties, respectively.
Is the Housing Market Doomed Under Trump?
Our answer is a resounding no. This is because of two important factors. First, the economic cycle was already quite mature when President Trump took office, so the prospects of any housing market indicator to be greater in Trump’s first year than Obama’s average over his final four years was low because most of our housing market indicators rebounded shortly after the housing market hit bottom in 2012. Second, softening housing market indicators under Trump aren’t necessarily bad for everyone trying to engage in the market, as we note our methodology below. For example, moderating rents and prices, while not so great for property owners, actually benefit renters who might be trying to save up for a down payment. So despair not: signs that housing is cooling under Trump is likely more of a reflection of where the housing market is relative to the economic cycle. Furthermore, new housing construction – which is the one bright spot in our report – is sorely needed to help relieve the inventory shortages we’ve noted over the past few years.