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Impact of the U.S. Mortgage Market on the Midterm Elections

Mortgage availability might be at historical highs but according to a new study, that’s not going to help U.S. President Donald Trump—nor his party—come 2020.

According to “Mortgage Market Credit Conditions and U.S. Presidential Elections,” the availability of mortgage credit, or really, the lack thereof, can have a serious impact on who wins presidential elections.

When credit availability is low, voters take it out the incumbent—or the incumbent’s political party. In 2008, it might have even lost John McCain the election. Without the shrinking of mortgage credit during George W. Bush’s tenure from 2004 to 2008, the study found that nine swing states could have gone to McCain rather than Barack Obama.

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In fact, according to Charles Calomiris, professor of financial institutions at Columbia Business School and one of the study’s authors, the housing collapse, along with the decline in mortgage availability during Bush’s administration, played a “dramatic role in state-by-state outcomes in the 2008 election.”

“Pundits, political analysts and campaign operatives on a national level need to be looking at mortgage availability for everyday Americans to understand who’s going to win the White House,” Calomiris said. “We discovered that mortgage credit crunches are far more powerful than rising unemployment as a barometer for electoral success.”

But could those same findings translate to smaller-scale elections, like the midterms in November? According to Calomiris, in theory, yes. But will they? Probably not this time around.

That’s because the study also found that when mortgage availability is high—as it is now—there’s not much impact on voter behavior.

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“I don’t really think [today’s high mortgage availability] is going to help the Republicans in this election because people don’t really credit the incumbent party when they get their mortgage,” Calomiris said. “Our sort of interpretation, which is a mixture of psychology and economics, is like this: When your mortgage gets approved, you think you did it. When your mortgage gets denied, you think somebody else did it.”

Still, the possibility that it could impact midterm elections this November is there. According to Milton Ezrati, chief economist at Vested, it would likely impact Senate races more than House ones.

“It might have more impact on senatorial elections because senators are associated with larger questions than representatives,” Ezrati said. “Mortgage availability has improved, but, of course, the study points out that such improvements help a lot less than deterioration would hurt. Still, it removes one problem incumbents would otherwise face.”

More likely though, the mortgage market will play a bigger role come 2020.

“I would say that the real interesting question might be about the presidential election of 2020,” Calomiris said. “It’s certainly not impossible to imagine that sometime between now and two years from now, you could start to see a real decline in mortgage availability.”


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