Yahoo Finance I’m an Economist: 5 Cities Where I Wouldn’t Buy a House If Biden Is Re-Elected
Exorbitant interest rates and ever-increasing housing costs have already priced many would-be American buyers out of the real estate market — or at least made it much harder to afford property.
According to the U.S. Census Bureau and the Department of Housing and Urban Development, the average sales price of a home is a whopping $505,700. The Federal Reserve Bank of St. Missouri reported that interest rates on 30-year fixed-rate mortgages (FRMs) hover at nearly 7%. Rates on 15-year mortgages aren’t much better.
Considering the fact that the median weekly earnings of full-time workers in the U.S. is only $1,139 — or $59,228 a year — it’s not surprising that homeownership is already tough to achieve. But the upcoming presidential election could make it even harder to buy a house in some areas.
While it’s still unknown exactly how the next election will affect housing prices and the economy as a whole, there are bound to be some significant changes on the horizon. Here’s what Dennis Shirshikov, an economics professor at City University of New York, had to say about the direction of the housing market and where you might want to avoid purchasing a home, if Biden is re-elected.
Also here are predictions for the housing market if Biden wins again.
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A Re-Election Could Impact the Housing Market In Several Ways
If Biden gets re-elected for a second term, the results on the housing market wouldn’t be as straightforward as one might think, Shirshikov said.
“His administration has focused on increasing affordable housing and addressing supply constraints, which could lead to more housing construction and potentially moderate home prices,” he said. At the same time, Biden’s economic policies could play a key role in influencing both inflation and housing interest rates.
“While the Federal Reserve is the primary driver of interest rates, the Administration’s fiscal policies — such as infrastructure spending and social programs — could exert upward pressure on inflation,” he said. This, in turn, could lead to higher interest rates over time.
Mortgage interest rates are a key factor in housing affordability. The higher the rates, the higher the monthly mortgage payment will be. Higher rates also mean higher interest charges over the life of the mortgage loan — often adding hundreds of thousands of dollars to the total cost of homeownership.
If mortgage rates continue to increase with a Biden re-election, it could result in fewer people applying for mortgages. This could dampen housing demand as the cost of borrowing money becomes increasingly less affordable, Shirshikov said. On the other hand, it could also slow the pace of home price increases.
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Changes to the Housing Market Won’t Be Equal Across the Board
The effects of a Biden re-election are likely to be widespread, but uneven across different regions, Shirshikov said. It depends heavily on the existing housing market and local economic conditions.
Specifically, Shirshikov believes areas that already have high demand for housing and relatively limited supply — like many coastal cities — will be impacted the most. This includes cities within the states of California, Florida and certain Northeast coastal regions.
Certain swing states — like Arizona, North Carolina and Wisconsin — could also experience more rapid growth and higher prices. The same goes for non-coastal, high-cost urban areas, Shirshikov said.
On the other hand, areas with more balanced housing markets are less likely to experience significant changes, he said. It’s also possible that rural areas where home prices and demand have historically been low will see more significant growth in the housing market as more people — particularly first-time buyers — start seeking out more affordable options.
Top Cities To Avoid Buying a Home After a Biden Win
Of course, it’s too early to say with certainty how the housing market will look in the next four years. Regardless of which presidential candidate wins the election, there are going to be some major changes either way.
But if Biden does win, here are the top cities Shirshikov believe will become even more unaffordable and should thus be avoided:
San Francisco, Calif.
Los Angeles, Calif.
New York City, N.Y.
Austin, Texas
Seattle, Wash.
These areas, he said, as well as other up-and-coming hubs, are likely to see some significant impacts if Biden wins. As a prospective buyer, you might also want to avoid major cities in Arizona, Texas, Florida and Washington D.C. These major metropolitan areas have already experienced quite a bit of growth in recent years and are likely to continue to become more expensive — even if Biden doesn’t win.
According to Urban.org, nearly 63% of American homeowners have a mortgage. If you’re thinking about joining them — that is, if you plan to obtain financing to afford your next or first home — you’ll want to keep a close eye on how things go over the next few months or years.
From soaring housing prices in tech hubs to fluctuating interest rates, these factors can have a major impact on how affordable your purchase will be. Depending on your financial situation and goals, you might be better off avoiding these already expensive, high-demand areas and turning to more affordable locations instead.
Just remember, there are no guarantees of what will happen once the upcoming presidential election concludes. So, do your due diligence before making any major financial decisions.
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This article originally appeared on GOBankingRates.com: I’m an Economist: 5 Cities Where I Wouldn’t Buy a House If Biden Is Re-Elected
