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Home Prices Correlate with Political Leanings in New Study

November 13, 2013

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People in cities that voted for Obama got the best return on their home purchase. According to Trulia Chief Economist Jed Kolko, who compared home price trends in blue and red cities (blue or red according to how much of a margin Obama won or lost by), from October 2012 to October 2013, home prices have risen by more than 13% in seven of the ten blue-est cities, but only in one of the ten red-est cities. Before jumping to conclusions about the relationship between home prices and political affiliation though, it’s important to understand the context of this trend.

First, the home recovery in liberal states may come from selection bias. Because liberals tend to believe the economy is recovering nicely under Obama, and because they tend to move to liberal places, they’re more inclined than conservatives to buy homes. As long as consumers have confidence, economies will grow. Under Obama, only liberals have confidence.

So it’s not so much being liberal in itself, but more of being liberal under Obama.

Second, while liberal cities are recovering the fastest, they were also hit the hardest during the crisis. This was partly due to local policies having more leniency on the subprime mortgages which eventually defaulted. Banks are now all tightening how much mortgages they give out, which means more relative confidence in blue city real estate, resulting in higher prices.

After learning their lesson, we can’t expect liberal cities to have the same fast crash, and subsequent fast rise, in the future.

As with anything in life, the best way to succeed in real estate is to make conclusions on statistics with thought rather than instinct.

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From → Gary Richetelli

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