Housing costs account for 90% of inflation – The role of the housing crisis in the 2024 presidential election campaign

A critical issue in the upcoming 2024 presidential election is the current housing crisis in the United States, with both major parties scrambling to present solutions to increasingly worried citizens. Real estate agent Mike McCann, who has been helping Philadelphia residents buy and sell homes for decades, said the market is unlike anything he has ever experienced.

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“Sales have dropped dramatically compared to a few years ago,” said McCann The Financial Times“The crazy thing is that in every other downturn in my 38 years, prices kept falling – but inventories were low. People are paralyzed and say, 'I'm not selling my house because I have a 2.6 percent mortgage rate.'”

This reluctance to sell and high mortgage rates have created a perfect storm that has caused housing-related spending to account for nearly 90% of the inflation recorded in July. With the Federal Reserve expected to begin cutting interest rates in September, some relief may be in the offing for new buyers. But experts warn the impact may be slow to materialize, making this a crucial issue as the election approaches.

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The cost of living is a major concern for Americans, posing a challenge for candidates vying for the favor of a fickle electorate. Vice President Kamala Harris has put forward proposals to improve housing affordability, one of which includes a credit of up to $25,000 for first-time buyers.

“We should be doing everything we can to make buying a home more affordable, not less,” Harris said during her speech in Raleigh, North Carolina.

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Harris also called for the construction of three million new housing units for sale and rental over the next four years. Janneke Ratcliffe, vice president of the Housing Finance Policy Center at the Urban Institute, told CNBC that significantly fewer new single-family and multifamily rental homes have been built since the foreclosure crisis between 2007 and 2010. Many experts say increasing supply will help solve the housing affordability problem.

Other initiatives Harris plans to introduce include tax breaks for homebuilders to increase supply and measures to combat unfair business practices by commercial landlords.

Former President Donald Trump has taken his own approach to solving the housing crisis, stating that cracking down on legal and illegal immigrants is necessary to free up housing for U.S. citizens. He also stated that the price of energy contributes to housing affordability and plans to increase the supply of energy resources with his call to “drill, baby, drill.”

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Beyond these two ideals, Trump's Republican platform promises to allow home construction on federal land and to provide tax breaks for first-time homebuyers.

Housing remains a challenge for many Americans. Rising rents and new home prices are making it increasingly difficult for average families to make ends meet. According to the National Association of Home Builders, 75% of U.S. households cannot afford a new home at the median price.

Given the complexity of the housing crisis and its impact on inflation, voters must consider the long-term implications of the proposed solutions. Consulting a financial advisor can provide advice tailored to an individual's situation and help navigate this difficult economic environment.

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