Do Elections Hinge on Mortgage Rates?

July 18, 2018

Changes in the availability of mortgage credit can impact voting patterns in presidential elections, according to a new paper by researchers Alexis Antoniades of Georgetown University and Charles W. Calomiris of Columbia University. They analyzed swings in mortgage credit to study the impact they may have had on political choices. When credit is readily available, consumers don’t seem to be at all politically influenced by mortgage credit. But when loans are challenging to come by, they take their anger out on incumbent politicians and parties, the report suggests.

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“If the supply of mortgage credit had not contracted from 2004 to 2008, [Republican presidential candidate John] McCain would have received half the votes needed in nine crucial swing states to reverse the outcome of the election,” which went to Barack Obama, the researchers write. “The effect on voting in these swing states from local contractions in mortgage credit supply was five times as important as the increase in the unemployment rate.”

Researchers also note that the limits on mortgage credit during Obama’s first term also had consequences for the Democratic Party, which lost congressional seats. On the other hand, when credit was widely available, it did not seem to help the incumbent Democratic Party in 2000 or the Republican Party in 2004, researchers note. Consumers don’t seem to reward politicians for actions to expand credit, but they do appear to take notice and action when it isn’t widely available, the researchers note.

“Asymmetries in voting response may reflect attribution bias,” the researchers write. “When a voter gets a job or secures a mortgage, he or she may conclude that this is a consequence of his or her achievements; when a voter loses a job or is rejected for a mortgage, he or she may find it easier (in the sense of avoiding cognitive dissonance) to blame others.”

Can the Mortgage Market Predict the Presidency?” MarketWatch (July 17, 2018)