The diverging relationship between economic performance and political success in the U.S. highlights a shift from the past, where a strong economy positively impacted incumbent approval ratings. President Biden’s approval ratings remain unaffected despite recent economic improvements, suggesting a decoupling of economic sentiment and political fortunes. This phenomenon, which contrasts with stable economic-political linkages in Europe, is attributed to the U.S.’s heightened partisan divide, where political allegiance increasingly dictates economic perception, challenging the traditional belief that “it’s the economy, stupid” in American politics.

Key Points:

• President Clinton’s political advisor, James Carville, highlighted the economy’s role in political success during 1992 presidential campaign with assertion, “It’s the economy, stupid.”
• Voter sentiment has traditionally linked to economic performance, affecting incumbent party success.
• Recent trends show a disconnect between the U.S. economy’s health and President Biden’s approval ratings.
• The COVID-19 pandemic and inflation crisis may have influenced this anomaly, yet the shift predates these events.
• Research indicates a decoupling of economic sentiment and presidential approval in the U.S. since Obama’s tenure.
• This phenomenon seems unique to the U.S., with European governments’ popularity still tied to economic conditions.
• S. political polarization may explain the decoupling, with partisan views influencing economic perceptions.
• Studies suggest that political biases skew individual economic assessments, impacting presidential approval.
• The current U.S. political climate suggests economic policy impact on electoral decisions is diminishing.
• Contrasts with Europe, where economic sentiment is more uniform across political lines, suggesting a more rational political-economic relationship.

Source: Financial Times

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Unlike many other metropolitan areas across the country, the housing market in Southwest Florida is comparably flush with for-sale inventory.

“I think one of the major trends we are seeing is that our overall inventory is up 60% year over year compared to 2023,” said PJ Smith, president of the Naples Area Board of Realtors and the broker-owner of Naples Golf to Gulf Real Estate. “We are seeing a healthy increase in inventory, which we really needed.”

According to data from Altos Research as of March 15, the 90-day average number of single-family active listings in the Naples-Marco Island metro area was 2,362, up from 1,605 one year earlier but down from the 3,760 listings recorded in late March 2019 prior to the COVID-19 pandemic.

In the nearby metro area of Cape Coral-Fort Myers, active single-family inventory over the previous 90 days averaged 6,500 listings as of March 15, above its March 2020 level of 5,044 listings and approaching its March 2019 level of 7,243 listings.

Smith attributes the uptick in inventory to a bump in new listings. The 90-day average number of new listings as of mid-March 2024 was 170 in Naples-Marco Island, and 432 in Cape Coral-Fort Myers). There is also some pent-up desire to sell being released by a steadier interest rate environment and an overall slower market.

“Last year we were still adjusting from the effects of the pandemic market, but now the trends seem to be getting back to our baseline, which is more like our 2019 market,” Smith said. “Days on market is also trending back to what is more normal for our market as well.”

Data from Altos Research shows that the 90-day average median number of days on market in the Naples-Marco Island metro area was 70 days as of mid-March, up from a record low of 21 days in mid-May 2022.

While some properties are sitting on the market longer, Smith noted that those in good condition, priced well and in a desirable location are still selling quickly.

“I just sold a property after two days on the market,” Smith said. “We are still seeing properties go pending quickly and some with multiple offers.”

Local real estate professionals attribute the slower market to a variety of factors including higher home prices, which have remained steady despite the slowdown, higher interest rates, and rising costs for homeowners and flood insurance.

“Florida, like many places, is seeing the insurance piece of the component impacting people’s payments in a way that is making it hard to them to navigate the market,” said Cyndee Haydon, a Seminole-based agent for Future Home Realty agent.

According to an analysis by S&P Global, between 2018 and 2023, homeowners insurance rates in Florida have jumped by 43.2%. From 2022 to 2023 alone, rates rose 15%. And data from the Insurance Information Institute shows that Floridian homeowners are paying an average of nearly $6,000 a year in insurance, which is nearly three times what they paid in 2019. In comparison, the average U.S. homeowners insurance policy was roughly $1,700 in 2023.

Compounding the rising insurance costs is the fact that many insurers and reinsurers have made the decision to leave the state. These companies have cited the recent uptick in the number and severity of hurricanes and other weather-related disasters impacting the Sunshine State.

“Florida is seeing notably more hurricanes, so continuous years of poor experience, meaning losses for the insurance carriers, they have no choice but to increase those premiums,” said Sean Kent, the senior vice president of insurance at FirstService Financial.

“Additionally, there are just a few carriers that are willing to participate and insure some of those units, so accessibility to coverage has been reduced significantly.”

These rising costs are understandably impacting the ability or willingness of some buyers to purchase specific properties.

“Insurance is an expense that is expected — but nothing as substantial as we are seeing today,” said Sheryl Houck, a Tampa-based eXp Realty agent. “We are seeing contracts fall through during the due-diligence period because of the sticker shock on insurance costs, so that is definitely a problem.”

Due to this, real estate professionals are bringing insurance partners into their transactions much earlier than before.

“It is definitely a significant concern and issue,” Smith said. “What we recommend is that before you put a property under contract, you consult and get a quote so that you know what your potential insurance costs will be.”

In addition to navigating rising insurance costs with buyers, agents said they have also had to field questions from past clients about the rising premiums, who often need help in finding ways to lower their costs.

“We have instances where clients reach out and ask why they are seeing a 62% jump in their insurance, but we have been able to help them, whether that’s raising their deductible or putting them in touch with some of our other insurance contacts,” Houck said.

Despite rising insurance costs that make homeownership in these markets more costly, local real estate professionals don’t feel that this is behind the recent uptick in new listings.

“We’ve seen a lot of people move out of state to more affordable markets,” Houck said, ”but it is all relative because we are also seeing a lot of people moving in, because our market is more affordable than New York or California.”

Still, if premiums continue to rise, agents feel like this could become a bigger issue, especially for the area’s large population of retirees.

“When we look at people that are getting closer to retirement or have a fixed income, it becomes more and more of a concern,” Haydon said. “People are really being pinched with affordability.”

But while rising insurance costs are certainly a challenge for owners and buyers in Southwest Florida, Haydon said the slower housing market is good news for a lot of buyers.

“I have negotiated some of the most incredible deals for my buyers that are in the market right now that I have seen since the 2008 housing market crash,” Haydon said. “I had a buyer last month and the property was listed as $475,000, but with the necessary repairs, its value was $410,000 and we were able to negotiate an offer for $410,000.

“Normally, I would tell buyers that if they are 10% off the list price, they are dealing in different realities than the seller.”

Haydon said she has also recently had offers accepted with sale contingencies, closing cost coverages and a variety of other seller concessions.

Although things have slowed from the height of the frenzied post-pandemic market, local agents are optimistic about where the market is headed this spring and summer.

“It is very busy. Literally since Jan. 1, the spigot has turned on,” said Dyan Pithers, co-founder of The Pithers Group, a Tampa-based and Coldwell Banker Realty-brokered firm. “There are a lot of buyers in the market, and we are really focusing on showing value to sellers to get those listings out there so there are homes for buyers to purchase. It is going to be a really strong spring and summer.”

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