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20 ELECTION SPOTLIGHT THE BALANCE OF POWER SHIFTS. SHELBY EXPECTED TO TAKE OVER AS CHAIR OF SENATE BANKING COMMITTEE U.S. Sen. Richard Shelby, R-Alabama, was expected to become the new chair of the Senate's Banking, Housing, and Urban Affairs Com- mittee following November's election in which Republicans retained control of the House of Representatives and made historic gains in the Senate to take over the majority. e move likely signals a shift in the housing policy that will emanate from the legislative branch. Shelby, 80, previously served as chair of the committee from 2003 to 2007. He is replacing retiring Sen. Tim Johnson, D-South Dakota, as chair, and in doing so is moving past commit- tee ranking member Mike Crapo, R-Idaho, in the pecking order in accordance with the GOP caucus rules that govern eligibility for leadership. Shelby will have just two years to lead the committee under GOP party rules after he takes the gavel in January. Despite working against the clock, many analysts and observ- ers believe that his experience and longtime involvement with the committee will allow him to speed up the committee's activity. It remains to be seen what issues Shelby will tackle first in his second term as Senate Banking Committee chair, but experts believe that a priority will be taking on issues with the Dodd-Frank Wall Street Reform Act. ere are reported to be several proposed bills regarding financial regulation reform in the House that have yet to make their way to the Senate due to outgoing chair Tim Johnson's opposition to such reform. Incoming Senate Majority Leader Mitch McConnell has signaled that the Repub- licans would look at revisiting Dodd-Frank. e Republicans will hold at least 53 seats in the Senate starting in January. It is likely that the number will grow to 54 with the probable victory of Republican Rep. Bill Cassidy over incumbent Mary Landrieu in the runoff for Louisiana's Sen- ate seat and the final results of Alaska's Senate election still being officially tabulated. Still, any housing legislation that Shelby proposes will need at least some Democratic support in the Senate in order to pass the fili- buster test. It's unclear whether McConnell will expand the so-called "nuclear option" to further diminish the traditional parliamentary procedure. While decrying outgoing majority leader Harry Reid's pushing of the nuclear but- ton to push through some of President Obama's nominees, McConnell did note that it was "hard to unring a bell." But the president still holds the power of the veto pen for any new policy reforms that make it out of the legislative branch. McCon- nell declared that he will attempt to set a tone of conciliation by working with the Democrats, including the president, to find areas of common ground. Whether there is any common ground to be had in housing policy remains to be seen. STUDY: PRESSING HOUSING CHALLENGES MORE APPARENT IN BLUE MARKETS A recent study conducted by Trulia shows that while Democratic- and Republican-leaning U.S. markets were affected similarly by the housing crisis, the most pressing current issues of the hous- ing industry seem to be more severely affecting Democratic-leaning metros. Based on the 2012 presidential vote, Trulia categorized the largest 100 metros in the U.S. as either red or blue. e Republican candidate, Mitt Romney, received more votes than the Democratic candidate, Barack Obama, in 32 states. In 40 markets, termed "light blue," Obama beat Romney by less than 20 percentage points. Trulia termed 28 markets to be "dark blue," meaning Obama's margin of victory was more than 20 percent in those markets. Trulia found there was not a significant dif- ference in price declines between red markets and blue markets following the housing bust in 2008, with peak-to-trough pricing averaging 16 percent in red markets, 25 percent in dark blue markets, and 26 percent in light blue markets. Likewise, according to Trulia, the recent recovery has been similar in both red and blue markets. Home prices were up 7 percent year-over-year in red markets in September, while dark blue and light blue markets saw gains of 6.3 percent and 6.2 percent, respectively. Trulia also reported that there was not a huge gap between red and blue markets regarding the number of homes in foreclosure, another measure of housing recovery. e fundamental differences between red and blue markets occurred in housing affordability, Trulia reported. In September, the 10 reddest markets all had a median asking price of lower than $130 per square foot, while nine of the 10 bluest markets reported a median asking price of higher than $130 per square foot. e correlation between price-per-square-foot and 2012 presi- dential vote margin was 63 percent, which was "statistically significant," according to Trulia. e only expensive red market as far as median asking price was Orange County, California, at $363 per square foot, and there was a huge dropoff to second on the most expensive list in red markets, which was Northport-Bradenton-Sarasota, Florida, at $150 per square foot. While Trulia reported that households in blue markets tend to have higher incomes than those in red markets, the higher incomes could not offset the higher home prices in those blue markets. Trulia's middle-class affordability measure, which measures the share of homes per sale that a certain median-in- come household can afford, is lower in blue markets. Also, according to Trulia, blue markets have greater income inequality and lower homeownership than red markets. "Because blue markets are less affordable, have lower homeownership, and have greater income in- equality, political leaders in Democratic-leaning and Republican-leaning metros may push for different policies," said Jed Kolko, chief economist at Trulia. "Furthermore, these local differences in home prices mean that some national housing policies favor red markets and others blue markets. For instance, the current system of conforming loan limits benefits red markets more because homes in those markets are likelier to fall within local loan limits." Due to higher home prices and more residents in higher tax brackets, however, the mortgage interest deduction currently benefits blue markets more, Trulia reported. Kolko concludes that the differences between red and blue markets could potentially make it tougher to reform long-stand- ing housing policies.

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