House prices could rank alongside Iraq in determining the next occupant of the White House, if the gloomiest property forecasts prove correct. A number of states that suffered most in the property slump over the second quarter of the year are either “swing” states or are seen as potentially vulnerable to a Democrat win.

Data published last week by the National Association of Realtors showed that Florida, Nevada, Ohio and Arizona suffered some of the worst decreases in home sales activity across the country.

Larry Sabato, Professor of Politics at the University of Virginia, said: “Florida has consistently been Republican, except for 2000, but now it is being seen as growing much more competitive and a top target for both parties. Nevada is very closely contested, but a bad economy there could be a bit of a coup for the Democrats. Arizona used to be Republican by a 20 per cent margin, which has now narrowed to about 5 per cent.”

In the last election, President Bush won Arizona by a 9 per cent margin, but it is in a region of the United States that has been moving towards the Democrats in recent years, in part because of its rapidly growing Hispanic population.

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BACKGROUND

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Mr Sabato said: “We are a long way from election day, but if the Democrats get all three states, the election is over. If this continues, the [housing] recession could be as serious an issue as Iraq.” He pointed out that Ohio, which suffered a 7.3 per cent decline in house sales in the second quarter, is “the critical swing state, the most important state for 2008”.

Economic weakness, including a housing recession, reflects badly on the White House incumbent and a protracted slowdown in the property market would be expected to play into Democrat hands.

Michael Barone, resident scholar at the American Enterprise Institute, a think-tank, said: “A setback in one’s lifetime project of accumulation of wealth is hardly helpful.”

He pointed out that in the 1992 elections President Bush Sr saw his vote reduced most in Southern California and New Hampshire, both of which had suffered from a property slump. However, Mr Barone said that Florida was a tricky example because many homeowners are resident outside the state.

Bob Mulholland, of the California Democratic Party, said: “The US dream is to buy two or three properties in your lifetime. You upscale each time, retire, buy a bungalow and live off the cash. Right now, people are losing their homes. The properties aren’t going to make it to retirement. Housing is going to be the Iraq albatross from a domestic point of view.”

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