The Affordable Care Act (ACA), otherwise known as “Obamacare”, was created to give millions of uninsured Americans access to health care. But in their zeal to pass historic legislation, the designers and proponents of the law failed to consider the possible negative economic ramifications of the devilish details within the ACA, particularly as it may affect the real estate market.
Within the last 12 years, we have already witnessed the strength that housing has upon the American economy. It is no coincidence that during the period from 2001 to 2006, both the real estate market and the general economy were flourishing, with construction and other housing related jobs creating stronger GDP and an unemployment rate in 2005 below 5%. But as the accompanying chart shows, when the housing market sank after 2006, GDP growth sank along with it.
It is also true that the economy and the housing market have a “chicken and egg relationship” in that either one can influence the other. Therefore, anything that threatens to slow down the economy can also bring a screeching halt to the real estate market and the housing-related stocks that are directly tied to it.
Obamacare has already produced a noticeable and fearful effect among Corporate America, and it could produce another slow down or perhaps even a recession. Another recession would trigger a new wave of foreclosures, adding cheap new inventory to the real estate market, and once more depleting home values.
So what exactly is the problem with Obamacare, and why should a well-intentioned law be so negative for both the general economy and the real estate industry?