I heard this anecdote yesterday, and I found it striking. The two states that had the biggest swing in support away from Republicans between the 1988 presidential election and the 1992 presidential election were California and New Hampshire.

California, 1988: Bush: 51.1 percent, 5,054,917 votes Dukakis, 47.6 percent, 4,702,233 votes California, 1992: Clinton: 46.01 percent, 5,121,325 votes Bush: 32.61 percent, 3,630,574 votes Perot: 20.63 percent, 2,296,006 votes

That’s a drop of 18.49 percent for Republicans.

New Hampshire, 1988:
Bush: 62.5 percent, 281,537
Dukakis: 36.3 percent, 163,696
New Hampshire, 1992:
Clinton: 38.91 percent, 209,040 votes
Bush: 37.69 percent, 202,484 votes
Perot: 22.59 percent, 121,337 votes

That’s a drop of 24.81 percent for Republicans.

What do those states have in common? Well, among other things, they both had a severe real estate slump in much of 1991 and 1992. This site lists some headlines in California papers from that era, mostly focusing on Southern California.

In New Hampshire, an ironically-headlined Fortune magazine piece (“GRIM TIMES IN THE GRANITE STATE MAY NOT HURT BUSH”) from February 1992 mentioned, “a real estate crash — the worst since the Depression — has driven five of the state’s seven largest banks out of existence.”

There are differences between today and 1992, of course. Unemployment hit 9.9 percent back then, a number that seems unimaginable today. Both states were hit hard by cutbacks in the defense industry. And George H.W. Bush was spectacularly incapable of “feeling your pain,” and emoting on command like his Democratic rival, and his campaign was just about doomed before it started because of internal divisions, if accounts like Mary Matalin’s are right. And I’m not quite sure people’s thinking is as simple as, “I’m losing my house because my ARM reset higher than I can pay, so I’ll vote against the president’s party.”

But it’s likely the two parties are going to be singing different tunes as today’s housing slump/long-overdue-correction continues:

Rudolph W. Giuliani, in an interview with Larry Kudlow on CNBC, said it was up to “the market to straighten out, and it will.” As president, he added, he would “not succumb to the temptation of trying to manipulate it too much and come in with a bailout.”
As for investors, Mr. Giuliani said, “you have to take responsibility for the decisions you make. If you invest in something risky, you get a possibly greater return. Everyone knew that sub-prime was risky.” As a result, he added, when the loans go bad, “you have to live with the consequences.”
By contrast, Hillary Rodham Clinton presented a multipoint plan “to preserve the American dream of home ownership” that she said would “curb unfair lending practices and hold brokers and lenders accountable, give families the support they need to avoid foreclosure and increase the supply of affordable housing.”
At the heart of Mrs. Clinton’s proposal, an idea shared by several other Democrats in Congress, is a $1 billion fund to assist homeowners facing foreclosure, along with an expansion of the role of Fannie Mae and Freddie Mac, the two government-sponsored corporations that back home mortgages, so that they could take on somewhat riskier loans themselves.

I have a rare moment of applause for the New York Times for their acknowledgement of the obvious flaws in this approach:

But the difficulty facing any politician who wants to help average Americans at risk of losing their homes is that doing so inevitably serves to bail out the Wall Street investors who are carrying the loans as well. That only encourages them to take more bad risks in the future, secure in the knowledge that the government is likely to step in to protect them from their follies.
Moreover, it is doubtful that most of the recent home buyers — particularly those in the middle class who took out risky, adjustable rate loans with little or no down payment so they could buy a more expensive house — were simply innocent bystanders themselves, unwitting victims of predatory lenders.
This is a problem recognized not just by free market conservatives, but by activist liberals as well. “I don’t see a way you could reasonably help the people you want to help,” said Dean Baker, co-director of the Center for Economic and Policy Research, “without also helping people you don’t want to help.”

In fact, I strongly suspect a housing bailout would trigger a huge fight and backlash among those who didn’t speculate, try to flip houses, buy more house than they could reasonably afford, etc. “Why are you giving away taxpayer’s money to people who were irresponsible? Shouldn’t these people face the consequences of their actions? Why are you punishing the responsible ones?”

It’s the welfare reform debate, updated for 2008. I recently heard from someone who had been tracking the immigration debate out on the campaign trail, and he said that the restrictionist view was, most often, argued in terms of fairness — “I have to obey the law, pay taxes, wait in line, provide proper documentation – why does the government want to give those people a pass?”

Particularly when you hear stories like this one:

California’s Inland Empire region is suffering from one of the highest foreclosure rates in the country. The culprit? House flippers, those who purchased properties to resell them for a fast profit. Instead, however, these housing flips are increasingly heading into default.
The toll the trend is taking on the area is visually apparent. Many homes now sit vacant and neglected, as their bargain-basement sale prices drag down the value of neighboring properties — many of them still occupied by their owners.

Still, if you look at the states where the current housing slump is worst – Florida, Nevada, Arizona, Ohio, Virginia – a bunch of red states, and all the fastest-growing ones, too. The issue of falling house prices is a huge wild card in a campaign season that was already full of big issues.

UPDATE: A bit more on the subject from Eyeon08.