August 7, 2024
How Presidential Elections Influence the Housing Market
By Gail Rossetti at rossettirealty.com
The U.S. presidential election is a pivotal event with wide-ranging implications for the nation’s political landscape and economic environment. One sector that often sparks interest during election periods is the housing market. Many prospective homebuyers and sellers wonder how the outcome of an election might influence housing prices, sales, and mortgage rates. While the impact of presidential elections on the housing market is often subtle and temporary, understanding the historical trends can provide valuable insights for those making real estate decisions in an election year.
Historical Impact on Home Sales
One of the most noticeable effects of a presidential election on the housing market is a slight slowdown in home sales during the election month, particularly in November. This slowdown is typically driven by uncertainty; potential buyers and sellers might delay their decisions until after the election, preferring to see how the political landscape settles. Ali Wolf, Chief Economist at Zonda, notes that this dip in November sales is a consistent trend observed during election years.
However, this slowdown is usually short-lived. Historical data from the Department of Housing and Urban Development (HUD) and the National Association of Realtors (NAR) show that home sales tend to rebound in December and often continue to increase in the following year. For instance, after nine of the last eleven presidential elections, home sales rose in the year immediately following the election. This suggests that while uncertainty may cause a temporary dip, the election does not significantly alter the long-term trajectory of home sales.
Stability in Home Prices
Home prices are another critical concern for homeowners and potential buyers during an election year. Fortunately, historical data indicates that home prices are generally resilient to presidential election fluctuations. As housing analyst Ryan Lundquist points out, the price trends in the housing market are mainly independent of election outcomes.
Data from the National Association of Realtors show that home prices increased the following year after seven of the last eight presidential elections. The only exception was during the 2008 financial crisis, a period marked by extraordinary circumstances far beyond the influence of the election alone. In more typical years, home prices tend to rise regardless of election results, reflecting the overall strength and stability of the housing market.
Influence on Mortgage Rates
Mortgage rates are a crucial factor in the housing market, affecting affordability and monthly payments for buyers. Interestingly, presidential elections often coincide with a period of declining mortgage rates. Data from Freddie Mac indicate that in eight of the last eleven election years, mortgage rates decreased from July to November. This trend suggests that the market anticipates potential economic changes during an election, leading to lower rates as lenders adjust to perceived risks and opportunities.
Lower mortgage rates during an election year can benefit buyers, making homes more affordable and encouraging market activity. If declining rates continue through the election period, it could provide a timely boost for those looking to enter the housing market or refinance their existing mortgages.
Market Sentiment and Election Year Dynamics
While the statistical impact of presidential elections on the housing market is generally minor, the psychological impact should be considered. Elections create an environment of heightened awareness and uncertainty, influencing consumer behavior. Some buyers and sellers may choose to “wait and see” before making significant financial decisions, contributing to the temporary slowdown in market activity observed in election years.
However, once the election is over and the political future becomes more apparent, market confidence tends to return, leading to a resurgence in activity. This pattern underscores the importance of understanding that any election-related slowdown is likely to be short-term and that the fundamental drivers of the housing market—such as supply, demand, and economic conditions—remain dominant.
Conclusion
In summary, while U.S. presidential elections impact the housing market, the effects are typically minor and temporary. A slight slowdown in home sales may occur in November, but a rebound usually follows this in the following months. Home prices remain stable or continue upward, largely unaffected by the election results. Mortgage rates may decline in the lead-up to an election, offering potential benefits to buyers.
For those considering buying or selling a home in an election year, the key takeaway is that while elections can introduce short-term uncertainty, the long-term outlook for the housing market remains robust. Making informed decisions based on broader market trends rather than election-year jitters is likely the best strategy for navigating the housing market during these times.
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