How an Election Year Impacts the Real Estate Market
If you follow the real estate market, you might notice a slight cooling or slow down in activity in the months leading up to November during election years. The fact that this process repeats itself one out of every four years makes this a noticeable trend. While there is no evidence that one particular candidate or political party is “better” for real estate, all markets, including real estate, dislike uncertainty and the uncertainty of a presidential election causes a temporary reduction in activity until a decision is reached.
How Does an Election Impact the Real Estate Market?
According to Keeping Current Matters, there is a sharper seasonal drop in transactions between October and November in presidential election years than in non-presidential election years. From 1963 from 2019, there is an average seasonal decline in transactions of 9.8% from October to November, while in presidential election years during the same period, there is a 15.0% drop in transactions. From the July to November period in these years, transactions decline slightly, but the steepest drop occurs in the month before the election for transactions that normally close the following month. While this is not as dramatic as you might think, it definitely represents a “wait and see what happens” approach by more than just a few home buyers.
What Happens Next?
Data shows that this typical slowdown in activity does not reduce the total amount of transactions, it only delays them. Real estate typically performs very strongly in years following a presidential election year. According to Keeping Current Matters, the number of transactions has increased in 9 of the past 11 years following a presidential election year and the median sales price has gone up in 10 of the past 11 and, even including the Great Recession trough of 2009, by an average of 6.7%. This is good news for home buyers willing to pull the trigger in 2024 as well as for would-be sellers who are not willing or able to sell their home during a temporary market lull.
Do Interest Rates Play a Role?
While 2024 is somewhat slower to begin with due to higher interest rates than we’ve seen over the past two decades, buyers typically get a break during the July to November period in presidential election years. According to Keeping Current Matters, the average rate on a 30-year fixed mortgage has come down during this period in 8 of the past 11 presidential election years. While it is tough to say whether politics has any bearing on mortgage rates – it shouldn’t – this might be the result of a flight to safety in the form of treasury bonds in periods of uncertainty where investments that are perceived to be riskier (e.g. real estate, stocks) are less favored.
What Does this Mean for You?
Broader market conditions aside, if you are buyer, it might benefit you to purchase during this slower period prior to the election, regardless of interest rates. If you are a potential seller, it might make sense to wait until next year when more demand comes back into the market. One of the main issues and challenges facing Americans is housing, whether it’s being stuck in their homes due to a locked lower interest rate or being unable to afford one due to the high payments. While each candidate has their pros and cons and various implication for the real estate market in terms of taxes, inflation, and specific housing programs they hope to implement, data has shown that the political party of the president that is ultimately elected generally has very little impact on the real estate market, and one should not be concerned for massive market valuation changes based on the result. An election year slowdown pushes some demand into the future much like the housing changes brought on by the COVID-19 pandemic brought some future demand into the present. The feeling of stability that another administration change is another four years out gives the market a sense of security, which historically leads to more confidence to transact, thus higher prices.