The effects of buying and selling real estate in the midst of election year remain to be seen. The nationwide market still holds steady, yet inventory dropped off a bit in January as median list prices almost broke $300K. February manifested some gain in pricing and multiple U.S. zip codes boasted a 10+% growth. Not too shabby.
On the flip side, experts still hold that elections impact the market more and more with each passing day. Presidential politics can generate a fickle market
resulting in uncertainty among sellers and buyers alike. People are not akin to change and tend to make irrational decisions when nervous.
In the year leading up to past presidential elections, the overall demeanor of the population tends to stabilize during the first six months and gradually becomes more intense during the last six months. In general, people grow nervous regarding the unpredictable election outcome, thus affecting real estate decision-making. For example, a rising incumbent who intends to continue the implementation of known processes can have a calming effect on the housing market as nerves are eased. When people are unsure about the impending election results, they grow skittish. Not knowing knew policies and how the possible new president might tent to implement them breeds general nervousness regarding the stock market, the wellbeing of the local economy, and anticipated tax hikes.
Experts have noted that it is not uncommon for median home sales to drop as much as 15% during October and November. One year post-election, new construction home sales can dip as much as eight percent. In fact, from 2008 to 2019, Manhattan co-op sales dropped almost 13% during a presidential voting year in the months of July through September. Fortunately, most zip codes bounce back quickly as consumer demand begins to rise and lost November sales are recouped by November. By then, consumers are feeling less nervous about proceeding with a real estate transaction.
It is unclear as to how the upcoming election could affect home prices as the variation in the number of homes sold and the number of homes available on the market only last for a couple of months. This is not a long enough time frame to affect anything significantly as would be best manifested in a two-year period, for example. U.S. inventory remains low, so it is unlikely that prices will change much. It is, however, expected that 2020 will invite steadier price hikes such as a modest 3-4%. However, in the event this prediction goes unmet, it will likely be due to a 1.5% appreciation decrease in contrast with the prior year’s gains.
Upper crust markets normally feel the effects of an election more intensely as higher-income bracket classes patiently await post-election real estate decision making while middle-classes gear up to withstand tax changes, prepping for a financial hit. Foreigners also opt to wait until after the election to proceed with real estate transactions. Tax and residency reform affect such decision-making.
The bottom line: U.S. citizens are more concerned with continued employment and the state of the economy during an election year. Middle-class first-time buyers and house hunters are unlikely to be deterred by an election year. The economy’s future and mortgage rates, at this point, are bright.