How will the election impact the housing market?
There is no doubt elections impact the housing market.
The question I am asked most often as a real estate agent is: ”What is going to happen to the housing market?”
My response is always the same: “I don’t know, but here’s what I do know.” No one can predict everything that might influence the housing market, including a nationwide pandemic. We can, however, look at past trends to make educated predictions about what we can anticipate—such as a presidential election.
Whether you want to “Build Back Better” or “Keep America Great,” there is no doubt that presidential elections impact the housing market.
Why? The uncertainty of elections and the possibility of change causes many potential buyers and sellers to hold off on making significant decisions.
A recent study by the housing consultancy firm Meyers Research demonstrated that over the last 13 presidential election years, “new home sales record a drop in median sale activity of 15% from October to November,” according to Forbes.
The degree a presidential election impacts the market depends on the predictability of an election outcome. In Forbes, Arlene Reed explains that when an incumbent becomes a clear frontrunner, “cementing the continuation of familiar policies,” the housing market may experience less of a dip. In contrast, if an election has no clear frontrunner, buyers and sellers become more tentative. “There's some uncertainty how the new president’s policies will affect the economy, the stock market, taxes,” she says.
Most buyers and sellers take a cautious “wait and see approach” to the housing market during an election year, particularly those in higher income brackets. Following election day, however, the housing market recovers quickly.
“In December [following an election], and in the following year, the sales that are lost during November are recovered,” Ali Wolf, director of economic research for Meyers Research, tells Forbes. “It isn’t that consumers say, ‘I'm nervous, and I never want to buy.’ They say, ‘I'm nervous. Let's just wait to see how things play out.’”
How Has COVID Impacted the Housing Market
But this election year is unlike any other. The nation has already experienced considerable uncertainty and anxiety throughout the COVID-19 pandemic that is reflected in recent housing market trends.
The housing market slumped during April and May. By July, however, home sales reached above pre-pandemic levels, according to the national association of realtors. The market experienced a significant rebound, and homebuying demand is strong. July home sales were higher in 2020 than in previous years, and it was the second month this year with a 20% increase in home sales.
The competition created by low inventory has caused home prices to rise 8%. Currently, the housing market has a 3-month supply of inventory. A normal, balanced market usually has 5 to 6 months of inventory. Interest rates have also reached record lows.
With tight inventories across the country and record low interest rates, will we really see a slowdown in the market this election?
It’s hard to say. We may see historical trends continue with a dip in the market the next few months. Or, we may see a secondary wave of demand due to COVID-19 as people working from home look for housing options with more office and living space as well as homes in safe, remote, and affordable areas.
Whatever may happen this election, and no matter who you vote for, recent and past events suggest that the housing market will be strong by the end of this year and into 2021.