Impact of Election Year Dynamics
- Home Sales Trends: Historically, home sales tend to slow down during election years, particularly in November, due to buyer indecision. Reports indicate that sales can dip by as much as 15% in November compared to non-election years, but this slowdown is often temporary, with a rebound typically occurring in December and continuing into the following year.
- Price Resilience: Despite potential slowdowns in sales, home prices generally show resilience during election years. Data suggests that home prices have increased on average by about 4.8% during election years, compared to 4.4% in non-election years. This trend has persisted through most presidential elections since 2008, with only significant economic downturns causing exceptions.
Economic Policies and Predictions
- Interest Rates and Affordability: The next president’s policies will likely influence interest rates significantly. For instance, a Trump reelection could lead to lower interest rates through Federal Reserve recommendations, potentially stimulating refinancing and home sales. Conversely, if inflationary pressures rise due to expansive fiscal policies, the Fed might increase rates, making mortgages more expensive and affecting housing affordability negatively.
- Housing Supply Initiatives: Different candidates propose varying strategies for addressing housing supply and affordability:
- Trump’s Approach: Emphasizes deregulation and tax incentives aimed at promoting homeownership and easing construction barriers.
- Harris’s Plan: Focuses on constructing three million new homes over four years and providing substantial down payment assistance for first-time buyers.
- Trump’s Approach: Emphasizes deregulation and tax incentives aimed at promoting homeownership and easing construction barriers.
- Market Stability Factors: The overall stability of the real estate market will depend on how effectively the new administration can address supply issues while managing demand through fiscal policies. Experts agree that simply increasing demand without corresponding supply improvements could exacerbate affordability challenges.
- Inventory Levels: Recent trends indicate a shift towards a more balanced market with increasing inventory levels, giving buyers more options and negotiating power. This shift could mitigate some of the competitive pressures seen in previous seller-dominated markets.
- Mortgage Rate Trends: Mortgage rates have historically shown a tendency to decline leading up to elections, which may provide a favorable environment for buyers if this trend continues into 2024.
Halpern said while there’s no crystal ball providing all of the answers, a year to 18 months from now when mortgage rates could be lower, there might not be as much buying power, and if the trend continues, you could be paying more money for the same home.
While uncertainty typically accompanies election years, historical data suggests that the real estate market tends to remain resilient with gradual price increases and eventual rebounds in sales activity post-election. The specific impact will largely depend on the policies implemented by the incoming administration regarding interest rates, housing supply, and overall economic management.