The U.S. Presidential Election’s Impact on Real Estate

By NPMGAdmin

shutterstock_336271163As 2016 ticks along, each passing day brings us closer to November which will ring in the United States’ 58th Presidential Election Day on the 8th. Several things are often affected as the election draws near, such as commerce and the economy, but what about the real estate market? As you may have guessed, the answer is a resounding yes! Let’s dig a little deeper to find out how and why.

First, we look at the evidence. In a paper published in 2014 in the British Journal of Political Science, economist Brandice Canes-Wrone, along with co-author Jee-Kwang Park, observed very distinct trends in home sales during gubernatorial election years versus non-election years. They studied data from 1999 to 2006 in 35 states during 73 of those elections. They found that home sales declined two-tenths to three-tenths of a percent. Another study done in 2012 by the website Movoto also shows the real estate market being affected and this time by presidential elections. Movoto used data from the California Realtors Association and noticed that home prices increased 1.5% less than the years preceding and following the elections.

Both of these studies had the same conclusion: the real estate market may have been directly affected by the uncertainty of the election. In other words, consumers don’t feel comfortable enough with the state of the economy to make such a large purchase. When the economy is in a weakened state, such as the one it is in now, it is a direct reflection of consumer confidence. Consumer confidence affects consumer spending. The unknown of a presidential election year puts stress on the average joe or jane home buyer, and they often hold out on such large expenditures until the economy and the unknowns, including who may be running the nation, are settled. Adding to this consumer uncertainty is how close a race is, such as what we are seeing so far this year.

Another question for folks out there looking to buy is about mortgage interest rates. Does an election year affect those too? Brad Yzerman, a loan officer and creator of the site HomeLoanArtist.com, states that “there is no historical evidence that supports mortgage rate consistently go either up or down in a presidential election year.” He goes on to say that some brokers and loan officers may use the fear of uncertainty to scare people into refinancing or buying, so be on guard for such fear tactics.

What does this all mean for you? Should you sell? Should you buy? The answer is: it depends. Truly, there is uncertainty involved as the election draws closer. Much of our wants for moving or selling could be held off until after the market settles again once the new president is in office. Even experts in the mortgage and real estate fields forecast various opinions. Rentals are on the rise, so perhaps that may be a good direction to go in before buying. The economy and real estate market will always be in flux, so get advice from a trusted real estate expert who can take all of the details of your specific situation into account and help you make an informed, rational decision.

sources: realtytoday.com, mymortgageinsider.com, movoto.com

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