How will the real estate market change post-election?
It’s been 2 weeks since the presidential election, and things are coming into focus. Cabinet appointments, Republican Congressional control, and local election results have led to an abundance of prognosticators & instigators proclaiming with near-certainty how everything from our global alliances to our drinking water will change.
Some see the end of days approaching, while others foresee brighter days ahead. Time will tell if any of these professed changes actually come to be.
But will our local real estate market change? Is there any truth to the predictable nature of home buyers and sellers pre and post presidential elections? As always, let’s look at the data to find out!
In recent days, statisticians at both the national and local levels have shared their insights on how elections have historically influenced the real estate market. Both revealed some interesting trends on the surface.
First up, the national numbers. Zillow writer Jordan Teicher shared insightful data last week from the last 25 years that shows the number of transactions tend to decrease from October to November (just before the election) in election years (-3.7% on average) while in non-election years there is a +.6% increase. Furthermore, the change from November to December (just after the election) saw a bigger increase in election years (+2.4%) compared to non-election years (+.9%).
As a result, one could conclude that market activity tends to slow down before and pick up after presidential elections. But keep in mind that these are national statistics, and it’s always a good idea to look at more local numbers when assessing real estate markets. For that, we turn to local appraiser Ryan Lundquist.
Ryan astutely shared on his latest blog post that while Sacramento home prices and mortgage rates have no correlation to election cycles, the number of transactions does appear to be influenced. In most months we see above-average sales in the year after an election.
But, he quickly points out that the trend is only due to outlier sale figures from the market boom year of 2005 & market bust year of 2009. If you exclude those two years from consideration, you lose any statistical trend showing a post-election “pop” in the market.
It’s common to stare at historical data long enough in order to find a favorable story about the future.
It is wise to refrain from doing so.
Many people are hoping for an increase in market activity in the coming months. Any changes, however, will have nothing to do with the election. Instead, it will depend on buyer affordability. Elevated mortgage rates and record-high home prices have made home-buying more expensive than ever. Any increase in market activity will require mortgage rates to fall or rent rates to increase where buyers feel better about taking the financial plunge into homeownership.