Here’s a closer look at how the upcoming election will affect real estate.

2020 will be remembered as one of the most challenging years of our lives. A global pandemic, a recession that causes historic unemployment, and a heightened level of social unrest have all changed the way we live our lives. Only the real estate market seems to be unaffected as recent forecasts show that more homes will be purchased this year than last year.

As we come to the end of this tumultuous year, we’re bracing for what may be the most contentious presidential election of the century. It’s important that we look at the impact this election has on real estate. We’ll do that by answering three questions:

1. Is there a drop off in home sales during an election year? BTIG, a research and analysis firm, looked at new home sales from 1963 to 2019 in their report titled “One house, Two House, Red House, Blue House.”

They noted that in non-presidential years, there is an average decrease of 9.8% from October to November sales. This is the normal seasonality of the market. However, the data also revealed that during election years, that decrease becomes a much steeper 15%. The report states that “this may indicate that potential homebuyers may become even more cautious in the face of national election uncertainty.”

2. Are those sales lost forever? The answer is no, BTIG determined. They said, “Caution is temporary, and ultimately results in deferred sales because the economy, jobs, interest rates, and consumer confidence all have far more meaningful roles in the purchasing decision than a presidential election.”

“Demand isn’t lost during an election year; it’s just delayed.”

In a separate study, Chief Economist Ali Wolf concluded that purchases are just being delayed until after the election and states, “History suggests that the slowdown is largely concentrated in the month of November. In fact, the year after a presidential election is the best of a four-year cycle.” 

This suggests that demand for new homes is not lost because of election uncertainty; it just gets pushed out to the following year.

3. Will it matter who’s elected? To some degree, but not in the overall number of home sales. As mentioned previously, consumer confidence plays a significant role in a family’s desire to buy a home. The BTIG report states, “A change in administration might benefit trailing blue county housing dynamics. The reelection of President Trump could continue to propel red county outperformance.”

The bottom line: If mortgage rates remain near all-time lows, the economy continues to recover, and unemployment continues to decrease, the real estate market should remain strong up to and beyond the election.

If you have any other questions for me about the market or about real estate in general, don’t hesitate to reach out via phone or email today. I look forward to hearing from you.