Is there a drop-off in home sales during a presidential election year?
There is the normal seasonality of the market, with a slowdown in activity that’s usually seen in fall and winter. BTIG, a research and analysis company, looked at new home sales from 1963 through 2019 in their report titled One House, Two House, Red House, Blue House.
However, in presidential election years the typical drop increases from -9.8% to -15%.
The report explains why:
“This may indicate that potential home buyers may become more cautious in the face of national election uncertainty.”
Will it matter who is elected?
Not in the overall number of home sales. As mentioned above, consumer confidence plays a significant role in a family’s desire to buy a home. So, how might consumer confidence impact the housing market post-election? Overall sales should not be impacted in a significant way.
The year 2020 will be remembered as one of the most challenging times of our lives. A worldwide pandemic, a recession causing historic unemployment, and a high level of social unrest have all changed the way we live. Only the real estate market seems to be unaffected, as a new forecast projects there may be more homes purchased this year than last year.
As we come to the end of this tumultuous year, we’re preparing for perhaps the most contentious presidential election of the century. Today, it’s important to look at the impact past presidential election years have had on the real estate market.
Does consumers caution mean those sales are lost forever?
No. BTIG determined:
“This caution is temporary, and ultimately results in deferred sales, as the economy, jobs, interest rates and consumer confidence all have far more meaningful roles in the home purchase decision than a Presidential election result in the months that follow.”
Purchases are just delayed
In a separate study done by Meyers Research & Zonda, Ali Wolf, Chief Economist, agrees that those purchases are just delayed until after the election:
“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 the four-year cycle. This suggests that demand for new housing is not lost because of election uncertainty, rather it gets pushed out to the following year.”
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 past the election.
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice.