The results are in, and it looks like Joe Biden will be the 46th President of The United States, but with the 2020 election comes additional concern for the current housing market conditions. We’ve already seen significant upheavals in the market this year as a result of the COVID-19 pandemic and now many professionals are anticipating further instability post-election.
How has real estate been affected by past elections?
Historically, home sales dip in the months leading up to an election because of uncertainty about the future halting the desire to buy a new home. This year we’re experiencing both an election as well as a pandemic so concerns about the future of the economy, employment, and the real estate market as a whole are bound to be running high. A report from Meyers Research looked at the last 13 election cycles and cited a difference in the average change in sales activity from October to November. The normal drop in sales activity in a non-election year from October to November is 8 percent, but in an election year it drops roughly 15 percent.
While Meyers Research predicts the instability of 2020 to exacerbate this decline in sales activity, they note that the decline is “largely concentrated in the month of November” and that the year following an election is historically the best of the four-year cycle. So, while we are likely to see a steeper decline than normal this November, 2021 is poised to see strengthened sales activity. We’ll have to wait and see how this trend affects the future real estate climate though. Afterall, many experts anticipated a crash rather than the mad dash we’ve seen.
What about mortgage rates?
While there may be some concern about mortgage rates increasing, a chart included in an article by Guaranteed Rate shows no strong trends in election years over the past 10 cycles from November to December that could allow us to form any prediction. Essentially, rates could move in any direction, or not at all.
However, while no trend can be accurately predicted using historical data, Freddie Mac cites another dip in mortgage rates, bringing them – as of November 5th – to another record low. That’s twelve times this year alone we’ve seen record-low mortgage rates. Recently, mortgage rates have fallen three basis points to 2.78 percent.
And home values?
Another difference to be noted is the election’s effect on home values. While elections wouldn’t typically decrease your home value, they do have a history of decreasing the year’s appreciated value. Data from the California Association of Realtors (the website appears to be down as of writing this post) and also referenced to in many articles, including one from greenfieldadvisors.com and medium.com, describe how home appreciation values are about 1.5% less in election years than in others.
The bottom line…
Elections do cause shifts in the housing market, as is predicted, but they are not irrecoverable. Sales bounce back, mortgage rates often change (but not by any significant or predictable amount), and home prices can be affected in the short term.
It is difficult to distinguish between the effects of the COVID-19 pandemic and the 2020 presidential election, but we are bound to see even more changes before Inauguration Day.
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