Election Countdown: What Real Estate Investors Need to Know

With elections just around the corner, real estate investors are faced with an all-too-familiar challenge: uncertainty. Elections, especially presidential ones, have a way of impacting not only national policies but also real estate markets in ways that are sometimes unexpected. During our 2024 Real Estate Webinar, we examined the key trends that investors need to be aware of as the election approaches.

This post will cover everything you need to know as a real estate investor in the weeks leading up to election day and how you can prepare for the post-election landscape.

1. How Elections Historically Impact Real Estate Markets

It’s no secret that election years bring about fluctuations in the real estate market, but how exactly do elections affect home sales, prices, and mortgage rates? Let’s break it down:

• Home Sales: In the months leading up to elections, home sales often slow down. People become cautious, choosing to delay major purchases like homes until after the election, when there is more clarity on the country’s future direction. According to historical data presented in our webinar, home sales tend to dip in November of election years, but they usually recover quickly in the following months.

• Home Prices: Despite the slowdown in sales, home prices typically increase the year following an election. For instance, after seven out of the last eight presidential elections, home prices went up. In the most recent election cycle, median sales prices jumped from $296,700 in 2020 to $350,700 in 2021. This is critical for investors looking to buy properties before values rise again.

• Mortgage Rates: Mortgage rates often fluctuate leading up to elections as economic policy speculation affects market confidence. Interestingly, mortgage rates decreased in the lead-up to 8 of the last 11 presidential elections. Lower mortgage rates can be a significant boon for investors looking to secure financing ahead of expected changes.

2. Uncertainty and Policy Expectations: What to Watch For

As we discussed during the webinar, elections create a unique kind of uncertainty for real estate investors. Political outcomes affect economic policy, interest rates, and housing regulations—all of which directly impact real estate investments. Here are the major factors to monitor as we head towards the polls:

• Tax Policy Changes: Depending on which party takes office, changes in tax policies could directly affect real estate profitability, particularly with capital gains taxes and depreciation benefits. Investors should be on high alert for any shifts in tax incentives that could impact rental income, sales, and property values.

• Housing Regulations: New administrations often bring changes to affordable housing programs, zoning laws, and environmental regulations. These can either restrict or promote certain types of development. For example, a push for more affordable housing could lead to tax credits or incentives for multifamily property owners.

• Interest Rates: The Federal Reserve’s policies will likely shift based on the election outcome. Investors should prepare for potential changes in interest rates, as these will determine the cost of borrowing and refinancing.

3. The Investor’s Dilemma: To Wait or Not to Wait?

One of the biggest questions investors face during an election year is whether to act now or wait until after the election dust settles. While it’s natural to want to wait until there is more certainty, the real estate market doesn’t stop, and neither should your strategy. Here’s why:

• Opportunities Amid Uncertainty: As noted during our recent webinar, real estate investors can often find significant opportunities during uncertain times. Sellers may be more flexible, and property prices may temporarily stagnate, creating opportunities for savvy investors to purchase at better prices.

• Post-Election Recovery: Historically, the real estate market tends to bounce back quickly after elections. Investment activity often surges once the election results are clear and the economy stabilizes. Investors who have prepared in advance can take full advantage of this recovery.

In fact, after our fund's launch in 2021, which was delayed due to the 2020 election and the global pandemic, we were able to transact over $32.8 million in real estate and loans once the market stabilized. The lesson here is clear: waiting for absolute certainty can cost you opportunities.

4. Practical Steps to Take Before the Election

As the election draws nearer, there are a few key actions investors can take to position themselves for success, regardless of the outcome:

• Review Your Portfolio: Take a detailed look at your current real estate holdings. Are there any properties that could benefit from refinancing before interest rates potentially increase? Are there any underperforming assets you should offload? Now is the time to clean up your portfolio.

• Strengthen Your Financing Options: Secure financing while rates are still favorable. Whether you’re purchasing new properties or refinancing existing ones, it’s smart to lock in lower rates before any potential post-election rate hikes.

• Scout for New Investments: Keep your eyes open for new opportunities, particularly those that could be undervalued due to market hesitation. Just as we advised during our webinar, sharpening your due diligence and watching market indicators closely will help you spot good deals before others do.

5. Prepare for Post-Election Opportunities

Once the election is over and the new administration begins to implement its policies, the real estate market will likely enter a period of recovery. Investors who have stayed engaged and active during the uncertainty will be in a prime position to capitalize on opportunities. Here’s what you should prepare for:

• Rental Demand: Historically, multifamily properties maintain steady demand during uncertain times as more people opt to rent rather than buy. Be prepared to expand your multifamily holdings, especially in markets that are likely to see population growth.

• Increased Investment Activity: Expect increased competition for properties as the market recovers. Investors who acted early will be able to leverage their assets for better returns, while others scramble to catch up.

Conclusion: Stay Informed, Stay Ready

While election cycles can make real estate investment more complex, they also create unique opportunities for those who are prepared. Understanding how elections impact home sales, prices, and mortgage rates can give you the edge you need to navigate this volatile period. By staying informed and proactive, you can position yourself for post-election success.

As we stressed during our 2024 Real Estate Webinar, the key is to watch, but don’t wait. Stay vigilant, maintain your financing options, and be ready to act when the right opportunity presents itself. Real estate is a long game, and those who are prepared will always come out ahead.

For the webinar slides and a full recap, hit this button.