How Presidential Elections Shape the Housing Market: What History Tells Us

Presidential elections bring with them more than just political debates and policy promises—they create ripples across various sectors, including real estate. Investors often wonder: how do elections affect the housing market? The good news is that we can turn to history to uncover trends and patterns that provide insight into what might happen.

In our recent 2024 Real Estate Webinar, we delved deep into how past elections have impacted home sales, prices, and mortgage rates, helping investors better understand how to prepare. This post will explore these historical trends and how they might shape the housing market post-election.

1. Home Sales: A Temporary Dip Before Rebound

Historically, presidential election years tend to cause a temporary slowdown in home sales. This is largely due to uncertainty—people prefer to delay major decisions, such as buying or selling a home, until after the election when they feel more confident about the country's direction.

• The November Dip: As shared during our webinar, home sales typically dip during November in election years. The numbers confirm this: sales often decrease as consumers adopt a “wait and see” approach. For example, in 1980, home sales dropped from 2.97 million to 2.41 million in the year following the election. However, this is not the full story.

• Post-Election Recovery: Historically, home sales tend to bounce back quickly after the election. In fact, home sales increased after 9 of the last 11 presidential elections. For instance, after the 2016 election, U.S. home sales rose from 5.45 million in 2016 to 5.51 million in 2017.

This tells us that while elections may bring a short-term lull in the housing market, the long-term outlook is generally positive for investors who are ready to act once the dust settles.

2. Home Prices: A Steady Rise After Elections

One of the more encouraging patterns we’ve observed is that home prices tend to rise in the year following a presidential election. This is particularly important for investors who may be wondering if now is a good time to invest in real estate.

• Historical Trend: After 7 of the last 8 presidential elections, the U.S. has seen a rise in home prices. For instance, in the aftermath of the 2020 election, the median sales price of existing homes increased from $296,700 to $350,700 in 2021. This represents a significant growth, driven by post-election confidence and economic recovery.

• 2008 Exception: The notable exception occurred during the 2008 election when the global financial crisis caused home prices to drop from $196,600 to $172,100 in 2009. However, this was more of an anomaly tied to the broader economic crisis rather than the election itself. In normal election cycles, the trend points to rising prices.

For investors, this means that buying during an election year could yield significant gains in the following months or years, especially as prices typically rise post-election.

3. Mortgage Rates: The Election Effect

Mortgage rates are another key factor that is influenced by presidential elections. Historically, mortgage rates tend to decrease leading up to elections, providing a favorable environment for buyers looking to lock in lower rates.

• Pre-Election Decreases: Mortgage rates decreased in the lead-up to 8 of the last 11 presidential elections. For example, in 2020, rates dropped from 3.02% in July to 2.77% by November, creating a more affordable lending environment. This decrease often occurs because the Federal Reserve and policymakers aim to stimulate the economy ahead of an election.

• Volatility in the Past: It's worth noting that there have been periods of volatility, such as in the 1980 election, when mortgage rates spiked from 12.19% to 14.21%. However, in recent cycles, the trend has leaned toward declining rates before an election, making it an opportune time for buyers and investors to secure financing.

For real estate investors, lower mortgage rates mean lower borrowing costs and better returns on investment, particularly in the months leading up to an election.

4. Election-Driven Economic Policies: What Investors Should Watch

Beyond these market trends, presidential elections also usher in policy changes that can directly impact the housing market. Depending on the administration that takes office, we may see shifts in tax policy, affordable housing initiatives, or interest rate adjustments that will influence real estate investments.

• Tax Policies: Changes to capital gains taxes, property tax deductions, and incentives for first-time buyers or affordable housing could shift the market. For example, an administration focused on expanding affordable housing might provide tax incentives for developers of multifamily properties.

• Interest Rates and Economic Stimulus: Election outcomes can influence Federal Reserve policy. An administration focused on economic growth may push for lower interest rates or increased stimulus, which can benefit both homeowners and investors.

As discussed in our webinar, it’s important for investors to keep an eye on potential post-election policy changes, as they could present new opportunities or challenges for those in the real estate market.

5. What History Teaches Us: Stay Prepared, Stay Active

The key lesson from history is that presidential elections, while creating short-term uncertainty, tend to have a positive long-term effect on the housing market. Here’s what investors can take away from historical trends:

• Expect a Short-Term Slowdown: Be prepared for a temporary dip in sales or increased caution from buyers, particularly in November. However, don’t let this discourage you—history shows that the market typically recovers quickly after the election.

• Look for Post-Election Growth: Home prices and sales usually rise in the year following a presidential election. Investors who stay engaged during the election year can take advantage of these increases.

• Lock in Financing Early: Mortgage rates often decrease before an election. If you’re considering making a purchase or refinancing, now is the time to act before any potential rate hikes after the election.

Conclusion: History as a Guide for Smart Investing

Presidential elections are a time of change, but for real estate investors, they also present opportunities. By understanding how elections have historically impacted home sales, prices, and mortgage rates, investors can position themselves to make smart, informed decisions.

As emphasized during our 2024 Real Estate Webinar, the key is to stay informed, act strategically, and be prepared for post-election recovery. History tells us that elections are less about uncertainty and more about opportunity, especially for those who are ready to capitalize on market shifts.

This blog post draws on insights shared during the 2024 Real Estate Webinar. Stay tuned for our next post, where we’ll explore more strategies to help you navigate the real estate market.

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