With the 2024 Presidential election just around the corner, you may be wondering how it could affect the housing market, especially if you're considering buying or selling a home. It’s a fair question, as major political events can create uncertainty. Here’s a look at what typically happens to home sales, prices, and mortgage rates during election years.
Home Sales
Historically, Presidential elections have only caused a slight, temporary slowdown in home sales, particularly in November. According to Ali Wolf, Chief Economist at Zonda:
"In an election year, November tends to be slower than normal, with home sales usually unchanged compared to a non-election year."
This slowdown occurs because some people feel uncertain about making big financial decisions during such a pivotal time. However, this effect is usually short-lived. Home sales often bounce back in December and tend to increase the following year.
Data from the Department of Housing and Urban Development (HUD) and the National Association of Realtors (NAR) supports this trend, showing that home sales rose in the year following nine of the last 11 Presidential elections.
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The graph shows annual home sales from 1978 onwards, with Presidential election years marked in blue. The year following each election is marked in green if existing home sales increased, and the only two years where home sales decreased after an election are shown in orange.
Home Prices
What about the impact on home prices during election years? Typically, home prices do not drop. As Ryan Lundquist, a residential appraiser and housing analyst, explains: "An election year doesn’t change the existing price trend in the market."
Home prices generally continue their upward trend year-over-year, regardless of election cycles. According to the latest data from the National Association of Realtors (NAR), home prices increased the year after seven of the last eight Presidential elections.
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Similar to the previous graph, this one highlights election years in blue. The only instance where home prices declined after an election is marked in orange, which occurred during the housing market crash—a highly unusual event. Today's market conditions are quite different.
All the green bars indicate years when prices increased following an election. So, if you're concerned about your home's value dropping due to an election, you can feel reassured that prices have typically risen after most Presidential elections.
Mortgage Rates
Mortgage rates significantly impact your monthly mortgage payment. Looking at the past 11 Presidential election years, data from Freddie Mac shows that mortgage rates decreased from July to November in eight of those years (see chart below).
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Mortgage Rate Outlook
Most forecasts predict that mortgage rates will ease slightly for the rest of the year. If this prediction holds, we could see a continuation of the trend of declining rates leading up to past Presidential elections. This is potentially great news for prospective home buyers, as lower rates can mean more affordable monthly payments.
What This Means for You
So, what's the key takeaway? While Presidential elections can have some impact on the housing market, the effects are generally minor and short-lived. As Lisa Sturtevant, Chief Economist at Bright MLS, puts it: “Historically, the housing market doesn’t tend to look very different in presidential election years compared to other years.”
For most buyers and sellers, elections don't significantly alter their plans. While it's natural to feel uncertain during an election year, history shows that the housing market is strong and resilient. If you have questions or concerns, reach out. We love this stuff!