How Presidential Elections and Economic Trends Impact the Housing Market
As the 2024 presidential election approaches, many homeowners and prospective buyers are wondering how the outcome could affect the housing market and mortgage rates. While elections often create temporary uncertainty, historical trends show that their long-term effects on the housing market are usually minimal. Instead, key factors like interest rates, housing supply and demand, and broader economic conditions play a much larger role.
Election Year Uncertainty and Home Sales
Presidential elections often create a brief slowdown in home sales, especially in November. Buyers and sellers may delay major financial decisions while waiting for election results and potential policy changes. However, this dip is typically short-lived. According to data from the National Association of Realtors (NAR), home sales have bounced back after nine of the last eleven presidential elections, continuing to rise the following year.
For instance, in the 2016 election, home sales dipped slightly but rebounded in December and continued throughout 2017. Similarly, after the 2012 election, home sales increased by 9.2% the following year, despite initial concerns surrounding the election.
Historical Trends in Mortgage Rates During Election Years
Mortgage rates play a pivotal role in shaping the housing market, and while presidential elections don’t directly cause significant rate changes, slight fluctuations are common. According to Freddie Mac’s Primary Mortgage Market Survey (PMMS):
- In 2016, rates were 3.44% in July, rising to 3.54% by November.
- In 2008, mortgage rates dropped from 6.43% in July to 6.20% by November, driven primarily by the financial crisis rather than the election.
While election-year uncertainty can cause minor fluctuations, mortgage rates are largely determined by broader economic factors, particularly the Federal Reserve’s monetary policies. For example, the 30-Year Fixed Mortgage Rate data from FRED offers a historical view of these trends. In 2024, mortgage rates have fluctuated slightly due to inflationary pressures, with the average 30-year fixed-rate mortgage hovering around 6.35% in September.
Home Prices and Presidential Elections
What about home prices? Historically, home prices have been resilient during election years. While home sales may experience a brief dip in November, prices generally continue to rise. After the 2016 election, home prices continued to grow throughout 2017 despite initial uncertainty. Similarly, after the 2004 election between George W. Bush and John Kerry, home prices increased, driven by low interest rates and strong housing demand.
According to NAR, home prices rose after seven of the last eight presidential elections, with 2008 being the only exception due to the housing market crash, which was influenced more by the broader economic downturn rather than the election.
Expert Insight on Election-Year Impacts
“As we approach the 2024 election, it’s important to remember that while political events can create short-term uncertainty, the housing market’s resilience is driven by broader economic factors. Historically, mortgage rates and home prices have stabilized post-election. In fact, after nine of the last eleven presidential elections, home sales increased the following year,” explains Mark Fleming, Chief Economist at First American Financial Corporation. This resilience highlights the importance of focusing on long-term financial goals rather than reacting to short-term election-driven fluctuations.
Long-Term Policy Impacts
While the short-term effects of presidential elections are often temporary, the long-term impact of policies introduced by each administration can significantly affect the housing market. Policies related to housing affordability, taxes, and regulations can influence housing supply and demand over time.
For example:
- After the 2008 election, the Obama administration introduced programs like the Home Affordable Refinance Program (HARP), which helped stabilize the housing market during the recovery from the Great Recession.
- The Trump administration passed the Tax Cuts and Jobs Act (TCJA) in 2017, which limited mortgage interest and property tax deductions, impacting high-tax states but leaving the broader housing market largely unaffected.
Affordability: A Key Issue for Younger Voters
Housing affordability has become a significant concern, especially for Gen Z and Millennial homebuyers. A recent Real Estate News survey revealed that 91% of Gen Z voters consider housing affordability a key factor in their voting decisions. Rising home prices, combined with wage stagnation, have made homeownership increasingly challenging for younger generations.
Both Vice President Kamala Harris and former President Donald Trump have emphasized housing affordability in their platforms, but their approaches differ. Regardless of the election outcome, affordability is likely to remain a central issue, especially for first-time homebuyers and younger voters.
What This Means for Buyers and Sellers
If you’re considering buying or selling a home during an election year, the key takeaway is that while elections may create short-term uncertainty, their long-term impact on the housing market is typically minimal. Historical data shows that home sales, prices, and mortgage rates generally stabilize after the election, and broader economic trends play a far more significant role.
If you’re uncertain about how to navigate these fluctuations, consulting with a real estate expert can help you make informed decisions based on broader economic conditions and your financial goals.
Bottom Line
While presidential elections can create temporary uncertainty in the housing market, history shows that these effects are generally short-lived. Broader economic trends, such as interest rates, housing supply, and long-term policies, have a much greater and lasting influence. As we approach the 2024 election, it’s essential to focus on the bigger picture, understanding that the housing market’s resilience is shaped by many factors beyond just the election.
Need guidance on navigating the housing market during an election year? Contact us, your real estate experts, to help you make well-informed decisions during uncertain times.