Have you considered how Elections can Impact the Housing Market

 

Do Elections Impact the Housing Market?

The 2024 Presidential election is just months away. As someone who’s thinking about potentially buying or selling a home, you’re probably curious about what effect, if any, elections have on the housing market.

It’s a great question because buying or selling a home is a major decision, and it’s natural to wonder how such a major event might impact your plans.

Historically, Presidential elections have only had a small, temporary impact on the housing market. Here’s the latest on exactly what’s happened to home sales, prices, and mortgage rates throughout those time periods.

Home Sales

During the month of November, in years when the Presidential election takes place, there’s typically a slight slowdown in home sales. As Ali Wolf, Chief Economist at Zonda, explains:

“Usually, home sales are unchanged compared to a non-election year with the exception being November. In an election year, November is slower than normal.”

This is mostly because some people feel uncertain and hesitant about making big decisions during such a pivotal time. However, it’s important to know this slowdown is temporary. Historically, home sales bounce back in December and continue to rise the following year.

In fact, data from the Department of Housing and Urban Development (HUD) and the National Association of Realtors (NAR) shows after nine of the last 11 Presidential elections, home sales went up the next year (see graph below): 

The graph shows annual home sales going back to 1978. Each year with a Presidential election is noted in blue. The year immediately after each election is green if existing home sales rose that year. The two orange bars represent the only years when home sales decreased after an election.

Home Prices

What about home prices? Do they drop during election years? Not typically. As residential appraiser and housing analyst Ryan Lundquist puts it:

“An election year doesn’t alter the price trend that is already happening in the market.”

Home prices are pretty resilient. They generally rise year-over-year, regardless of elections. The latest data from NAR shows after seven of the last eight Presidential elections, home prices increased the following year (see graph below): 

Just like the previous graph, this shows election years in blue. The only year when prices declined after an election is in orange. That was during the housing market crash, which was far from a typical year. Today’s market is different than it was back then.

All the green bars represent when prices rose the following year. So, if you're worried about your home losing value because of an election, you can rest easy knowing prices rise after most Presidential elections.

Mortgage Rates

Mortgage rates are important because they affect how much your monthly payment will be when you buy a home. Looking at the last 11 Presidential election years, data from Freddie Mac shows mortgage rates decreased from July to November in eight of them (see chart below): 

Most forecasts expect mortgage rates to ease slightly throughout the remainder of the year. If they’re right, this year will follow the trend of declining rates leading up to most previous elections. And if you’re looking to buy a home in the coming months, this could be good news, as lower rates could mean a lower monthly payment.

What This Means for You

So, what’s the big takeaway? While Presidential elections do have some impact on the housing market, the effects are usually small and temporary. As Lisa Sturtevant, Chief Economist at Bright MLS, says:

“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 have a major impact on their plans.

Bottom Line

While it’s natural to feel a bit uncertain during an election year, history shows the housing market remains strong and resilient. For help navigating the market, election year or not, let’s connect.

Homebuilders are not overbuilding; they are simply catching up.

 

Homebuilders Aren’t Overbuilding, They’re Catching Up

You may have heard that there are more brand-new homes available right now than the norm. Today, about one in three homes on the market are newly built. And if you’re wondering what that means for the housing market and for your own move, here’s what you need to know.

Why This Isn’t Like 2008

People remember what happened to the housing market back in 2008. And one of the factors that contributed to that crash was that there were too many homes for sale. While only part of the oversupply back then came from builders, the lasting impact is that some people still feel uneasy when they hear new home construction has ramped up.

Even though the supply of new homes has grown this year, the data shows there’s no need to worry. Builders aren’t overbuilding, they’re just catching up. 

The graph below uses data from the Census to show the number of new houses built over the last 52 years. Following the crash in 2008, there was a long period of underbuilding (shown in red). And it wasn’t until recently that we finally met the long-term average for how many homes are built in a typical year. 

This shows, that even with the increase in new builds we’ve seen lately, there won’t suddenly be an oversupply of homes for sale. There’s too much of a gap to make up after over a decade of underbuilding. And if you’re still worried builders are overdoing it, here’s something else that should be reassuring. 

New Home Construction May Be at Its Peak for the Year

The latest data from the Census on housing starts (homes where builders just broke ground) and permits (homes where builders can start development soon) shows builders are slowing down their pace right now. Why is that?

They’re responding to still high mortgage rates and how those are impacting buyer demand. Basically, they’re pulling back appropriately in response to what’s happening in the market. As an article from HousingWire explains: 

“Even with a massive housing shortage across the nation, homebuilders are completing their pipelines and not seeking as many permits to construct new single-family houses.” 

Builders remember what happened when they overbuilt in the crash, and they’re looking to avoid a repeat of that. So, they’re being mindful and pulling back a bit.

You May Have More Options Now Versus Later

If you’re considering a newly built home, here’s how this impacts you. With builders seeking fewer permits and not breaking ground on as many new homes, we may be at the peak of new home construction for the year. This doesn’t mean new home construction is screeching to a stop – just that the pace is slowing down now, and that’ll impact what comes to market later this year. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“Given the recent declines in housing starts, home completions will steadily show declines in about six months.”

So, if you’re ready and able to buy now, you may find you’ll have more newly built options to choose from now versus later on. This may be enough reason to kick off your search.

Just be sure to work with a local real estate agent you know and trust throughout the process. An agent will have valuable insight into builder reputations and other key factors specific to your market. And if there isn’t much new construction near you, they’ll be able to point you toward a nearby area where there is.

Bottom Line

While it’s true new home construction is a bigger segment of the market than the norm, that’s not a bad thing. Builders aren’t overbuilding, and they’re responding to market signals to avoid repeating the mistakes that were made in 2008.

 

If you want to buy now while new home options may be at their peak, let’s connect.