The Housing Market's Reaction to Elections: A Closer Look

As the 2024 Presidential election approaches, you might find yourself contemplating a home purchase or sale. Naturally, you're curious about how the election could impact the housing market, considering the significance of such a decision.
Historically, Presidential elections have had a limited and temporary effect on the housing market. Let's delve into the latest insights on how home sales, prices, and mortgage rates have fared during these periods.

Home Sales 

In November of election years, there tends to be a slight dip in home sales. Ali Wolf, Chief Economist at Zonda, notes, "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 hesitation is largely due to the uncertainty surrounding major decisions during this time. However, it's crucial to understand that this slowdown is short-lived. Historically, home sales have rebounded in December and continued to climb in the following year.

Data from the Department of Housing and Urban Development (HUD) and the National Association of Realtors (NAR) reveals that after nine of the last 11 Presidential elections, home sales increased the following year (refer to the graph below for details).

The graph provides a historical perspective on annual home sales dating back to 1978, with Presidential election years highlighted in blue. Following each election year, the subsequent year is denoted in green if existing home sales experienced an increase, while the two orange bars signify the only instances of decreased home sales after an election.

Home Prices 

What about home prices? Do they tend to drop during election years? Not typically. According to residential appraiser and housing analyst Ryan Lundquist, "An election year doesn't alter the price trend that is already happening in the market." Home prices demonstrate resilience, generally exhibiting year-over-year increases, irrespective of elections. Recent data from NAR indicates that after seven of the last eight Presidential elections, home prices rose in the following year (refer to the graph below for details).

Similar to the previous graph, this visualization also highlights election years in blue, with the single instance of price decline after an election depicted in orange. It's important to note that this decline occurred during the housing market crash, an extraordinary event far from the norm. Today's market landscape differs significantly from that tumultuous period.

Each green bar represents a year when prices increased in the following year. Therefore, if concerns about your home's value fluctuating due to an election weigh on your mind, take comfort in the fact that prices typically rise after most Presidential elections.

Mortgage Rates 

The trajectory of mortgage rates is crucial as it directly impacts your monthly payments when purchasing a home. Examining the last 11 Presidential election years, data from Freddie Mac reveals that mortgage rates decreased from July to November in eight of those years (refer to the chart below for details).

Anticipated forecasts suggest that mortgage rates are likely to slightly ease in the remaining months of the year. If these predictions hold true, this year will align with the trend of declining rates leading up to most previous elections. For those considering a home purchase in the upcoming months, this could translate to positive news, as lower rates may result in a reduced monthly payment.

What This Means for You

So, what's the key takeaway? While Presidential elections do exert some influence on the housing market, the impacts are typically minor and transitory. According to Lisa Sturtevant, Chief Economist at Bright MLS, "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 have minimal impact on their plans.

Bottom Line

Although it's natural to experience some uncertainty during an election year, historical data demonstrates the housing market's enduring strength and resilience. Whether it's an election year or not, if you need assistance navigating the market, let's connect.