What Happens to the Real Estate Market During Election Season?

Election seasons are known for bringing uncertainty and speculation, impacting various sectors of the economy, including real estate. As potential changes in government policies loom, the real estate market often exhibits specific trends that can affect both buyers and sellers. In this blog, we’ll explore these trends, supported by detailed statistics, to give you a comprehensive understanding of what to expect during election periods.

1. Market Uncertainty and Activity Slowdown

• Home Sales: According to the National Association of Realtors (NAR), home sales can slow down by as much as 15% during the months leading up to an election compared to non-election years. This slowdown is largely driven by buyer and seller hesitation as they wait to see how the election results might impact the economy and housing policies.
• Consumer Behavior: Realtor.com surveys show that around 25% of potential homebuyers consider the election as a significant factor in their decision-making process, often leading to delayed transactions.

2. Price Stabilization and Potential Drops

• Price Trends: Zillow’s research indicates that home price appreciation typically slows during election years. For example, in the 2016 election, home price growth decelerated from 5.6% the year before the election to 4.8% during the election year.
• Local Market Impacts: In politically sensitive areas, such as Washington, D.C., home prices may drop by up to 2% during the election cycle due to heightened uncertainty.

3. Fluctuating Interest Rates

• Pre-Election Volatility: Mortgage rates often experience volatility leading up to an election. For instance, in the 2020 election cycle, mortgage rates fluctuated between 2.9% and 3.3% due to market speculation about future economic policies.
• Post-Election Adjustments: After elections, mortgage rates may stabilize or even drop slightly as uncertainty diminishes. Following the 2012 election, for example, mortgage rates fell by approximately 0.2% within the first three months post-election.

4. Reduced Inventory Levels

• Fewer Listings: Data from Redfin indicates that new home listings decrease by 10-15% during the peak of election season compared to other years. Sellers often delay putting their homes on the market, waiting for post-election stability.
• Seller Caution: This reduced inventory can lead to more competition for available homes, even though overall market activity might be lower.

5. Longer Days on Market

• Extended Selling Times: Homes tend to stay on the market longer during election seasons. According to a report by CoreLogic, the average days on market (DOM) can increase by up to 10% during election years, as both buyers and sellers are more cautious, leading to slower transactions.

6. Consumer Confidence

• Confidence Indices: The Conference Board’s Consumer Confidence Index often dips during election years, reflecting broader economic uncertainty. For instance, consumer confidence dropped by 10-15 points in the months leading up to the 2008 and 2016 elections.
• Post-Election Rebound: Consumer confidence typically rebounds after the election, leading to increased homebuying and selling activity.

7. Impact on Investment Decisions

• Investor Behavior: Real estate investors tend to be more cautious during election seasons, which can lead to a reduction in transaction volumes. According to CBRE, commercial real estate investment volumes can drop by as much as 20% during election years compared to the previous year.