What Does the 2020 Presidential Election Mean for Housing Markets?
Nature abhors a vacuum, and so do most people. In this case, the vacuum is uncertainty about the future. Real estate has been a bright spot in our economy, but uncertainty about the Presidential election will cause many people to put off the decision to buy or sell a home. What does history teach us about the interplay between elections and real estate cycles?
Home sales generally slow down in November due to normal market seasonality, but the slowdown is more pronounced in election years. Since 1963, the average sales drop from October to November is almost -10% in non-election years, but -15% in election years!
Uncertainty about the future causes a lot of people to step out of the market. But real estate cycles are long, and the relevant question is: are people truly exiting the market or simply deferring their activity?
From Uncertainty to Confidence
Just a few months ago we faced a level of uncertainty far greater than any election in history: Covid-19. As the economy shut down, real estate slowed to a crawl. The prevailing conversation among buyers was "I'm going to wait for prices to come down." That sentiment lasted barely two months. As uncertainty turns to normalcy, all those deferred transactions came pouring back into the market and we had one of the strongest summer seasons on record.
Historically, Presidential election cycles follow the same pattern. According to Meyers Research, the year after a presidential election is the best in the four-year cycle. This historical trend, coupled with strong local market factors, indicate this pattern will likely continue this election. I expect 2021 to be a very strong year for Bay Area housing.
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Ultimately it's all about consumer confidence. While we still face a number of challenges, once the election is over, no matter how it turns out, at least we'll have a clear view of what lies ahead. A strong tech sector and historically low interest rates will continue to support affordability and a strong housing market. I always caution people against trying to time the market. So if you're thinking about getting in, this election-driven slowdown would be the perfect opportunity to get ahead of the competition.
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