It’s almost that time again! The 2020 elections are just around the corner. What does that mean for the real estate market? Many factors affect the real estate market, but none of them affects it as profoundly as presidential elections. While these elections impact a wide range of industries, the stock and real estate markets often seem to take a bigger hit than the rest. This is in large part due to their high volatility and uncertainty associated with elections. If you’re thinking of dipping your toes into this market by either selling or buying property, read on to see how exactly election years impact real estate.
Elections cause a substantial decrease in real estate price growth rates. A survey by Movoto shows that although property prices increase during an election year, the appreciation rate often drops by 1.5% on the year before the elections, and 0.8% after the elections. While this might seem like a slight drop, it usually has a profound effect on property values, and sellers end up losing a lot.
Most buyers are often hesitant to make purchases. They usually prefer to wait and see how things turn out. This phenomenon is particularly common when an incumbent is leaving the office, and a new president is expected to take over. On the one hand, some buyers are still pessimistic about the candidates. They are afraid that their policies might hurt the economy. Therefore, they’d rather wait than make a large purchase then end up on the verge of financial failures.
On the other hand, some buyers prefer to wait because they’re optimistic that once the leading candidate assumes office, he/she will introduce policies and tax incentives that will make housing more affordable. Therefore, they’d rather wait and enjoy significant savings brought about the candidate’s policies.
This essentially means that demand is usually not low, but it’s just pushed aside until the market stabilizes.
Other than slow price increases and fewer buyers in the market, there’s also less inventory on the market. Why? Most sellers are often hesitant about placing their property on the market in election years due to the wide-spread notion that it won’t get the value it deserves due to a slow appreciation rate. Therefore, they prefer to wait until the market stabilizes again so they can place it on the market. Also, like the buyers, most sellers don’t want to make a life-altering decision like selling a home without knowing what the future holds. Similar to demand, this means that the supply in real estate during election years is not low, but it’s pushed aside until the market becomes stable again.
A majority of real estate developers in both residential and commercial real estate usually put big projects on hold until the elections are over. This is essential because they stand to lose more if the new government decides to introduce new tax and housing policies.
In a nutshell, the real estate market is usually slower than average on the year leading to, during, and after the elections. This is largely because a majority of home buyers, sellers, and developers prefer to sit it out and see what the new government has in store for them. The good news is that things often stabilize in the long run. Planning to sell or buy a home but have more concerns about how the upcoming elections will affect real estate? Get in touch with us today for a more candid conversation on what might happen so you can make the right decision. We’ve got your back!
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