HOW IS REAL ESTATE AFFECTED BY A PRESIDENTIAL ELECTION?
Elections have historically affected house prices with a slightly lower percentage increase in value. According to Movoto: the California real estate market typically rises 1.5% less during an election year than in the year prior to the election, and 0.8% less than in the year following the election. This may not seem like much, but these percentage differences can add up over time. An election year could potentially cost homeowners thousands of dollars in lost value the larger the asset.
House Price Trends During Election Years
Data from Freddie Mac Finance.
Using the Freddie Mac House Price Index, Gord Collins, a SFO agent who looked into the historical effect that election years have on U.S. real estate prices as compared to off years. The off years that are considered are the even-numbered years that fall between elections. Using the percentage increase for the 12th month of each year in the sample, he found that house prices in the off years increased, on average, by 0.22% more than house prices in election years. The chart (right) details the percentage increases for each year in the sample since 1978. For 2016, house prices are estimated to increase 3%, a drop from 5% in 2014.
According to an economic study published in the British Journal of Political Science, elections cause a decline in the number of home sales as well as a slight price decrease. The decline is greater in tight elections where there is increased uncertainty. This change can be compared to the effect of other market factors, such as growth in per capita income.
WHY DO ELECTIONS AFFECT HOME PRICES?
It may seem a bit strange for a presidential election to affect your home’s value, but the potential explanations for this effect may bring about more understanding. The Movoto study hypothesizes that election years can be stressful and uneasy for many Americans. And people are less likely to make large purchases, such as a house, in very uncertain times. The results of the election can potentially affect the finances of Americans, so fewer people are willing to invest in a home when their financial future appears to be uncertain or influenced by the incoming president.
Realtytoday.com states that researchers conducted a survey during the 2008 election and found that “the election was really weighing on the minds of the would-be buyers.” Different presidents in their respective parties may have different housing and mortgage policies that may affect buyers in various ways. These risks are concerning to potential homebuyers, and many may choose to wait and buy during a time that appears to be more politically stable. Currently really low interest rates are driving buyers to purchase so selling now may be good but buyers might be willing to wait for better prices.
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