Ready or not, the 2020 presidential election is upon us, and its potential effect on the Real Estate Industry should have us all paying close attention. No matter what side you are on; what happens in November is now affecting peoples decisions on weather to buy or sell a home. Here are some key indicators that I researched
1. Appreciation May Drop Off During an Election Year1
Election years produce slower growth. That’s great for bargain buyers but not so much for industry professionals. While the slower growth is minimal, it will still impact the industry.
2. Uncertainty Can Make It More Difficult to Sell Your Home.
Another factor impacting home sales is the uncertainty that comes with a new president. In years where an incumbent is not running (like in 2016), someone new will take office, contributing to buyers’ hesitancy to make large purchases.
Brandice Canes-Wrone, a Princeton economist, and co-author Jee-Kwang Park, conducted research2 that looked at data from 35 housing markets during 73 gubernatorial elections. They found that two factors affected what they call “pre-election decline”: a close presidential race and policy differences between the two parties. Many buyers will simply wait until after the new president is in office before buying a home.
3. Real-Estate Tax Rates, Deductions, and Credits May Change.
The tax deductions and credits for property-owners are among the longest-running tax breaks on record. The Trump administration brought us the Tax Cuts and Jobs Act; a new administration could undo some or all of that as pertaining to property-tax deductions. Removing or reducing one’s ability to deduct up to $10,000 of property taxes for federal returns could be a significant deterrent for first-time homebuyers.
4. The Consumer Confidence Factor
One influencer in 2016 was the fluctuation in consumer confidence3 in the U.S. economy. The health of the economy and housing market are closely tied together. When consumers feel confident, they are more likely to buy. With consumers on the fence about the economy, the uncertainty of the elections could create more pessimism than optimism.
5. Elections Can Affect a Home’s Value.
Elections have historically affected housing prices with a slightly lower percentage increase in value4. According to a study of the California real-estate market, home prices typically rise 1.5% less during an election year5 than in the year prior to the election, and 0.8% less than in the year following the election. While these percentages may not seem like much, they can add up over time. An election year could potentially cost homeowners thousands of dollars in lost value to their largest assets.
Housing prices in election off-years increased, on average, by 0.22% more than housing prices in election years. In 2016, housing prices increased by only 3%, a drop from 2014’s 5% pricing increase.
Now these are just averages and not absolutes, BUT making those decisions about buying or selling a home are affected by what is happening in Washington D.C. The best way to help make your decision is by talking to a REAL ESTATE PROFESSIONAL that can help guide you through the buying and selling process in times of national elections to make the best decisions for your family. Contact me today with any of your real estate questions. #cincyhomessean