Do Election Cycles Affect Home Sales and Prices?
With the third and final presidential debate over and done with, we can all step back for a moment and collectively take a deep breath. We survived it.
Great. Now then, let’s talk politics some more.
We recently polled RECON subscribers and our Facebook, LinkedIn, and Twitter followers, asking whether they have fewer, more, or about the same number of homebuyers before a presidential election.
The response wasn’t huge—only 20. But of those, exactly half said they have fewer. The remaining ten respondents were split between more and about the same.
How tight an election matters “a great deal,” said Dr. Brandice Canes-Wrone, an economist with Princeton University. Two years ago, she co-authored a paper where data from Zillow.com were used to compare home sales in 73 U.S. gubernatorial elections from 35 states from 1999 to 2006.
In races where the winner won less than 55 percent of the vote, Canes-Wrone said home sales fell between a third and a half of a percentage point.
Meanwhile, Seattle-based economic analysis firm Greenfield Advisors published an article earlier this year discussing how and why an election year has historically affected home prices.
The author compared U.S. home price increases during presidential election years with increases during non-election years going back to 1978. The numbers show prices during off years increased an average of 0.22 percent more than prices during election years.
Why might an election season mean a slowdown in sales and home price increases? In a word: uncertainty.
“People are less likely to make large purchases, such as a house, in very uncertain times,” according to the Greenfield article. “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.”
If you listen to our Real Estate Red Zone podcast, be on the lookout in the coming weeks for an interview with Real Estate Center Chief Economist Dr. Jim Gaines. We’ll ask for his perspective on how a change in administrations can affect the housing market.
