Donald Trump or Hillary Clinton? Republican or Democrat? Does it really matter?
When most people cast their vote at the polls on election day, the housing market and how to price my home are probably the last things on their minds. It's true that real estate and the presidential election don't seem to have any connection at first glance. But you might be surprised to learn that isn't necessarily true.
How the election impacts the housing market varies from one election cycle to the next and according to experts, there are several factors that determine just what that impact will be. Typically, home prices rise over the course of an election year and into the next while the rate of growth slows. Although, there are some exceptions.
One gauge of U.S. large-cap companies, the Standard & Poor's 500, has been known to drop by almost 3% in election years without an incumbent seeking reelection. Chief Economist for Windermere Real Estate, Matthew Gardner explains that this phenomenon occurs because markets don't like uncertainty. Subsequently, they take precautionary measures when a new candidate is elected. However, they stabilize over the course of a presidency as we adjust to the new President and their policies.
Unfortunately, despite what is claimed on the campaign trail, it is impossible to know exactly what new policies, laws, and taxes will be implemented by a new President until they take office. When a President declines to run for re-election or has completed two terms and cannot serve again, this makes markets vulnerable and puts them at the mercy of the incoming Commander-in-Chief. Unsurprisingly, the markets favor centrist candidates over radical ones who promise to enact significant changes.
So what happens when a sitting President runs for reelection? Well it's good news for the housing market and economy alike. During the course of these election cycles, Standard & Poor's 500 averages returns of more than 12%. Since 1900, only five out of nineteen Presidents have lost their reelection campaigns, so the markets can consider it a safe assumption that reelection years will result in a repeat of the last term.
But what does all of this mean for current and would-be property owners? As the rate of home sales slows during an election year, it may take longer to sell a house and ultimately result in a lower price than the owner had expected. For this reason, experts recommend selling homes in the year preceding or following an election year if at all possible.
On the other hand, these conditions can make it a good time to buy a home for interested parties if they are willing to take on the risk of uncertainty. In addition to seeing lower home prices and less competition while shopping for a home, buyers also get the added bonus of experiencing lower interest rates on mortgages during election years.
Ultimately, we don't know what's in store for 2017. Depending on who you listen to, either candidate could cause irreparable harm or a great boon to the economy and housing market. In truth, we won't know how the markets will be impacted by our new President until long after the election results are in.