How Will the Election Impact Home Values?

The 2016 Presidential Election is only a few weeks away, and while some of its implications may be obvious, many Americans are wondering how it will impact the real estate market. As a general rule, election results hardly make much of a difference, but with one of the world’s biggest real estate moguls running against a longtime politician, this year could prove to be different.

The Election Cycle

Before digging in to how this year’s election results will impact the market, let’s first look at past races. Historically speaking, the election cycle, not the election results, have a much stronger bearing on the real estate industry. According to the Freddie Mac price index, US housing prices have increased an average of 4.25% per year since 1978. During the 9 election years since then (1980, 1984, etc.), home prices only increased by 2.75% per year. This clearly marks a slow down in real estate during election years.

So what causes this trend? The answer is uncertainty. While the President does not have the power to unilaterally dictate the rise and fall of the real estate market, many Americans believe that he (or she) does. This perception, albeit not warranted, is strong enough to make people hesitant to make any major financial decisions during times of uncertainty. Therefore, with less buyers in the marketplace, home values will inevitably fall, or at least slow their growth during an election year.

Another interesting point in uncertainty is looking at which elections most negatively impacted home values. Since 1978, these elections were 1980, 2000, and 2008. All of these elections had one thing in common – uncertainty as to who the next President would be. In 1980, Jimmy Carter was one of the most unpopular president’s of all-time and it was fairly well-known he wouldn’t be re-elected. He nearly even lost the Democratic nomination to Senator Ted Kennedy, which would have marked the first time the incumbent President lost the re-nomination since Chester Arthur in 1884. In 2000 and 2008, Bill Clinton and George W. Bush (respectively) had reached their term limits.

All that said, there is no clear-cut correlation between which party is in the White House and housing prices. Some Presidents witnessed a better real estate market, such as Ronald Reagan and Barack Obama, but others saw a declining market, such as Jimmy Carter and George W. Bush. Though the President can influence interest rates and set the overarching vision for economic policy, the bottom line is that no matter who’s in office, the market is not greatly impacted by their policy.

The Candidates

Every President we’ve seen to date, except perhaps for James Polk and Franklin Roosevelt, have done little to impact the housing market’s general trend of slow and steady positive growth. But could this year be different? Here’s what the doomsday extremists say:

“Donald Trump’s erratic behavior will drive the real estate market into panic mode, and the entire economy will capsize in his failed attempts to renegotiate trade deals, taxes, and government regulations. Hilary, on the other hand, will destroy the economy with her crippling tax hikes and anti-business mentality”.

With this mindset, perhaps the only logical solution is to vote for Gary Johnson, but is there actually any truth behind the extremist ideology?

While Donald Trump talks a lot about disrupting the economy by lowering taxes and deregulating the private sector, he understands real estate more than most. Regardless of your opinions on Trump, the guy did become a billionaire off of his real estate investments. Therefore, it is highly unlikely he will do anything to directly negatively impact the real estate market. In fact, many experts believe after all is said and done, his economic policy will be extremely pro-real estate. That said, we could see a minor setback in home values if Trump is elected simply due to an over-reaction of uncertainty. In addition, Trump’s stance on immigration could reduce the amount of potential home buyers and renters moving into the US each year, which currently accounts for nearly 25% of our annual population growth. As a whole, a Trump presidency will likely lead to a volatile real estate market until early 2018, at which point we should see above-average growth.

Now let’s talk about Clinton. It’s well-known that Hilary Clinton supports much more government regulation than Donald Trump, which generally slows economic growth – at least according to Republicans. Democrats argue that this slowed economic growth is counter-balanced by a more stable growth. Based on statistics from the US Department of Commerce, the truth is somewhere in the middle, but overall it is generally accepted that Clinton’s economic policy will lead to slow, consistent, and steady growth both in the stock market and in real estate.  The question now becomes, how slow will this growth be? Since World War II, growth in GDP has been slowest (3.2% per year) under President Obama. Growth under Obama has also been consistent, ranging from 2.5%-4.5% during his last 7 years in office. Conversely, Ronald Reagan oversaw some of the highest growth (7.7% per year), but also very sporadic ranging from 3.8%-11.4%. Most experts believe Clinton’s economic policy will fall somewhere in between Obama’s and Reagan’s leading to healthy, moderate growth to the GDP, and thus the real estate market.

Conclusion

It’s very difficult to predict the future, but one thing is certain: the election cycle and consumer reaction to the election will impact real estate much more than the election results themselves. I suspect the increased uncertainty and polarity in America’s political environment will temporarily impact growth in home values over the next few months, but it will ultimately level out. At the end of the day, property values will almost certainly be the same regardless of who is in the White House. If Trump is elected, the growth will probably be more volatile, and if Clinton is elected, it will be slow and steady. There are advantages to both, and therefore it is essential as a homeowner to understand how these trends no only impact the real estate market as a whole, but also how they impact your home individually.

About The Alfriend Group

Kyle Alfriend has been selling and marketing homes for over 20 years, successfully selling and buying homes in a variety of market conditions. He has sold over 1,200 homes, totaling over $250 million in homes sales. In Dublin, he has sold more homes that anyone ever. He has represented the areas largest builders, built his own homes, and owns and manages several investment properties. He has been awarded the "Top 10 M.A.M.E. Award (Major Achievements in Marketing Excellence) by the building and Realtor associations every year since 1993. He believes that everyone deserves the very best in knowledge, experience, and integrity when buying or selling their home. The Alfriend Group was started 5 years ago as a real estate team of professionals, specializing in buying/selling homes, property management, and real estate investments. For more information, call us today at (614) 395-1776.

Central Ohio Real Estate, Investing, Real Estate News

6 thoughts on “How Will the Election Impact Home Values?

  1. Observing from a distance it does appear that Clinton has it. If this result is confirmed we should (all else being equal) see a breath of relief reflected in the markets.

    Then again, I had a similar level of confidence that the UK would vote to stay, and we all know how that turned out…

  2. I think it makes a big difference whether people are more optimistic about their personal future because the economy is doing better or if, like my family, they drastically changed their lifestyle to begin saving more and paying down debt. Doing so makes me feel better about my own personal situation but not about the economy as a whole.

  3. Recently, we’ve heard from ex presidents of the USA who oppose Trump. The motive of the Bush family is obvious. Trump aggressively exposed how weak Jeb Bush was as a Presidential candidate. And exposed how corrupt and compromised our entire presidential election process is in that we keep getting the same recycled candidates year after year, keeping all us all prisoners of the same old same old with no hope of progress or real change. IF this country really was the free and the cliche anyone could be president could be true, we wouldn’t see the same old tired boring idiots running for office year after year after year. Trump is only showing what we’ve all known for years and because he has the money to go against the oppressive system, many people want him to be our next President. Of course, we all know these are empty words. No celebrity who said this will leave if Trump wins. That’s why they like Clintons. They are liars like her.

  4. Very interesting post with great sources, however, it does not answer the question on what could happen in our current scenario. We have two possible outcomes, one is for the status quo to remain and the other calls for isolationism (forcing Apple to manufacture everything in the US, tariffs to the Chinese) and barriers to free movement of labor, including deportation of 12M laborers. The latter has had no precedent occurrences in the past.

  5. If we want to make things better we need to ignore both Clinton and Trump. In my opinion, Senator Sanders is by far the most likely to change the direction of the economy by putting more money into circulation through government programs AND individual spending because he will increase the income of the lower income groups with government assistance as opposed to funneling wealth to the top as has been the pattern of both parties, but especially the Republicans, for too many years.

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