How the Real Estate Market Will Change with the 2016 Election
Election Day 2016 is creeping steadily closer, and the political rhetoric is heating up. Swing states are crossing party lines, and everyone’s gearing up to vote, whether or not they had a chance in the primaries.
But the tempers of the nation’s voters aren’t the only element that will shift as the national election draws near. Several essential business markets will be affected, as well; real estate is one of them.
Evidence of the election’s effect on real estate can be assessed over several decades. One study conducted of the period between 1999 and 2006 indicated that home sales declined somewhat in 35 states. During that time, 73 elections took place, on both the state and national levels, which suggests they may have been a factor in the fall of real property values.
This information has not gone unnoticed by sellers, buyers, or professionals in the industry. The trend is for buyers to grow less interested in purchasing a home when a major election looms. Financial institutions are also less likely to lend money.
As any economist knows, consumer confidence affects consumer spending, and the market tends to take a slight dip when an election is pending.
How Will 2016’s Election Affect Sales?
Economists have already observed a dip in real estate values after the highest spike following the 2008 recession. Data suggests that it isn’t likely to result in a complete downturn, to the extent we saw eight years ago, but it may take a little work to bring the numbers back up.
“2016 will remain a very tight market for at least the first half of the year,” says Roxanne DeBerry, a real estate agent in the Dallas, Texas area. “It takes time to build inventory. If we don’t build inventory of homes for people to purchase, then home prices will remain high. We definitely need more inventory for the market to balance.”
DeBerry is confident that the market will regain balance as time goes on, and that even though things are a little strained now, it will be shortlived.
Does This Affect Interest Rates?
Any time a market makes a shift, at least some of the rest of the economy will experience side effects. The most glaring is uncertainty that might affect interest rates. Brad Yzerman, a loan officer from HomeLoanArtist, told Real Estate Book that, “there is no historical evidence that supports mortgage rate consistently go either up or down in a presidential election year.”
However, he points out that the uncertainty that comes with changes in the housing market during an election year can lead to decisions by financial institutions to alter interest rates.
Why Would Such a Change Occur?
Fear is a major motivating factor in the economy during an election year. When a new president is selected, changes are bound to come, and consumers naturally worry that their finances may be affected.
Because consumers have such a powerful effect on spending, their insecurity over the economy can change interest rates and the amount of home sales.
The vital thing to remember is that the market will not shift downward forever. The general economy, and therefore the real estate market, will always be in flux, so given time, balance will be restored to the market at some point after the election draws to a close.