Is It Really Harder to Sell Your Home During an Election Year?
An Election Year Brings Uncertainty and That’s Bad for Real Estate
- Fewer purchases are made in an election year
- Homes sales can dip by up to half a percent
- Prices rise slower in an election year
- Investors play a key role in election cycle home sales
If you’ve been on the fence about buying or selling a home, then you might want to wait a year to do it. Why? Because 2016 is an election year and if history is any guide, buying and selling a home is about to get a little harder than normal.
The reason is because an election year brings with it a natural state of uncertainty. After all, at the moment, Americans have no idea who will be leading the country come November, and this can make some buyers extremely wary.
Fewer Large Purchases Are Made During Election Years
Americans, by and large, tend to spend much more conservatively during election years, but this is especially the case with real estate. And, the fact that home prices usually increase during an election year doesn’t help matters.
The most pressing problem is that nobody truly knows what the next president is going to do. They will have their own mortgage and housing policies, which in some cases can differ quite significantly from what we’ve grown accustomed to over the last president’s tenure in office. A new president can also affect the job market, the economy, and the nation’s healthcare system.
As a result, with their future finances essentially up in the air, many Americans simply don’t want to risk making the largest investment of their life.
How Much Do Elections Impact Sales?
In 2015, the British Journal of Political Science published a paper written by Princeton economist Brandice Canes-Wrone and her co-author Jee-Kwang Park. The duo used home sales data that was collected between 1999 and 2006 from a real estate website to determine how home sales performed during 73 gubernatorial elections in 35 states. The research showed that during election years, home sales dropped from two-tenths to three-tenths of a percent, depending upon the state.
An election year’s effect on the real estate market has also been shown to be more severe during years in which the race is close. For instance, in elections where the winner received less than 55% of the vote, the number of home sales dropped by as much as a third and a half of a percentage point.
These results serve to confirm another study, one conducted in 2012 by yet another real estate website. This site’s researchers used data from the California Realtors Association and they discovered a similar trend in the housing market during presidential election years.
In fact, according to this study, home prices rose by as much as 6% before election years, and then dropped to 4.5% during election years. Then, in the year following an election, home sales would rebound by 5.3%.
What Can We Expect in 2016?
With the 2016 election shaping up to be one of the closest in history, and with the candidates themselves so controversially charged, home buyers and sellers might expect a dramatic reduction in home sales performance this year if history has anything to say about it. But, there is still a chance that the market won’t end up as bad as it has in the past. Ultimately, everything hinges on who investors and potential home buyers think will win the election.
What Part Do Investors Play?
Historically, in an election year, if stocks rise between July 31 and October 31, then it is often seen as a sign that the incumbent party will win (according to CNBC). On the other hand, if equities fall, then the standing belief is that a new party will be most likely taking over the presidency.
Even though any presidential change makes for some degree of uncertainty in the market, having the incumbent party remain in power usually results in a smoother transition, with less impact on the country’s housing market!
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