2020 was a wild year in many respects. As we move into the new year filled with hope the housing market remains strong. 2020 left us with a pandemic, an election and record low mortgage rates.
Housing Market Changes In Election Years
Dated: October 6 2020
Just a week after the first presidential debate many Americans are now more confused than ever. Regardless of political affiliation we can all agree that 2020 has been quite the year. Amidst political turmoil our nation still finds itself in a pandemic that has re-shaped life as we know it. With so many uncertainties Americans are left with more questions than answers and the housing market is no different. Our market still tells us that inventory and interest rates are historically low indicating we are still in a heavy sellers market. As many look to bail out of northern metropolis's still on lockdown it is safe to say demand is greatly outweighing the current supply. Although this election cycle is different in many ways than the past we can still draw conclusions based on history and past statistics. So how does an election directly affect the housing market as a whole?
1. Appreciation May Drop Off During an Election Year1
Historically speaking, election years are good for buyers as home prices tend to rise more slowly. After looking at pricing data from the National Realtors Association, researchers concluded that election years had a negative impact on the housing markets.
- Home prices rose 6.0% in the year before elections
-Home prices rose 4.5% the year of elections
-Home prices rose 5.3% the year after elections
Election years produce slower growth. That’s great for bargain buyers but not so much for industry professionals. While the slower growth is minimal, it will still impact the industry.
2. Real-Estate Tax Rates, Deductions, and Credits May Change.
The tax deductions and credits for property-owners are among the longest-running tax breaks on record. The Trump administration brought us the Tax Cuts and Jobs Act; a new administration could undo some or all of that as pertaining to property-tax deductions. Removing or reducing one’s ability to deduct up to $10,000 of property taxes for federal returns could be a significant deterrent for first-time homebuyers.
3. The Consumer Confidence Factor
One influencer in 2016 was the fluctuation in consumer confidence in the U.S. economy. The health of the economy and housing market are closely tied together. When consumers feel confident, they are more likely to buy. With consumers on the fence about the economy, the uncertainty of the elections could create more pessimism than optimism.
4. Elections Can Affect a Home’s Value.
Elections have historically affected housing prices with a slightly lower percentage increase in value. According to a study of the national real-estate market, home prices typically rise 1.5% less during an election year than in the year prior to the election, and 0.8% less than in the year following the election. While these percentages may not seem like much, they can add up over time. An election year could potentially cost homeowners thousands of dollars in lost value to their largest assets.
About Dan Lorentz, ABR, CRS, Founder & Team Leader of Greater Charleston Properties: Founder and Team Leader of the Greater Charleston Properties Team, Dan Lorentz, has lived in the Charleston, SC ....