With November 3rd fast approaching, you may be asking yourself, “How will the presidential election affect the real estate market?” While the election results are undoubtedly pivotal no matter which candidate wins, the question is – could they have a negative effect on the local housing market? Data suggests potential homebuyers are more cautious in the face of national election uncertainty.
What Usually Happens to Housing During an Election Year
According to national data from BTIG, November usually sees a decrease of roughly 9% in housing market activity. Seasonally, real estate sales take a dip during the late fall as a result of the upcoming busy holiday season and the beginning of colder winter weather. In the month of November for election years, however, it can be as much as a 15% slow down.
This is why the year after a presidential election typically sees an increase in real estate activity. Because housing demand is usually put on hold with buyers and sellers waiting until after the election results to make a move, they come back to the market and complete more sales the following year. In this respect, 2021 is projected to be busier than in 2020.
California’s Housing Market in 2020
While there may be homeowners who wait until 2021 to make their move based on the uncertainty of the election, there’s no stopping the pent up and now overwhelming homebuyer demand created by the halted spring market earlier this year.
When Coronavirus first hit back in the spring, economists were projecting a 15-20% decrease in overall home sales. That quickly changed, however, and economists are now predicting that by the end of the year, we will see a 1% increase in total home sales versus last year. The California housing recovery remains strong as the median home price broke the $700,000 mark, according to the CAR Market Report for August 2020. Home sales climbed to their highest level in more than a decade and a rising number of consumers continue to agree that it’s a good time to sell.
Market Winners and Losers
Winners: Homeowners and Sellers
Why: According to C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young, “Low rates and tight housing inventory are contributing factors to the statewide median price setting a new record high three months in a row from June to August.” The Federal Reserve has kept interest rates at historic lows, hovering below 3% in an attempt to support the shaky economy. That’s why the only major industry remaining unaffected by the negative economic impacts of the coronavirus appears to be the housing market.
Low mortgage rates, increased buyer demand, and tight inventory from the country’s continued housing shortage are pushing this year’s busy real estate season straight through to at least the end of 2020 – regardless of the election. In fact, the housing market boom is expected to continue for some time. Housing inventory today is tight, and the continued tightening of available homes started in 2008 when home builders began building fewer and fewer homes every year, cautious from the Great Recession. Inventory is also lagging from our halted spring market when the quarantine and subsequent shutdown caused millions of homeowners to pause their plans to sell.
With Millennials continuing to hit prime home-buying age and a near guarantee that the Fed will keep rates low throughout the continued uncertainty of the Coronavirus, buyer demand isn’t going anywhere this election season. Homeowners and sellers, therefore, remain in a powerful position as winners in the Southern California’s seller’s market, with the ability to sell for top dollar and secure an ultra-low mortgage rate on their next home.
Potential Losers: Tentative Homebuyers
Why: The opportunity created by lower mortgage rates is encouraging a record number of buyers to join the market, and helping the housing market make an impressive rebound and driving up home prices. It’s important to note that even though prices have been rising, the cost of buying a home with today’s low rates still makes it more affordable than last year.
However, the longer you wait, the greater the chances are that the cost of your next home will rise. The listed price of a home is straight forward, but the monthly cost for a buyer is determined by the interest rate you secure on your mortgage loan and the home’s continued appreciation. The rate at which these two factors change over time is called “The Cost of Waiting”. The longer you wait to buy, the more likely you are to pay more in interest rates (if they rise in 2021) and appreciation costs.
The low supply and high demand we’re seeing today won’t be resolved quickly, indicating that the hot market we’re currently experiencing has years left to play out. So if you’re wondering whether you should wait to buy or sell until after the election, there’s no need. Regardless of the outcome, for most Southern California housing markets, it is a good time to buy and sell real estate.
Find out if your neighborhood could be the unlucky exception to this rule by reaching out to us at email@example.com. If you’re considering a move, let us know the zip code and area you’re interested in and we will crunch the numbers on how your specific neighborhood will fare post-election. Knowledge is power!