Two weeks ago, my family and I took a trip down to the beaches of South Carolina. It was wonderful in so many ways- sun, bike rides along the water, boogie boarding, snoozing in the hammock, and watching TV void of political ads. We didn’t watch too much TV except for a few sporting events- a Broncos game and the start of the World Series. What I noticed when I returned to Colorado was the incessant barrage of nasty political ads that I didn’t catch down south. It was so refreshing not to hear it in the background, day in, day out and I for one can’t wait until November 8th is over.
No doubt the election has been a topic of many conversations and gatherings lately, mostly in a humorous context. My youngest son does a convincing Donald Trump impersonation. Aside from all the other repercussions that this election will yield, as a realtor, it’s interesting to ponder what might happen from a real estate perspective after November.
So what does the general public think?
Redfin, a national real estate firm conducted a survey of 975 homebuyers in 36 states and Washington D.C. The number of respondents agreeing the election will negatively affect the housing market grew from 15 percent in February to 27 percent in May. One percent said they would leave the country if their candidate loses in the election and another 9 percent said they will either consider or seriously consider defecting to another country.
As a whole, we’re in better shape this election year than 2012…
Regardless of the candidates we have to choose from, presidential elections themselves can affect everything from mortgage rates and housing prices to stock values and corporate investments. Studies reflect that there is an overall sentiment of uncertainty during typical election years that impacts housing more than the actual election result.
Fortunately, the U.S. housing market is stronger than it was during the 2012 election, and so is the overall economy. In November 2012, home sales were rising, but the market was still recovering from the economic downturn of 2008. By comparison, home sales through May 2016 have seen the biggest increase since 2007. According to the U.S. Census Bureau, the median value for new homes sold in June 2012 was $232,600. By June 2016, that figure had soared to $306,700. In late 2012, 30-year mortgage rates were 3.34 percent and 15-year rates averaged 2.75 percent. Today, lenders are quoting 30-year rates near 3.25 percent and 15-year rates in the mid-2s. Unemployment has plummeted from an average of 8.1 percent in 2012 to less than four percent today. In addition, consumer spending in the second quarter of 2016 rose by a whopping 4.2 percent, and retail sales jumped by 3.1 percent over the same period in 2015.
Since 1833, the Dow Jones Industrial Average has gained an average of 10.4 percent in the year before a presidential election, and only 6 percent during the election year (Stock Trader’s Almanac). The first year of a president’s term sees an average gain of 2.5 percent and the President’s second year in office sees an increase of 4.2 percent. Of course, the exception was in 2008, when then Dow sank almost 34 percent.
There are conflicting opinions out there- the California Association of Realtors (CAR) disputes these presidential election trends and maintains that market fundamentals, such as inventory, affordability, interest rates, job growth and consumer confidence are the true factors that affect the housing market. Consumer confidence is probably the most influenced by an election, and some Americans, believing that their financial future might change due to the new president, may hold off on purchasing a home until the political dust has settled. Some reports have noted that it may be slightly harder to sell a home during an election year, though I’m not too sure we’ve experienced that in Denver this year.
So, what say ye from the candidates on housing policy or upcoming proposed changes?
Housing makes up around 18 percent of our country’s economy and still remains one of the most effective means for Americans to build wealth. Even so, neither Clinton or Trump has said much on housing policy, even though it affects a large percentage of our population. Trump promises to dismantle the 2010 financial regulatory law called Dodd Frank and to eliminate the Department of Housing and Urban Development, which oversees loan programs such as the FHA home loan. He hasn’t mentioned his housing policies or proposed programs as of late. Clinton has announced several proposals to increase housing affordability and rental supply, revamp downpayment assistance programs, and invest in high-poverty neighborhoods. “The next president will inherit the lowest homeownership rate in 48 years and so far the voters have heard little to nothing about what the candidates will do to boost people’s chances of becoming homeowners,” said Nela Richardson, Chief Economist for Redfin.
No matter who wins on Tuesday, Clinton or Trump will likely inherit a stronger real estate market than four years ago and immediate shock to the market will be largely unnoticeable, since it always takes considerable time to notice changes after new policies have been implemented. Until then, I must endure more ads, sprinkled into my Sunday football routine.