As we find ourselves just five months away from the presidential election, I can't help but reflect on my experience in real estate. I've navigated through three presidential election cycles and am now approaching my fourth. Inevitably, during these times, I hear the same concerns from buyers, sellers, and investors: "I don’t know what’s going to happen in November, I think we will pause and find out." This sentiment of uncertainty is common, but today, I want to address it head-on.

Is there really a reason to avoid buying or selling real estate in an election year? Does the real estate market historically behave erratically due to the election?

The short answer is no.

Let's delve into some data. The Case-Shiller Home Price Index, which tracks year-over-year changes in home prices, provides valuable insights. If we look back to 1987, we can compare market performance over nine presidential election years and 28 non-election years.

Here's what we find:

• Average home appreciation in election years: 4.84%

• Average home appreciation in non-election years: 4.44%
  

The difference is minimal. In fact, home prices tend to do slightly better in election years. However, in my opinion, the impact of the presidential election on real estate is largely irrelevant when making real estate decisions.

Home prices generally increase by more than 4% annually, and any significant deviations are rarely related to who is in the White House, regardless of their political affiliation. So, if you're considering buying or selling, don't let the election year deter you. The real estate market has its own rhythm, and historical data shows that it remains steady, election year or not.

Let's take a closer look at some of the extreme years in real estate. Here’s a chart showing home price value changes since 1987 according to Case-Shiller data:

Let’s highlight some extreme outliers and see if we can place presidential blame:

In 2008, home values dropped by a staggering 12%! This was the largest housing crisis in recent decades. Was it because Barack Obama stepped into office and tanked prices on day one? Of course not. The crash of 2007-08 was due to decades of bad banking policy that spanned multiple presidencies from both parties. Obama just happened to be in office when the crisis hit.

On the other extreme, home prices increased by 18.87% in 2021 and 10.43% in 2020. Was this because Biden was some sort of real estate value savant? Remember, he was also in office during Obama’s tenure when the real estate market tanked. The intense increase in real estate value in 2020-21 was largely driven by historically low interest rates (initiated during Trump’s presidency), the unprecedented "let’s just do this" mentality due to COVID-19 (which wasn’t driven by any single political party), and the shortfall of new construction starts which began in 2007 and continued through multiple presidencies to the present day.

In my humble opinion, the movement of real estate isn’t influenced by whether there’s an elephant or donkey in the White House. The factors that affect real estate are much more nuanced; a complex interplay of variables over time.

To add a bit more context—and perhaps confusion—I do think it’s possible we’ll see a dip in home prices this fall, coinciding with the election season. But if this happens, don’t be fooled into thinking it’s because of who took office. Any drop will likely be related to interest rates, the aftermath of COVID-19, and ongoing home construction issues.

Sellers have been clinging to their sub-4% rates, hoping that the era of 7-8% rates will end, making transitions less costly in terms of mortgage values. 

But, as rates continue to hover around 7%, life moves on—even if rates don’t. People die, get divorced, families grow and shrink—and eventually, people need to sell their homes.

The sellers who have "overstayed their welcome," so to speak, in their current life circumstances are likely to give up on "waiting for the rate." I think there's a high likelihood this could happen this fall, creating an uptick in inventory.

Similarly, I believe there’s a significant number of COVID-era movers and buyers with adjustable-rate mortgages who are now facing regret and the need to sell. The COVID-driven demand also led to a surge in new construction, especially in places like Texas and Florida, where builders ramped up production at intense levels over the past four years. As demand has calmed down, these areas are still producing homes at a breakneck speed.

So, yes, this fall into winter could see a drop in real estate values—maybe a percent or two. But will it be because of the president? Should you "wait and see"?

I would say no. If values drop, it will be due to people giving up on waiting for rates to fall, builders potentially overbuilding, and individuals finally making moves they perhaps should have made a few years ago, some motivated by an adjustable-rate mortgage coming due.

If you need to buy, look at your circumstances and make a decision. The same goes if you need to sell.

And talk to me about the broader long-term factors that may, just may, be worth taking into consideration for your situation. Let's focus on what really drives the real estate market and your personal needs rather than the political landscape.

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