Election Paralysis on the Real Estate Housing Market

Politics aside, voters and potential real estate residential home purchasers and sellers are concerned about how the upcoming midterm election and its outcome will affect them financially. With the election having the capacity to change the balance of power, this sense of uncertainty may make selling residential real estate more difficult and cause a delay on purchasing a home until after the elections as buyers prefer to wait for more clarity on domestic and international direction.

Why? According to a paper published by the British Journal of Political Science, during gubernatorial elections in 35 states from 1999 to 2006, residential real estate sales declined  from two-tenths of a percent to three-tenths of a percent. When elections are more hotly contested, highly publicized, and the winner received less than 55% of the vote, residential real estate sales dropped around three and a half percentage points. The significance of election years is even comparable to “that of other, well-established influences on the housing markets” according to the authors of the study.  Our prior posting, for instance, discussed rising constructions costs have translated into difficulty for builders and developers to build entry-level and affordable homes as one such housing influence.

Yet, despite the election, according to Freddie Mac, mortgage rates are at their lowest point since mid-April. This is despite two Federal Reserve rate-hikes this year and with two more potential hikes before years-end. How so?  Slowing domestic home sales, especially in higher priced residential real estate where price reductions stand at 11.2 % nationally, and 2.9% in Miami-Fort Lauderdale may be a factor in keeping mortgage rates low.  Also, overseas crises resulting from constant media headlines suggesting potential full blown trade war has led to increased concerns of a recession which could cause mortgage rates to fall for the time being.

So, while there may be some real estate purchasers waiting until after the elections are over,   mortgage rates are nevertheless drawing real estate purchases.   Election uncertainty may actually yield real estate opportunity.

From the trenches,

Roy Oppenheim