The Real Estate Market During an Election Year

Election years bring a unique set of challenges and opportunities for many industries, and the real estate market is no exception. For Realtors®, buyers, and sellers alike, election cycles can have a profound impact on housing activity, market confidence, and future policy landscapes. At Capital City Coordination, our team of licensed Realtors® coordinates for Realtors®, providing more than just transaction support—we deeply understand the market, the nuances of being a Realtor®, and how to navigate the complexities that election years introduce. This insight helps real estate professionals stay ahead of the curve and prepare for both slowdowns and post-election rebounds.

How Election Years Impact the Real Estate Market

Historically, the real estate market slows during election years, primarily due to uncertainty. Uncertainty about the outcome of the election, the future of tax policies, mortgage regulations, and economic stability can cause potential homebuyers and sellers to delay making decisions. Several data points and historical trends back this up:

Buyer and Seller Hesitation: In the months leading up to an election, many buyers adopt a “wait-and-see” approach. A study from the real estate firm Meyers Research showed that home sales typically drop by 15% in the fall of an election year compared to the same period in non-election years. This decrease in activity is largely driven by uncertainty about the future, causing hesitation among buyers and sellers alike.
Interest Rate Fluctuations: While the Federal Reserve is theoretically independent of political influence, it is often more cautious about adjusting interest rates during an election year. The uncertainty surrounding the election can lead to slower decision-making at the Fed, which in turn creates hesitation in the mortgage market. This can lead to fewer loan approvals and a general sense of market stagnation.
Economic and Political Uncertainty: Elections introduce unpredictability into economic policies that directly impact real estate, such as mortgage interest deductions, capital gains taxes, and regulatory oversight. Potential changes in housing and fiscal policies can significantly influence market behavior, as buyers and sellers wait for clarity on what policies will look like under a new or continued administration.

Case Studies: Election Year Market Slowdowns

Historical data shows consistent patterns of real estate slowdowns during election years. For example:

2008 Presidential Election: The housing market was already in turmoil due to the financial crisis, but the uncertainty surrounding the election exacerbated the market’s instability. According to a study by the National Association of Realtors® (NAR), home sales dropped nearly 20% in the months leading up to the election.
2016 Presidential Election: Similarly, in 2016, the real estate market slowed as uncertainty about the policies of the incoming administration weighed heavily on both buyers and sellers. A Zillow study showed that sales volume dipped as much as 10% during the fall months before the election.

What Happens to the Real Estate Market After Elections?

While the months leading up to an election often see a real estate slowdown, the period following an election typically brings a surge in activity. Once the uncertainty is removed, buyers and sellers feel more confident in making decisions, and the market tends to rebound.

Post-Election Bounce: According to data from Meyers Research, home sales often see an uptick after the election, as buyers and sellers who were waiting on the sidelines feel confident enough to move forward with transactions. This post-election bump typically occurs in the months immediately following November and can be seen as pent-up demand that finally gets unleashed once the election results are known.
Restored Confidence: Whether or not a particular candidate or party wins, the certainty of knowing the outcome tends to restore confidence in the market. Investors, homebuyers, and Realtors® all have more clarity on the direction of economic policy and can adjust their strategies accordingly. A study by the NAR showed that in most post-election years, home sales rise by 5-10% in the first two quarters following the election.
Policy Shifts: Once elected, the incoming administration may introduce new policies that affect the real estate market. For example, in 2017, the Trump administration enacted tax reforms that capped the state and local tax (SALT) deductions, which had a notable impact on high-tax states like California and New York. Understanding these potential shifts is key to anticipating changes in the market and advising clients appropriately.
Interest Rate Adjustments: After the election, the Federal Reserve often feels more confident in making decisions about interest rates, which can have a direct impact on mortgage rates. Historically, the Fed has been more likely to make significant rate changes in the year following an election, depending on the economic outlook. In 2017, for example, the Federal Reserve increased interest rates three times, which affected mortgage affordability and homebuying trends.

Backing It Up with Historical Data

The patterns of real estate slowdowns during election years and rebounds afterward are not just anecdotal but are backed by significant research and data.

Redfin: A 2020 Redfin study found that home sales dropped by an average of 15% in the months leading up to the last four presidential elections (2008, 2012, 2016, and 2020). However, this same study found that in the months immediately following the election, home sales rose sharply as buyer confidence returned.
National Bureau of Economic Research (NBER): A 2013 NBER study highlighted the broader economic effects of election uncertainty, finding that elections often lead to reduced spending and investment as businesses and individuals wait for policy clarity. This is especially true in the housing market, where large financial commitments like buying a home can be delayed until after the election results are finalized.

Preparing for the Election Cycle: What Realtors® Can Do

Understanding the impact of election cycles on the real estate market is essential, but what can real estate professionals do to prepare?

Stay Informed: Keep up to date with the political landscape and policy platforms of the candidates, especially regarding housing and tax policies. Understanding the potential changes that could come with a new administration can help you better advise your clients.
Focus on Long-Term Value: Encourage buyers and sellers to look beyond the immediate uncertainty of an election year and focus on the long-term value of real estate investments. Remind them that real estate has historically been a stable and appreciating asset, even amid political changes.
Plan for the Rebound: Use the election slowdown as a time to prepare for the post-election surge. Organize your files, fine-tune your processes, and be ready to hit the ground running when the market picks up after the election.
Communicate with Clients: Transparency and regular communication are key during uncertain times. Keep your clients informed about market trends and advise them on the best strategies for navigating the election cycle. This will help build trust and ensure that they feel confident in your expertise.

How to Register to Vote

As a real estate professional, you know how important it is to have a voice in the policies that affect your industry. Voting is one of the most powerful ways to make your voice heard. At Capital City Coordination, we encourage everybody to exercise their right to vote. If you’re not already registered to vote, here are the steps to ensure you can participate in the upcoming election.

Check Your Eligibility: In the United States, most citizens over the age of 18 are eligible to vote. Some states may have specific residency or registration deadlines, so check your state’s requirements early.
Register Online: Many states offer online voter registration. You can visit your state’s election website or go to a resource like CanIVote.org to check your registration status and find links to register.
Register by Mail or In Person: If online registration isn’t available in your state, you can fill out a voter registration form and mail it to your local election office. Alternatively, you can register in person at designated locations such as your county courthouse or DMV.
Verify Your Registration: Once you’ve registered, verify that your registration is active and up-to-date. This is especially important if you’ve moved recently or haven’t voted in a few years.

Conclusion

Election years bring about uncertainty in the real estate market, often leading to a temporary slowdown. However, history shows that the market tends to rebound after the election as buyers and sellers gain confidence. As a real estate professional, understanding these cycles allows you to prepare your business for both the slowdown and the post-election bounce.

By staying informed about potential policy changes, maintaining strong client relationships, and preparing for the market rebound, you can position yourself to thrive during election years and beyond. And, as mentioned above, voting is one of the most powerful tools you have to shape the future of your industry.