Today, Americans decide our President for the next four
years. That decision will have a major impact on many aspects of life in this
country, but the residential real estate market will not be one of them.
Analysts will try to measure the impact feasible changes in
regulations might have on housing, the effect of a possible first-time buyer
program, and any number of other situations based on who wins. The housing
market, however, will remain strong for four reasons:
1. Demand Is Strong among Millennials
The nation’s largest generation began entering the housing
market last year as they reached the age to marry and have children – two key
drivers of homeownership. As the Wall Street Journal recently reported:
“Millennials, long viewed as perennial home renters who
were reluctant or unable to buy, are now emerging as a driving force in the
U.S. housing market’s recent recovery.”
2. Mortgage Rates Are Historically Low
All-time low interest rates are also driving demand across
all generations. Strong demand created by this rate drop has countered other
economic disruptions (e.g., pandemic, recession, record unemployment).
In addition, Freddie Mac just forecasted mortgage rates to
remain low through next year:
“One of the main drivers of the strong housing recovery
is historically low mortgage interest rates…Given weakness in the broader
economy, the Federal Reserve’s signal that its policy rate will remain low
until inflation picks up, and no signs of inflation, we forecast mortgage rates
to remain flat over the next year. From the third quarter of 2020 through the
end of 2021, we forecast mortgage rates to remain unchanged at 3%.”
3. Prices Continue to Appreciate
The continued lack of supply of existing homes for sale
coupled with the surge in buyer demand has experts forecasting strong price
appreciation over the next twelve months.
4. History Says So
Though it’s true that the market slows slightly in November
when it’s a Presidential election year, the pace returns quickly. Here’s an
explanation as to why from the Homebuilding Industry Report by BTIG:
“This may indicate that potential homebuyers may become
more cautious in the face of national election uncertainty. This caution is
temporary, and ultimately results in deferred sales, as the economy, jobs,
interest rates and consumer confidence all have far more meaningful roles in
the home purchase decision than a Presidential election result in the months
that follow.”
Ali Wolf, Chief Economist for Meyers Research, also notes:
“History suggests that the slowdown is largely
concentrated in the month of November. In fact, the year after a presidential
election is the best of the four-year cycle. This suggests that demand for new
housing is not lost because of election uncertainty, rather it gets pushed out
to the following year as long as the economy stays on track.”
Bottom Line
There’s no doubt this is one of the most contentious
presidential elections in our nation’s history. The outcome will have a major
impact on many sectors of the economy. However, as Matthew Speakman, an
economist at Zillow, explained last week:
“While the path of the overall economy is likely to be
most directly dictated by coronavirus-related and political developments in the
coming months, recent trends suggest that the housing market – which has
basically withstood every pandemic-related challenge to this point – will
continue its strong momentum in the months to come.”
Source: Real Estate with Keeping Current Matters