What’s going to happen to the housing market with a presidential election year coming? There are so many ideas. I’ve heard stuff like, “Rates usually go down during a presidential year,” or “The market is likely going to be stronger because one party is trying to stay in power.” But are these things really true? Today I want to look at what happens to rates, prices, and volume during an election year. I’m going to speak about rates nationally, and then use Sacramento as a local example. Any thoughts?
UPCOMING (PUBLIC) SPEAKING GIGS:
11/16/23 Mega Agent Panel (register here)
11/30/23 Safe CU “Preparing for a Successful New Year”
01/30/24 Joel Wright & Mike Gobbi Event 9am (on Zoom here)
3/11/24 Yolo Association of Realtors (details TBA)
A SUMMARY OF THIS POST:
1) Prices don’t just do one thing during a presidential election year.
2) Rates don’t always go down during a presidential year.
3) Sales volume has been stronger in Sacramento County on average during a presidential year, but there’s more to consider about that.
PRICES DURING A PRESIDENTIAL YEAR:
An election year doesn’t alter the price trend that is already happening in the market. When looking at the median price in Sacramento from 1990 onward (presidential election years in green), the trend is all over the place. Sometimes prices have been up, and other times they’ve been down. No matter what, an election year doesn’t come along and change the trajectory of what has already been taking place.
But what about before the 90s? I’m glad you asked. Let’s look at the Freddie Mac Price Index in Sacramento from 1975 through 2022 (haven’t added 2023 yet). The green bars are presidential election years, and whether we’re looking at the first graph (nominal prices) or the second one (adjusted for inflation), the trend is truly hit and miss. Like I said, an election year doesn’t come along and alter the direction of prices.
MORTGAGE RATES DURING AN ELECTION YEAR:
Some people swear mortgage rates go down before or during an election year, but it’s really hit and miss when looking at the past thirteen elections. These visuals show the 30-year fixed rate since 1971 (FRED St Louis).
ADDED NEW IMAGE
Thanks to Bruce in the comments for asking about the Federal Funds rate. Does the Fed not raise or lower rates during an election year? Here’s a look at 1954 onward. What do you think?
And two images with a closer view. What do you see?
SALES VOLUME DURING AN ELECTION YEAR:
In Sacramento County we’ve actually tended to see stronger sales volume during a presidential year. Unfortunately, I only have access to sales volume data for a couple of decades, so I can’t run stats like this for the 70s through the 90s. Anyway, when looking at 2004, 2008, 2012, 2016, and 2020, these years have clearly tended to experience above average volume. However, there was also some really strong demand during years like 2004, 2008, and 2012 especially (more on that below). Ultimately, it wasn’t just a presidential election causing more buyers to participate in the market during those years.
Here’s a different way to look at presidential volume. As can be seen, presidential years have tended to be some of the strongest years we’ve seen.
VOLUME: FIRST PART VS LAST PART
When considering the last five presidential election years in Sacramento, the last few months of the year tended to be stronger than the first two-thirds of the year. However, I’m prone to say this extra volume during presidential years was more about what the market was doing at the time rather than residents voting for a president. I could be wrong, so let me know what you think.
Higher volume during presidential years:
2004: Huge demand in 2004 before the market peak in 2005
2008: A flood of foreclosures were purchased
2012: Higher demand as prices bottomed (investment funds buying too)
2016: Not much to say about this year
2020: 3% rates created abnormally high demand (second half)
NOTE: In case any nerds want to know, I also pulled stats from September to November only, and the graph looked just the same as September to December. The benefit of using through November is those sales mostly all got into contract before the election.
CLOSING THOUGHTS:
Part of me feels like I just wrote an anti-climactic post to say, “Bro, we don’t see one consistent trend during a presidential year.” Yet, this is actually really important to understand so we can have informed conversations. In real estate it seems like people make claims all the time about what prices, rates, and volume do during a presidential election year, but do stats actually support the narrative? I hope today I’ve given a few things to think about when these conversations come up. I’d love to hear if you have any different insights regarding Sacramento or your home market.
2024 EXPECTATIONS
It’s challenging to predict what prices are going to do in 2024 because the future price trend is hyper-sensitive to what happens with mortgage rates. Lots of people are predicting lower rates ahead, but only time will tell. In terms of volume, it’s hard to imagine a strong year if affordability remains such a challenge. Therefore, a presidential election year ahead isn’t poised to magically trump the trend of low volume that exists today. Yet, if mortgage rates drop, we should see more volume in 2024 than 2023. It’s just hard to imagine anywhere close to normal volume without a massive change to affordability and sellers thawing out more to list their homes. My advice all along has been this. Plan for low volume unless something alters the trend. Lastly, let’s watch consumer sentiment in 2024 as there seems to be a buffet of uncertainty at the moment for most facets of life.
Thanks for being here.
Questions: What have you seen happen during a presidential election year? What do you tend to hear from consumers? I’d love to hear.
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You always bring something new to think about. Great job.
Thanks Gary. I suspect we’re going to start to get more questions about this as we look to 2024. Here’s to hoping we have good conversations ahead.
Ugh.
A year away? Is this post like Halloween candy for sale on Labor Day or Christmas decorations at Costco before Halloween?
Haha. Hopefully it’s more like the $1.50 hot dog at Costco… But yeah, it maybe has some Christmas trees on Labor Day vibes. In truth, I want to start talking about this as we begin to think about 2024. I suspect we’re going to start to see an uptick in posts considering the new year, and this is definitely going to be part of the conversation. I had fun unpacking stats. Hopefully this resonates. There’s only one way to find out…
Thanks for dispelling some myths Ryan, great to see it in actual stats!
Thanks Michael. I’m also having people say they sense hesitation among buyers for a few months leading up to an election, so it’s possible there is a buyer reaction from some people at least. Depending on the questions that arise from this post, I may go for another round of research. Stats are like an onion, and there’s always another layer…
Ryan – again… nicely presented and thought provoking…. Question: Have you found, historically, the Fed Reserve will not move interest rates , up or down, in an election year? (I have heard this fact many times… by TV talking heads)
Hey Bruce. That’s a great question. I wish I would have thought of that before making this post, but I just made an image that I’m going to add to the post in the next few minutes. It shows the Federal Funds rate from 1954 onward. I think it’s hit and miss. See if you can spot a trend. Happy to share a larger graph too if that’s needed.
Good stuff Ryan. This is what is known as “evidenced-based research.”
Thank you so much Jonathan. I appreciate it. I may have to study this further to see if there is any uptick in volume after an election. Love the graph you made in this regard for Manhattan. https://millersamuel.com/manhattan-co-op-sales-fall-during-federal-election-year/
Rates will drive the market!!
Yep. Rates are the x-factor.
Well done Ryan! Thanks again for all of your excellent data with pragmatic color analysis. Cheers, ~ Pat
Thank you very much Pat. I appreciate the kind words. I was hoping the colors would tell a compelling story.
I can tell you my prediction for after the election is over. Though I cannot predict the future and do not know which way the election will go, I believe that if the party we have now is elected a second term, many people whom are fed up with the current political agenda will likely be moving out of CA in droves. Whether the feds lower rates or they don’t I predict an abundance of movement out of CA for the fed up citizens currently suffering from the disease of this current administration.
Thanks for the comment. Time will tell. And I just want to say I’m super careful about political topics here because it can get really argumentative fast, and I’m about the stats instead of the politics (but this is sort of a conversation centered on stats and politics). Anyway, we need to watch migration closely. Outbound migration saw a pretty good bump when rates were super low and people could work from home. Many sellers really need affordability to move today, and that’s tough with higher rates. The sellers that can pay cash or who can sell high and buy lower elsewhere are still in a winning position though. It’s just a place like Boise isn’t much less expensive compared to Sacramento County at least. I have an appraiser colleague who just moved from El Dorado County to somewhere in Florida.
For any onlookers, here’s a great source for migration data (PPIC). Unfortunately migration stats take forever to post. https://www.ppic.org/blog/whos-leaving-california-and-whos-moving-in/
Good to know, I think the drugs and the homeless are going to drive people out of California. Or I should say continue. I have a lot of friends that move for that specific reason and Sacramento and surrounding areas. It’s very unfortunate for those who truly need help and unfortunate for those who are exposed to all the drugs and crime. But don’t want to get political. But it’s definitely not getting better anytime soon. Lots of options out there Reno Arizona. The list goes on. However, it’s tough to leave family and friends but at a certain point you have to draw the line for safety.
And this is where we need to talk about this. We can avoid political vitriol, but have very real conversations about stuff that is affecting our population and even real estate.
I hope you’re right as I am invested in Boise Idaho area. LOL.
Haha. Realtor dot com has the median for Ada County at $492K as of Oct 2023 and Sacramento at $525K. Honestly, their Sacramento number is low, but maybe they include all condos too. Whatever the case, the numbers aren’t that different when comparing this one data source. I wish I had access to Ada County data over a long period of time to compare it to Sacramento County.
We’ll see how it shakes out. Boise has had explosive growth. I just visited some family there last month, and I was very pleased to see they’re getting their first In-N-Out. Haha. To be honest though, it was a bit nauseating talking to ex-Californians during my trip. I only want to hear so many conversations about why people will never move back to California. Here’s my rule in life. When talking to a person who still lives in an area you left, have a filter and read the room. This is good for leaving neighborhoods, schools, and even the state. Just something I’ve observed through the years. 🙂
Ha ha that’s hilarious I feel you.
Yeah, it’s about 20 to 30% less expensive than California but you don’t have all the scary people walking around.
I’m curious if newly elected officials and new legislation affect our city more then other places, given that Sacramento is the capital of California? I’m a spec builders and noticed that sales have been abnormally strong towards the end of election years and into the early part of the following year. Anyone else notice this?
Thanks Vadim. Government is our big employer, so it’s worth considering. I do have new homes data from 2000 onward, so I’ll have to take a look at some point.