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.
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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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