2024 Election Could be a “Wash”
The Impact of Elections on the National Housing Market
by Carole VanSickle Ellis
Conventional wisdom states that uncertainty in almost any element of the economy will usually result in “bad news” or short-term negative behavior in most financial markets.
Presidential elections have historically been considered a prime example of how uncertainty affects investor behavior, with financial markets typically responding to the election process and months following the actual vote with less movement and lower gains. While this holds true for many areas of industry, the housing market seems to stand apart from the trend. New research published by the Yale School of Management and Northwestern University could hold the key to identifying how any given election cycle could affect housing on national and local scales.
“There is good reason to believe that just uncertainty by itself is bad, but we also know that when there is high volatility, there is also high opportunity,” said study lead Stefano Giglio, Yale’s Frederic D. Wolfe professor of finance and management.
Although the study focused primarily on financial markets, the research team said the broad array of sources from which it drew data for analysis meant the study “has implications for both financial markets and the broader real economy.” In financial markets, investors tend to react to the potential for volatility by “shoring up” portfolio defenses, sometimes paying “heavy premiums to insure against the risk of an actual loss.”
However, in nonfinancial markets, such as real estate, investors actually tend to take the opposite approach, attempting to insure “against periods of low volatility,” Giglio said. He concluded, “Periods of high uncertainty are not necessarily ‘bad’ economic states, but possibly times of innovation, creative destruction, competition, and, ultimately, growth.”
Sharper Business Solutions founder Gary Harper, whose company helps entrepreneurs and real estate investors scale their businesses, agreed with Giglio’s assessment that high uncertainty is not necessarily bad for business as long as investors are cognizant of how external factors, such as consumer confidence, affect their company’s performance during election years.
“Consumer confidence often fluctuates during election years, so it is important to gauge market sentiment and adjust your strategies accordingly,” Harper said. He suggested implementing strategies that emphasize stable, long-term investments during times of broader economic uncertainty. “While election years can bring volatility, they also present unique opportunities for savvy investors,” he said.
Monick Halm, a California-based real estate investor and founder of the REI Goddesses mastermind, observed election-year reticence on the part of some investors could represent opportunity for others.
“While others are holding back due to fear or uncertainty, there may be less competition in the market, which can lead to more favorable buying conditions,” she said. Halm continued, “This is the time when strategic investors step in, take advantage of potential price adjustments, and set themselves up for future gains. The key is not to get distracted by the ‘noise’ or the headlines. Instead, focus on your long-term goals and stay adaptable.”
Establishing Causal Relationships Between Politics, Consumer Confidence & Housing
Although consumer sentiment surveys have been around for roughly three-quarters of a century (the Consumer Confidence Index, or CCI, made its debut in 1967), economists have historically struggled to establish clear causal relationships between sentiment and specific areas of consumption. However, since 1991, one relationship has emerged as an increasingly powerful driver of consumption of everything from household appliances to home purchases: a November win for a consumer’s preferred political party and increased short-term spending.
Hector Sandoval, director of the Economic Analysis Program and a research assistant professor at the Bureau of Economic and Business Research (BEBR), explained that a party shift, in particular, seems to improve consumer sentiment and increase spending on the part of the party entering office. As politics become increasingly partisan and consumers’ feelings on the topic become increasingly passionate, the fallout for local housing markets could be stark, particularly in markets where there is a marked political shift in the wake of November’s elections.
Sandoval’s research focuses primarily on consumer sentiment and spending within the state of Florida, where there have been relatively few major power shifts in the last 30 years at a state level. As a result, he said, his team was unable to determine “a statistically significant relationship” when it came to gubernatorial elections, but a study of national politics revealed that the “widening gap between Democrats and Republicans” is affecting actual consumer spending. Based on their beliefs, consumers were likely to make larger purchases when their preferred party was in power, with this trend becoming more pronounced when the preferred party was reentering office after a period of absence.
Interestingly, if Sandoval’s conclusions hold on a national level, the 2024 election might not necessarily have a substantial net impact on consumer spending or the national housing market simply because the nation is divided relatively evenly over the perceived unsuitability of the
opposing candidates.
For former president Donald Trump, in particular, it may surprise readers to discover that the country is split roughly down the middle when it comes to his presidential performance. Pew reported in March 2021 that 38% of Americans believed he had made “progress toward solving major problems facing the country during his administration,” while 37% said he “made these problems worse.” The remaining respondents said he had either “tried but failed” (15%) or “did not address [major problems]” (10%). At that time, Pew analysts observed that although “Republicans and Democrats offer starkly different assessments of Trump’s presidential legacy,” the actual numbers indicated public sentiment could be considered something of a wash, since 47% ranked the Trump administration as “great,” “good,” or “average,” and 53% ranked it as “poor” or “terrible.”
In 2024, these sentiments became more passionate (and more evenly split), with 51% of Americans rating the former president “very coldly” and 49% stating their feelings were “very warm,” “warm,” or “neutral.” As a result, if studies like Sandoval’s hold true for the 2024 election, one half of the population’s shifting sentiments and spending patterns are likely to cancel out the other half’s shifting sentiments and spending patterns, while the small population feeling relatively neutral about the election are unlikely to change their behavior regardless of which candidate wins.
Certain Politically Driven Markets Will Face Post-Election Upheaval
While national trends may not necessarily change dramatically during or immediately following a presidential election, certain local housing markets directly affected by a shift in administration are almost positive to experience upheaval in 2025. This is largely due to the presence in this year’s presidential election of not one, but two candidates representing a shift in political power.
Although Democrat presidential nominee and current Vice President Kamala Harris is part of the current administration, a win for her would still result in residents of Washington D.C. County and the Washington D.C. metro area making notable changes in their places of residence. Similarly, if the former president returns to office, many D.C. residents working in the Biden administration are likely to take their leave from the area.
According to the National Association of Realtors, almost every presidential election is followed by a spike in home sales in these two local markets.“Activity for home sales is busier in the election year and even better in the following year for the Washington D.C. County [and] the Washington D.C. metro area,” said NAR senior economist and director of real estate research Nadia Evangelou.
She cited NAR data trends beginning in 1988 indicating home-sales activity rises by an average of 10% the year before an election year, an average of 12% during an election year, and 10% again the year following an election year. She also noted people tend to go beyond the borders of the District to buy single-family homes.
During the same time periods, median home prices tend to rise also. The year prior to an election, D.C. County median home values increase by an average of 3%; they rise by an average of 7% during the election year itself, then return to 5% average growth the year following the election. Within the metro area, those numbers are more dramatic, with average median price growth hitting 7% the year prior to an election, 8% the year of the election, and 6% the year after the election.
These shifts are particularly noteworthy in the months between October and December, when homebuying activity traditionally slows down. They are also a matter of some dispute, with some analysts insisting presidential elections actually slow homebuying activity temporarily but substantially during those months in a way that is masked when data is viewed from a yearly perspective.
Research and analysis company BTIG released a report in 2020 indicating housing activity tends to drop both in the D.C. area and nationally as consumers push home purchases toward the new year and the advent of a new administration. The BTIG report indicated activity falls during the October-December period by about 9% every year, and more than 15% during an election year. However, these home sales are not “lost,” wrote Love Live D.C. realtor Jessica Evans at the time of publication. Instead, they are likely simply “pushed” into the following year, creating new and different opportunities as a new administration enters the scene.
