While the powers that be influence these events and outcomes, the supply and demand of the market tend to have the final say.
Speculation vs. Reality
One could easily speculate about how the uncertainty of potential changes in policies may affect economic conditions and assume that when people are uncertain about the future, they tend to be more cautious with large financial commitments, including buying or selling a home. While that seems to have logical merit, the data suggests otherwise. In the below chart from Case Shiller Home Price Appreciation, we can see that all the way back to 1987, with nine different four-year election cycles between now and then, the vast majority of election years saw average to above average home price appreciation.
Bigger than Just the Politician
I would certainly not downplay the impact of policy on the housing market, but history shows it is the bigger events and larger cycles that impact buyers, sellers and home price appreciation. The Great Recession and then the economic impact and decisions made during the pandemic have had greater impacts on the housing market than simply an election itself. While the powers that be influence these events and outcomes, the supply and demand of the market tend to have the final say.
Interest Rates and Election Cycles
There’s also the myth that interest rates go down in an election year. This may suggest that there’s not true Federal Reserve independence and that there could be a nice little bump as those looking for re-election want to garner good favor and show how well things are going. Well, we can throw that hope out the window with this year’s interest rates alone. I, along with most homebuyers, wouldn’t complain a bit if we received a little ‘good will’ rate dip, but the current cycle of inflation combating the Fed has brought basically no real rate improvement since February, with false economic data in April actually pushing rates near 25-year highs again just to moderately recover in May and June to a lackluster baseline. Historically speaking, only about 30% of the time do we see rates lower during an election year. See chart.
The Good News
Yes, it’s not the friendliest or most affordable market we’ve seen in the last century. However, the good news is that neither the election of local officials or even the determination of the leader of the free world is going to make or break your homebuying decision or the future of your equity.
The supply and demand economics, even if just considering our Northern Arizona housing market, have their own pace that single individuals, policies or committees can have little impact over. This free-market aspect is actually a good thing. Yes, it can be frustrating to those trying to get in the door but once in that door, it’s the most reassuring thing to know that the security of your housing value isn’t so temperamental to care whether it’s a democrat or republican holding any particular office.
My parting two pieces of advice to any would-be homeowner are: (1) Assess your personal economic situation and cycle and determine the best home-ownership strategy for you; and (2) Align that strategy with market outlooks and your ownership timeline so that you can stand to benefit from the larger cycle appreciation of the housing market over time, regardless of election cycles. FBN
By Chris Hallows
For additional information or to schedule an appointment visit ChrisHallows.Benchmark.us or call 928-707-8572. The Flagstaff location is 824 W Rte 66 Suite A-3.
Chris Hallows is the Branch Manager & Sr. Mortgage Advisor of Benchmark Mortgage Flagstaff.
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