Does the Election Year 2016 have an impact on the real estate market?
Does anyone remember the last few months of 1999? Despite a healthy economy at the time, there was that fear of the “Y2K Bug” that put many consumers on pause with major decisions and spending until after the new year. Then the New Year’s Eve ball dropped, nothing happened and life resumed.
Some may wonder, with the uncertainty of a political election year, if the housing market—home prices and home sales—is affected. I did some research into the past four election cycles and concluded that there is no solid evidence to suggest that there is any direct correlation.
I looked at patterns for home prices and sales surrounding 2000, 2004, 2008 and 2012 in the Mid-Atlantic region (see charts below). I compared data for the year before, the year of and the year after an election. The numbers are all over the place but there is one semi-consistent pattern. With the exception of 2008/2009, there is generally an improvement in both the election year and the year after the election over that of the prior year.
Even though this is good news, I still believe it is not enough data to connect the two entirely. There are so many factors that contribute to the real estate market—interest rates, economic conditions, supply and demand, mortgage accessibility, location, etc. To look at just home prices and sales in one region would be an inaccurate assessment—especially considering that there was a housing boom, a recession and recovery during these years. Furthermore, prices and activity generally increase year to year anyway.
RELATED: See 3 Haymarket Area Real Estate Prediction for 2016
The best way to look at the “health” of a real estate market is to look at economic confidence. In a robust economy, people tend to be optimistic, which helps consumer confidence and spending. In an economy characterized by high unemployment and stagnant wages, confidence declines.
In real estate, this can vary from region to region. We often hear stories about the “hottest real estate markets” in the country. Well, those areas are supported by new job creation and higher wages.
The unemployment rate in Prince William County (as of December, 2015) is 3.5%. That’s a drop from 4.2% in 2014 and 4.8% in 2013 and lower than the national average. Wages in our local counties are also above the national average. The health of our local economy is good, and the real estate market is predicted to improve this year.
Having said that, there are legislative policies that can affect the housing market directly. Policies related to regulation and mortgage accessibility, labor costs for new construction (immigration debate), and tax incentives to name a few.
The bottom line: fear of the unknown is a legitimate factor, but the actual election year is more about campaigns and promises than it is actual policy and real change.
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See this article in the Spring 2016 of Haymarket Homeowner: