The Real Estate Market During an Election Year

As we move deeper into the 2024 election cycle, buyers, sellers, and investors all have the same question, "How much will this year's election influence real estate markets?"

Understanding what's at stake, especially in pivotal markets such as Manhattan, provides valuable insights for navigating these uncertain times. Below, we examine what the race for the White House means for real estate and what really matters in an election year.

Fundamentally, supply and demand drive the real estate market. Yet, these forces are also influenced by additional factors that can vary dramatically from one state to the next, county to county, and even between neighboring communities.

The seven biggest influences on the residential real estate market include:

The impact of elections, however, is more abstract. More moment in time than consistent, ongoing influence, national elections are not unlike other singular events, such as social turmoil or natural disasters. Though they might sow seeds of uncertainty, any impact on real estate is often localized.

In a broad sense, the build-up to and immediate aftermath of a presidential election (and U.S. Senate and House races) carries a greater psychological impact than any immediate financial consequences. Historically, the market does tend to slow down closer to election day. The concern with what's to come can lead potential buyers and sellers to adopt a cautious, wait-and-see approach to major financial decisions.

Election tepidness can result in a sluggish end-of-year marketplace, but it can also be attributed to seasonality, given the time of year. If the concerns are because of any election-related worry, the trend is typically short-lived. Elections don't necessarily deter market activity. They simply delay transactions until after the votes are counted.

More often than not, non-election events occurring in an election year significantly impact a housing market, not the election itself. For example, 2008 and 2020 were monumental years for U.S. real estate, but each year's respective election had little consequence on buyers, sellers, and overall market conditions. Instead, the 2008 financial crisis and the 2020 pandemic made the most profound impact, reshuffling the housing market in the years that followed.

Presidential election years do bring a degree of volatility as buyers and sellers await outcomes and anticipate potential policy changes during a presidential term. This uncertainty can affect consumer confidence, leading to fluctuations in housing market activity, including variations in sales volume and home prices in the years after the election.

Mortgage rates have been the biggest driver of home affordability over the past four years. Mirroring the interest rate and monetary policy set by the Federal Reserve, we are in an era of hyper-volatile mortgage rates. However, that volatility is due to events beyond the influence of a given election cycle or even who occupies the White House.

Why?

While the machinations of an election year carry weight socially and politically, they have little bearing on mortgage rates driven by buyer qualifications, immediate market conditions, and broader economic considerations such as inflation. Should election polling, party convention bumps, or campaign trail statements or controversies directly affect the economy, consumer confidence, or the willingness of buyers or sellers to participate in the real estate market, mortgages could be impacted. But it would be an anomaly.

Consider that in the previous decade, between 2010 and 2019, which includes two presidential election cycles, rates for a 30-year fixed-rate mortgage fluctuated between a 10-year high of 5.21% in April 2010 to a low of 3.31% in November 2012 before returning to 4.94% in November 2018. Six months later, mortgages were again below 4%—a range of 1.91% over a 10-year period. In the two election years, 2012 and 2016, mortgage rates fluctuated by less than 1% in both cycles.

Between the start of 2020 (the last presidential election cycle) and the end of 1Q2024, mortgage rates ranged from a historical low of 2.65% achieved at the beginning of 2021 to a 23-year high of 7.79% at the end of October 2023—a range of 5.14% in less than four years. In 2020, the range was 1.05%, directly due to how the pandemic impacted the economy, not the election.

As in politics, real estate is ultimately local. Though the impact of a presidential election and that of U.S. Senators and Members of the House of Representatives has broad market implications post-election—the SALT Tax of 2017 being one example—local elections carry the most weight for local markets across New York. Elections for N.Y. Governor, state senators, and house members occur this year, and local positions, including NYC Mayor and City Council, are up for election in 2025. These elections are more tied to the fate of the city's real estate prospects than national ones.

For example, local and regional elections can significantly affect land use policies and zoning regulations, which are powerful tools in determining housing availability and affordability. A shift in land use policies could increase housing supply and improve affordability, whereas stricter regulations might limit supply and elevate prices.

The potential for new tax policies, housing regulations, and economic stimulus measures post-election can introduce significant uncertainty into the market. These changes can prompt buyers and sellers to delay real estate decisions further until clear policy directions emerge.

Observing the proposed tax policies of election contenders can provide insights into future market trends. For instance, higher taxes dampen investor enthusiasm but could enhance public infrastructure and services, indirectly benefiting the real estate sector.

Despite election year uncertainty, several strategies can help market participants navigate these turbulent times: staying current on election and market-related developments, establishing personal and financial goals, and working with experienced professionals to ensure you meet those goals.

Contact Kobi Lahav today if you're interested in buying, selling, or investing this election year. Regardless of which side of the transaction you find yourself on, allow Kobi's experience to help you navigate the dynamic Manhattan luxury real estate market.