Do Presidential Elections Impact Home Prices? Explore Trends and the Latest Fed Impact
As each election cycle rolls around, real estate professionals and homebuyers alike often wonder: Does a presidential election impact home prices? The answer, as history shows, is nuanced. While economic trends and other factors play significant roles, there’s compelling evidence suggesting that home prices tend to increase after presidential elections—though not without exception. In fact, according to data compiled by the National Association of Realtors (NAR) and Keeping Current Matters, home prices have risen after seven out of the last eight presidential elections. Let’s break down what the numbers reveal about the relationship between election cycles and the real estate market. A Historical Look at Post-Election Home Price Trends Let’s take a journey through the last few decades to see how home prices have responded in the year following the presidential elections. Here’s what the data shows: 1992 to 1993: Following the election of President Bill Clinton, home prices rose from $105,500 to $109,100. 1996 to 1997: After Clinton’s re-election, prices again increased from $122,600 to $129,000. 2000 to 2001: As George W. Bush took office, home prices climbed from $147,300 to $156,600. 2004 to 2005: After Bush’s re-election, prices jumped from $195,200 to $219,000. 2008 to 2009: This period, an exception to the trend, saw a drop in home prices from $196,600 to $172,100, due to the Great Recession and housing market crash. 2012 to 2013: Under President Obama’s second term, home prices increased from $177,200 to $197,400. 2016 to 2017: After President Trump’s election, home prices went up from $235,500 to $248,800. 2020 to 2021: In the aftermath of the pandemic and President Biden’s election, prices soared from $296,700 to $350,700. Analyzing the Outliers: 2008’s Housing Crisis The 2008 election is the standout exception, with home prices dropping significantly in the year following the election. However, this price decline had little to do with election results and everything to do with the economic environment of the time. The U.S. was in the midst of the Great Recession, and the housing market was in free fall due to subprime mortgage lending practices. This economic downturn created a perfect storm for declining home values, regardless of the election outcome. What Drives the Post-Election Price Boost? While the data suggests a pattern of rising home prices following most presidential elections, it’s essential to recognize the broader factors at play. Here are a few potential reasons for this trend: Increased Consumer Confidence: Elections can bring a sense of stability or renewed optimism, especially if economic policies are expected to favor job growth or lower taxes. This can boost consumer confidence, making people more willing to invest in significant purchases like homes. Potential Policy Shifts: Real estate policies, such as mortgage interest deductions, affordable housing initiatives, and lending regulations, can impact the housing market. A change in administration often brings a fresh economic approach, potentially stimulating the market. Economic Cycles: The real estate market typically follows broader economic cycles, which don’t always align directly with election cycles. Economic policies enacted early in a president’s term can take time to impact home prices, creating a lag that could align with post-election years. Interest Rates and Inflation: Often, interest rates play a more significant role than election results. The Federal Reserve’s response to inflation, employment, and economic growth can significantly impact mortgage rates, affecting home affordability. While interest rates can be influenced indirectly by election outcomes, they largely follow broader economic trends. Recent Developments: FOMC’s Decision to Cut Interest Rates This month’s decision by the Federal Open Market Committee (FOMC) to reduce the federal funds target rate by a quarter point is an example of the Fed's responsiveness to broader economic trends. The target rate is now between 4.5% and 4.75%, marking the second consecutive rate cut in the ongoing cycle. The FOMC’s stance reflects a balancing act between supporting employment and managing inflation, which has shown signs of easing. Fed Chair Jerome Powell emphasized that while economic growth remains a priority, inflation must remain controlled to sustain real estate affordability. Mortgage rates may reflect these reductions as the market adjusts, which could ease pressure on home affordability and impact the demand landscape. The upcoming December FOMC meeting could bring further adjustments, with a possible additional rate cut anticipated by market analysts. Why Home Sales Rise After Elections In addition to rising prices, home sales have increased after nine out of the last eleven presidential elections. This uptick can be attributed to a release of pent-up demand as uncertainty clears post-election. During election years, some buyers and sellers choose to wait and see the results before making big financial decisions. Once the election is over, that hesitation dissipates, and the market often sees increased activity as people feel more confident moving forward with transactions. Lessons for Buyers and Sellers in Election Years If you’re thinking about buying or selling a home in the year following an election, it’s useful to keep the following in mind: Don't Rely Solely on the Election Cycle: While history shows an upward trend, each election is unique, and broader economic factors like interest rates, inflation, and job growth will have a more direct impact on home prices. Watch Economic Policy Announcements: The first year of a new presidential term can bring significant policy changes. Pay attention to economic announcements, especially those related to housing and finance, to understand potential market impacts. Be Prepared for Market Movement: Election uncertainty can slow down the market, but things tend to pick up post-election. Whether you’re a buyer or a seller, anticipate that the market might see a surge in activity once the election dust settles. While the data shows that home prices have generally risen in the year following presidential elections, it’s essential to approach this information with context. Economic conditions, interest rates, and housing demand remain the primary drivers of real estate trends. While election results may nudge the market, they are just one piece of a much larger puzzle. With the recent FOMC rate cuts and anticipation of further adjustments, it’s clear that staying informed about federal policy and market indicators is critical. Whether it’s an election year or not, making informed real estate decisions will always come down to evaluating the specific circumstances of the market. For further details on market trends and to explore opportunities in Southwest Colorado, feel free to contact me. Let’s navigate these changing times together and find the best deals tailored to your needs. Stay informed! Fill out the form below to SUBSCRIBE to our weekly newsletter!
Why Mortgage Rates Didn't Drop After a Negative Jobs Report and What to Expect Pre-Election
In a recent podcast discussion, lead analyst Logan Mohtashami provided some much-needed clarity on the state of the bond market, mortgage rates, and what to expect as we move into an election period. Let's break down the critical points and takeaways. 1. Initial Reaction to the Jobs Report The latest jobs report came in unexpectedly low at 12,000, but the bond market barely flinched. Initially, the 10-year Treasury yield fell but quickly rebounded to around 4.34%. Mohtashami explains that while the report looked negative on the surface, it didn't present a significant deviation from the current economic trajectory. 2. Understanding the Bond Market's Reaction Despite the surprisingly low job creation numbers, the bond market did not show a dramatic response. This reaction—or lack thereof—can be explained by looking at the data holistically. Mohtashami pointed out that the broader economic context includes: GDP Growth at 3%: The economy is still expanding at a steady pace. Wage Growth at 4%: Although the Fed wants to see this number closer to 3%, it remains firm. Jobless Claims: Still relatively low at 216,000, indicating that the labor market is softening but not breaking. The bond market responds not just to single data points but to an aggregate view of the economy. The 10-year yield hovering around 4.34% and its resistance to dipping lower signals that while the labor market is losing steam, it's not collapsing. 3. Revisions and Realities Mohtashami highlighted that recent job data revisions have brought his long-term forecast closer to reality. He had anticipated job growth averaging between 140,000 and 165,000, and current averages now align at about 139,000 over the last 3, 6, and 12 months. Even if we exclude factors like strikes and hurricanes that may have skewed recent numbers, the labor market's softening trend matches broader economic expectations. 4. Why Aren't Rates Dropping? One of the most pressing questions listeners had was why mortgage rates haven't dropped despite seemingly negative job data. The answer lies in how the market perceives the economic fundamentals: Steady GDP Growth and Wage Increases: The economy growing at 3% and wages holding at 4% give the bond market little reason to expect significant rate cuts. Jobless Claims Stability: Jobless claims at 216,000 show that while hiring may be slowing, layoffs haven't surged, which would be a clear recession signal. Mohtashami reiterated that true economic downturns are marked by rising jobless claims and a shift in the bond market's behavior—neither of which we are seeing. 5. Federal Reserve's Role and Election Uncertainty As we approach the election, many are wondering how the bond market and the Federal Reserve will react. Mohtashami expects a 25 basis point rate cut as the Fed works toward neutral policy. The key takeaway is that these cuts are already priced into the market, so we shouldn't expect sudden rate drops unless there is a significant economic shift. Mohtashami cautions against overreacting to potential election-related market movements. Historical trends have shown that even when elections create volatility, the bond market tends to realign with underlying economic data. 6. Potential Triggers for Change Looking ahead, Mohtashami identifies a few areas of concern: Manufacturing Data: This sector has shown three consecutive months of weaker data. Residential Construction: With mortgage rates hovering between 6.75% and 7.5%, the housing market is under strain. Housing starts and permits have already hit recession lows, which could indicate further economic slowing if rates remain high. 7. Taking a Balanced View The big picture, according to Mohtashami, is to think of the economy in terms of expansion or recession, not as "strong" or "weak." This mindset helps avoid ideological biases and keeps focus on the data. Despite headlines and social media hype, the labor market, while softening, isn’t collapsing. The bond market's current behavior reflects this. If jobless claims were to rise significantly (toward the 323,000 mark on a four-week moving average), we could see the bond market and rates shift more noticeably. Key Takeaways for Mortgage and Real Estate Professionals Patience is Key: With rate cuts already priced in, don't expect drastic changes immediately following routine economic data or the election. Monitor Jobless Claims: This metric is the critical indicator for deeper market shifts. Stay Informed: As Mohtashami emphasized, keeping an eye on the data as a whole will guide better decision-making for professionals and clients alike. As we move closer to the election, uncertainties may stir short-term volatility, but Mohtashami's message is clear: keep a close eye on key data points, avoid reacting to isolated numbers, and remember that economic cycles are about expansion and contraction, not just short-term swings. For further details on market trends and to explore opportunities in Southwest Colorado, feel free to contact me. Let’s navigate these changing times together and find the best deals tailored to your needs. Stay informed! Fill out the form below to SUBSCRIBE to our weekly newsletter!!
How Rising Mortgage Rates Could Shape the Housing Market Through the End of 2024
As we head deeper into the final quarter of 2024, mortgage rates remain a key driver shaping inventory, sales trends, and buyer behavior. In a recent Housing Wire podcast discussion featuring lead analyst Logan Mohtashami, the conversation unpacked the delicate balance between rates, inventory, and market demand. Here's what you need to know about how these dynamics might play out—and what it could mean for the Southwest Colorado real estate market. Rising Mortgage Rates: A Double-Edged Sword Mortgage rates have remained volatile, fluctuating around the 7% mark, with occasional dips toward 6%. Historically, such high rates can stifle buyer enthusiasm and slow down sales, but they also create opportunities for inventory to accumulate—a necessary element for stabilizing the market. According to Mohtashami, the past year saw the lowest new listings data on record, following a sharp decline in the second half of 2022. As 2024 progresses, the key concern is whether more sellers will opt to “sit tight” until spring 2025 rather than listing their properties during the cooler months. This hesitation among sellers could reduce available inventory, especially as we approach Thanksgiving and Christmas—a period that naturally sees fewer new listings. Inventory Levels: Closer to Healthy, but Still Not There Mohtashami emphasizes the importance of returning to pre-pandemic inventory levels. He points to 2019 as a benchmark for healthy inventory growth—when listing peaks reached between 80,000 and 110,000 properties. While current inventory trends have shown improvement compared to 2023, we are still short of a balanced supply-and-demand environment. Why does this matter? Because when mortgage rates inevitably decline—potentially in 2025—having enough inventory on hand will prevent a sharp spike in home prices. As Logan put it, “You want a better atmosphere when rates do fall,” ensuring buyers have enough choices and preventing frantic bidding wars. What to Watch: October and November’s Inventory Trends Southwest Colorado—much like other markets outside of Texas and Florida—has struggled with low inventory. Mohtashami cautions that some sellers may delay listing due to the current mortgage environment, choosing to wait until spring 2025. This could lead to an even tighter supply in the final months of 2024. Increased rates may also influence sellers who had initially planned to upgrade homes. With financing costs higher, they might decide to hold off. As Mohtashami notes, many sellers are also buyers, and rising rates make it less attractive to trade up. Jobs Week: A Key Indicator for Rate Movements An essential event to track is Jobs Week, which will offer insight into labor market conditions and influence future rate decisions. The Federal Reserve closely monitors wage growth and job openings to gauge inflation trends. According to Mohtashami, if wage growth slows toward 3%, the Fed will likely feel comfortable maintaining or lowering rates. However, any acceleration in wage growth or job losses could prolong higher rates. For homeowners or buyers contemplating mortgage decisions, Mohtashami recommends locking in rates rather than waiting for further declines. His advice? “Don’t roll the dice with interest rates—secure your rate to minimize stress.” Southwest Colorado Real Estate: Takeaways for Buyers and Sellers In markets like Durango, Pagosa Springs, and Cortez, understanding these national trends can provide clarity for local buyers and sellers: Buyers: With rates hovering around 7%, it might feel discouraging, but keep an eye on winter inventory. Some sellers may lower prices, creating opportunities to negotiate deals before the spring market heats up. Sellers: If you’re on the fence about listing your property, consider the advantages of selling now before more listings flood the market in 2025. Rates may drop next year, but buyers still need homes today, and fewer listings can mean less competition. Investors: Pay attention to national labor reports and bond market movements. If rates begin to decline toward neutral policy levels in early 2025, investor demand for properties may increase, especially in vacation-heavy areas like Pagosa Springs. Closing Thoughts: Looking Ahead to 2025 While the road ahead remains uncertain, it’s clear that mortgage rates and labor data will play a crucial role in shaping the market’s trajectory. As Mohtashami emphasized, the goal is not to chase down home price crashes but to monitor trends that can help predict where the market is headed. The Southwest Colorado market will benefit from careful attention to these national indicators, especially as we prepare for a potentially more active market next spring. Stay informed and ready—because as Logan Mohtashami reminds us, “The trend is your friend.” For further details on market trends and to explore opportunities in Southwest Colorado, feel free to contact me. Let’s navigate these changing times together and find the best deals tailored to your needs.Stay informed! Fill out the form below to SUBSCRIBE to our weekly newsletter!
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