Today is election day, marking an important day that will shape the direction of some economic policies for the next four years, and that decision will have a major impact on many aspects of life in the United States.
Analysts will try to measure the impact feasible changes in regulations might have on housing, the effect of a possible first-time buyer program, and any number of other situations based on who wins. The housing market, however, should remain strong for three reasons:
1. Demand Is Strong Among Millennials
The nation’s largest generation began entering the housing market last year as they started more substantially marrying and starting families – two key drivers of homeownership. As the Wall Street Journal reported in August:
“Millennials, long viewed as perennial home renters who were reluctant or unable to buy, are now emerging as a driving force in the U.S. housing market’s recent recovery.”
This level of demand still far exceeds available and replacement inventory, creating a large pool of qualified buyers.
2. Mortgage Rates Are Historically Low
All-time low interest rates are also driving demand across all generations. Strong demand created by this rate drop has countered other economic disruptions (e.g., pandemic, recession, record unemployment).
In addition, Freddie Mac recently forecasted mortgage rates to remain low through next year:
“One of the main drivers of the strong housing recovery is historically low mortgage interest rates…Given weakness in the broader economy, the Federal Reserve’s signal that its policy rate will remain low until inflation picks up, and no signs of inflation, we forecast mortgage rates to remain flat over the next year. From the third quarter of 2020 through the end of 2021, we forecast mortgage rates to remain unchanged at 3%.”
3. Historical Accounts Show Limited Impact
Though it’s true that the market slows slightly in November when it’s a Presidential election year, the pace returns quickly. Here’s an explanation from earlier this year as to why from the Homebuilding Industry Report by BTIG:
“This may indicate that potential homebuyers may become more cautious in the face of national election uncertainty. This caution is temporary, and ultimately results in deferred sales, as the economy, jobs, interest rates and consumer confidence all have far more meaningful roles in the home purchase decision than a Presidential election result in the months that follow.”
Ali Wolf, Chief Economist for Meyers Research, also notes:
“History suggests that the slowdown is largely concentrated in the month of November. In fact, the year after a presidential election is the best of the four-year cycle. This suggests that demand for new housing is not lost because of election uncertainty, rather it gets pushed out to the following year as long as the economy stays on track.”
There’s no doubt this election will have a major impact on many sectors of the economy. Connect with your clients now to build their confidence and encourage them to consider making a transaction.