Talk to a real estate agent about expectations for the fall and they’ll likely mention that the housing market will be slow due in part to the election, a belief in the industry that’s become rote.
But a new report from John Burns Research and Consulting refutes that notion. The firm crunched 35 years of data and concluded that the typical seasonal decline in home sales activity in the fall is actually more severe in non-election years.
“Political uncertainty and negative campaigning undoubtedly weigh on consumer confidence,” the report reads. “But do these potential buyers have any bearing on overall home sales? We have found that this type of buyer is the exception rather than the rule.”
There is anecdotal evidence to support the idea that elections affect the home purchase market. A recent survey from Veterans United Home Loans shows that 60% of prospective buyers are taking the election into account, and 38% of respondents were pausing their search until after the election.
The question is whether they’ll actually follow through on that. The report from John Burns says no, in part because most people decide to buy homes as a result of changes in life, not because of politics.
The study analyzed the year-over-year changes in home sales during the five months leading up to November. In election years, new-home sales dropped by an average of 10%, while existing-home sales fell by 19%.
But the declines were actually larger in years without an election, as sales of new and existing home fell by 14% and 22%, respectively. The two election cycles in which home sales fell more than expected were in 2000 and 2008, years in which the economy was in a recession — with 2008 being a dramatic recession directly related to the housing market.
“Of course, some buyers will defer home purchases based on politics, and these buyers tend to be vocal about their reasoning, creating the perception that their impact is greater than it actually is,” the report reads. “Be cautious about overstating these buyers’ impact on broader housing demand when the data says otherwise.”
