5 Ways the U.S. Election Impacts the Real Estate Market

By the time you read this, we’ll likely have the election results in hand. But right now, as these words form, we’re still on the eve of Election Day. No matter where you fall on the political spectrum, the election season has caused its fair share of stress and uncertainties. We’re not here to discuss individual candidates, make predictions, or make a political statement.

But no matter how you slice it, politics – especially the U.S. election season – noticeably affects the housing market. It impacts real estate in the lead-up, during November, and especially in the months following the election. Let’s talk about how.

5 Aspects of the Election’s Impact on the Housing Market

#1 – Market Uncertainty and Volatility

In the lead-up to elections, real estate markets may experience a slowdown. We’ve clearly seen that this year, as “frozen” seems to be the choice descriptor for the state of the market. Buyers and investors often adopt a wait-and-see approach due to uncertainty about potential policy changes or economic conditions. Everyone feels insecure on the verge of a shake-up, and homebuyers are no different.

An election season can both slow things down and generate volatility.

Once the election results are finalized, markets tend to stabilize as uncertainty diminishes. Still, that isn’t always the case. New policies – like tax rate changes or housing subsidies – may prompt market shifts.

#2 – Interest Rates

The Federal Reserve may adjust its approach based on the new administration’s fiscal policies. Of course, we know – and expect – interest to continue to cool. But that doesn’t mean strategies won’t change come 2025. Higher rates slow buying activity, while lower rates rouse demand.

Rate changes affect housing affordability, with potential buyers more or less likely to enter the market based on mortgage accessibility. We’re already seeing record-low first-time homebuyers due to a lack of affordability. The Fed will set the tone for the real estate market in the wake of the new presidential administration – pay attention!

#3 – Policy Changes

New administrations may bring policies aimed at stimulating housing or addressing affordability issues. For instance, tax reforms or first-time homebuyer credits can influence buyer behavior and home prices. While different candidates may have expressed what they will – or won’t – do in this respect, the reality in practice may differ.

A shift toward or away from policies like 1031 exchanges can impact real estate investors, particularly those in SFRs, who benefit from tax advantages on property sales. Ultimately, it’s prudent for investors to stay abreast of potential changes and anticipate how they’ll adapt or gain a strategic advantage.

#4 – Economic Outlook and Consumer Confidence

Sentiment plays a massive role in the health of the economy. If Americans feel economically optimistic, it shows in their spending habits…including the housing market. Consider how things have “felt” for the past year or so. Even if inflation numbers are improving, many Americans still feel the financial pinch that makes inflation feel so much more than what it is.

Confidence is contagious, too. Increased housing market activity will excite sellers, buyers, and investors to jump back in. The opposite is true, too.

If post-election policies lead to inflationary pressures, that confidence won’t appear so readily. On one hand, we may see more potential buyers holding back. However, it can also prompt investors and homeowners to enter the market early to beat anticipated cost increases.

Further Reading: Should Real Estate Investors Try to Time the Market?

#5 – Regional Variances

Local markets can vary widely depending on state and local election results. While most of us are thinking about the presidential election, state and local elections are arguably more impactful in a practical, day-to-day way. Areas with anticipated tax benefits or other localized housing incentives might see heightened real estate activity. Additionally, when we’re talking about economic and consumer confidence? It may vary regionally based on political leanings and who wins.

While we don’t want to stereotype our markets, political demographics do affect real estate.

At the end of the day, election season doesn’t uniformly affect all markets. There are many variables to consider on top of humans being, at times, irrational decision-makers that act on sentiment. But, for the investor, understanding potential impacts on policy, interest rates, and economic sentiment can help you plan strategically.

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