Tim’s Two Cents: Do Presidential Elections Have an Impact on the Real Estate Market?

The hot topic on everyone’s mind heading into the next few days is, of course, our county’s Presidential Election.  I have lots of friends and clients contacting me to ask what my professional opinion is regarding how the outcome of the election will affect our Real Estate Market.

Presidents do not, single handedly,  make or break the economy.  There are cycles which the president falls into based on the timing of the market or other national or global events that lead to the markets moving in one direction or another. 

One of the biggest influences today is the roll that the media plays in all that we read, see and hear.  When I have worked closely with high profile clients in town during their home purchase or sale and was front row to the events in their lives, it has always amazed me how the story is retold in the public eye and how long it actually takes for the news to hit the streets.  The media has a way of sensationalizing everything and creating panic so we are drawn to their sources for information. When you know the individual you see the slant that the story is given to make the public feel or react a certain way. Depending upon where you get your news, your opinions can be influenced in one direction or the other.  

Let me start by letting you know that all real estate markets are hyper focused, geographical communities. What is happening in one part of the country can be the opposite of what the current state of the market is in another part.  With a large county like San Diego, we have micro markets within the immediate area. We also have a large differential between the least expensive homes and most expensive home in the area.   

The other thing to note is that historically, markets gain momentum slowly and tend to move in one direction or another for a sustained amount of time. Events will, at times, cause markets to go flat.  I observed this first hand during an appreciating market period that was stalled by the events of September 11th. People went through a healing process and it took time to emotionally feel confident enough to get back to buying and selling homes. 

The election functions in much the same way.  The years before elections are typically strong. Our government does not commit to any sudden changes.  The environment is very stable.  The election years tend to see a slight decrease in activity and subsequently appreciation with the year after the election showing improvement in both areas. Consumers do not like instability or change. It creates tension and that breads hesitation in making certain large scale purchases like cars and homes.   

The stock market also reacts in much the same the same way.  When I researched the historical data pertaining to the S&P 500 index, I learned that it has finished up in more than two-thirds of all calendar years since 1926, a period that’s seen eight Republican and seven Democratic Presidents. 

So, my thoughts are that we are approaching the fifth consecutive year of gradual, compounded appreciation in our San Diego Real Estate Market. As we established above, some areas have appreciated better than others.  Eventually, we will hit a period in time when appreciation is halted because we reach an affordability ceiling.  Interest rates will inevitably have to move higher. That will not be the presidents fault, just a natural occurring economic corrective period which is healthy. 

For now, we have a low inventory of homes available, low interest rates for borrowers, high rental rates, a growing, diverse work force and demand for housing.  The election is November 8th. Every four years we are told that this is the most important time in our country’s history.  We will adapt and survive the next four years as well. The sun will rise and fall on November 9th and we will keep moving forward.   

I still don’t know of a better place to be fortunate to be born into and love that the USA. Don’t let panic set in and emotions get the best of you.  Understand that one person is not solely responsible for the country’s direction, economically and otherwise. Respect the system and the recognize the difficulty that the job of the president of our country commands.  I would not want the job and completely agree or disagree with whomever is voted into office, I will accept the outcome and do my best to stand behind the individual for the next four years.

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Skoglin