In the past, I have commented on the housing debate during the presidential election cycle. I deliberated on writing about it this year because of the uncommon circumstances the economy and housing market has been enduring since the beginning of pandemic-economics. Looking back, housing and elections is about the economic response to the policy implementation during a president’s tenure.
During the 2012 election cycle, David Cross, writing for the Movoto.com blog, analyzed housing data from the California Association of Realtors and concluded that the housing market did not fare well during the election year of a president (David Cross; Election Years Are Bad for Home Prices; movoto.com; May 12, 2012). There is typically election uncertainty and stress that affect the decisions of home buyers and sellers. The analysis looked at home sale prices the three years prior to the 2012 election and concluded that home sale prices did indeed recede significantly (average of 5 percent appreciation the three years prior to 2012 election, while only 1.5 percent appreciation during 2012).
Unfortunately, Cross’ assessment was flawed for many reasons. First the time period that the analysis occurred was during a time when home prices fluctuated because housing was still emerging from the Great Recession. Second, the data is limited to California. Third, the data was limited to a three-year period. Fourth and most important, economic cycles were atypical during that time period because of the continued recovery from the Great Recession.
Even the NAR was said to have commented on this analysis, stating that the housing market responds to many factors. Economic factors typically include employment, interest rates, and consumer confidence. Rather than the elections having an impact on the housing market, it’s more likely that economic and social policy effects real estate at any given time.
Additionally, other factors that we have seen play out over the last decade is the shift in lifestyle. Notwithstanding this year’s pandemic, people are increasingly working from home. Prior to the pandemic, there was an abundant of research pointing to telecommuting’s effect on the commercial real estate market. The analysis of increased office space vacancies points to telecommuting. As more employees are working from their home office spaces, companies are reducing their office footprint.
A major factor that has impacted home re-sale inventory is “aging in place.” After the Great Recession, many Boomers have decided to stay in their homes. The post-recession attitude about housing changed. Many seniors decided not to downsize, but rathe stay in their family homes much longer. Additionally, multi-generational households increased and remain popular.
Also during the 2012 presidential election cycle, the Mortgage Interest Deduction was scrutinized. It wasn’t only on a national level, but the debate also occurred at the state level. The MID debate continues to today. Some argue that the MID artificially inflates home prices, because the MID is somewhat of a home owner subsidy. Others argue that the MID is necessary to make housing affordable.
Housing and elections during 2016 was front and center. At least for its fifteen minutes of fame. The Housing Party threw its hat in the ring to “Make Housing Great Again” (As President, I’ll Make American Housing Great Again—Really; realtor.com; October 21, 2015). The Housing Party’s platform had a focus on middle-class America and affordable housing by working toward getting a home for every family.
How will the housing market react to this year’s election? As the idiom states, “the proof is in the pudding.” Which means that we’ll only see the effect after policy implementation and economic response.
By Dan Krell
Copyright © 2020
Original located at https://dankrell.com/blog/2020/11/06/housing-and-elections/
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