Housing Market Trends After a Presidential Election
Regardless of which political party occupies the White House, every president has the power to shape America’s housing market and overall economy. History suggests that housing market trends after a presidential election are far more predictable when the outcome of the election is also more predictable. When there is marked uncertainty about who will hold the top office, that uncertainty trickles down into other areas. According to Mary Ann Bartels, Head of Merrill Lynch Wealth Management Portfolio Strategy, if there’s one thing markets hate, it’s uncertainty.
Studies show that the uncertainty produced by a presidential race can ultimately have even more impact on housing than the actual outcome of the election. Departing two-term presidents cause a void that financial markets typically find unnerving. According to the Stock Trader’s Almanac, the Dow Jones Industrial Average has gained an average of 10.4 percent in the year before a presidential election since 1833, but only 6 percent during election years, with the first year of a new president’s term seeing an average gain of 2.5 percent, and 4.2 percent during the second year.
Windermere Real Estate’s Chief Economist Matthew Gardner says historically speaking, home prices continue to rise during an election year and the year after, although the rate of growth does typically tend to slow down. However, Gardner states he does not expect that to happen in 2016; he expects to continue to see “very robust” growth in housing prices this year.
When it comes to the mortgage industry, there tends not to be a rapid rise in interest rates during an election year or the year after. Gardner echoes Ms. Bartels in the opinion that markets do not like change. He states that as time progresses and we become familiar with the new president and their policies, the impact on the housing market will probably not be devastatingly negative. The current U.S. housing market is stronger in 2016 than it was four years ago, as is the economy in general.