What is the impact of a presidential election on the housing market? The best answer may just be, “Not that much.” Every 4 years, analysts drudge up their deep histories of real estate data in order to ferret out the likely impacts of the presidential election season on the housing market. Some claim that election years have a significant negative impacts (particularly on home prices), while others struggle to find any effects at all.
In general, the average growth in home sales during an election year runs the same direction—that is, election years are either slightly higher or lower than a typical year, but rarely cut the opposite direction. The exception to this rule, which is perhaps the most significant discernable impact of presidential elections on California’s housing market, comes at the end of the year. Going back to 1990 on a monthly basis, California home sales actually contract by roughly 2% during the last 4 months of the year. However, during the past 5 election cycles, the final months of the year have been consistently upbeat. In fact, with the exception of December 2004, every single month of the final quarter saw robust growth in home sales during the election year. As such, perhaps the most w e can say with confidence is that as the presidential elections reach their conclusion, the winds of uncertainty are swept away—for better or worse—and people can go about their home-buying and selling activities again.
On average, some months during an election year perform better than the long-run average for that month, while others are worse (again, on average). This suggests that overall economic and market conditions dominate the decision to buy and sell a home, rather than the recurrence of the election cycle. A naïve analysis might even point out that sales and price growth “seem” higher during an election than the typical year. For example, during the last 5 election cycles (1992-2012) growth in home sales out-performed its long-run average in 56 of the 72 months observed or roughly 78% of the time.
This is perhaps counter-intuitive as studies like the 2012 Movoto analysis point to detrimental effects on housing as a result of increased political uncertainty associated with presidential elections. However, this type of naïve analysis fails to control for other market conditions like whether the economy was growing at an above- or below-average pace at the time, whether we were in a recession, availability of mortgage credit, labor market conditions, and many other factors. Given these confounding factors, it is difficult to determine whether the fact that home sales grew slightly faster or slower is truly driven by the election cycle or other unobserved factors. However, in the final months of the year, home sales move in the complete opposite direction of their long-run trend-suggesting more concrete differences as election seasons wind down.
The pattern for home prices is similar. Despite Movoto’s claims, C.A.R. finds little evidence of a negative effect on home prices during an election year. In fact, home price growth during the past 5 election cycles is actually slightly better than the long-run average. Again, the effects are most pronounced during the final months of the year when demand, and therefore upward pressure on prices, are boosted following the election.
Many researchers have tried to pin down the effects of our political elections on California’s housing market. There are some indications that elections do bolster the final months of an election year as uncertainty fades and the state gets back to business, but the more likely conclusion is that presidential elections don’t have much impact on the Golden State’s housing market at all.