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Will election year impact rates and real estate

election impact on rates and real estate

How will the election impact interest rates & real estate?

 

Regardless of which party you support 2016 is an Election year.  If you own Real Estate (or are thinking of purchasing, you may be curious about what historically happens in an election.  Do rates move around the time of an election?  Does it matter which party comes into power?  I did a quick analysis over the last 30 years and found …..    Along with rates, there is empirical evidence that  real estate will…

I pulled together some expert resources (Wall Street Journal, Marketwatch, Zillow, Movoto, etc.. ) to answer these questions and more

 

After looking at Freddie Mac’s 30-year fixed mortgage rates during election years, I think you’ll be interested to know that the whomever you vote for will likely not have much impact on rates whatsoever.  How am I so certain?

 

Over that last 30 years regardless of who was elected (or not elected) there has been little if any change in rates.  This happens regardless of the economic cycle we are in at the time and which political party is in power.

 

Marketwatch did a blog a during the last election and came to the similar conclusion: What this means: We can base no prediction about how interest rates are likely to fare over the next several weeks on the mere fact that a presidential election is imminent. “

 

Although historically rates do not move much during election years, there is empirical evidence that real estate is impacted.

 

In a paper published in 2014 in the British Journal of Political Science, economist Brandice Canes-Wrone, along with co-author Jee-Kwang Park, observed very distinct trends in home sales during gubernatorial election years versus non-election years. They studied data from 1999 to 2006 in 35 states during 73 of those elections. They found that home sales declined two-tenths to three-tenths of a percent. Another study done in 2012 by the website Movoto also shows the real estate market being affected and this time by presidential elections. Movoto used data from the California Realtors Association and noticed that home prices increased 1.5% less than the years preceding and following the elections.

 

Movoto’s study, although limited to CA, is interesting and could hold true in other markets.  Here is a link to the full study: This study found that prices didn’t actually decrease, but increased by less (before the election the average rate was 6%, during the election the increase was closer to 4.5%).  Although 1.5% might not sound like much on a million dollar house this is a change of 15k.

 

 

Furthermore, in a Wall street journal article various studies found that in election years, homes sales declined between two-tenths and three-tenths of a percent.

 

In a nutshell rates should stay low in this election cycle (very little change from today).   So what truly drives rates?  If you missed my prior article: Will mortgage rates rise? it is worth a second look as it dives into what actually drives mortgage rates (hints it is not the federal reserve).  Along with little impact on rates, real estate prices and number of sales should decline a small amount this year on the whole (obviously every market is unique but on the whole the average should decline)

 

Written by Glen Weinberg, COO/ VP Fairview Commercial Lending.  Glen has been published as an expert in Hard Money Lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.

 

Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide.  To get started on a loan all they need is their simple one page application (no upfront fees or other games).

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