Real Estate Predictions for an Election Year

What are the housing market predictions for 2020?  It’s an election year; prices remain at an all-time-high; and interest rates are still at historic lows.  But a lot of my buyers tell me they want to ‘wait and see’ what happens with the housing market.  Some people are convinced it’s going to crash and prices will drop, and that they want to delay their purchase until then; or they want to wait and see how the election will impact the market. But when is "then?"  And what if it never comes?  When my clients are conflicted about buying because they want to wait for a drop in prices, I often ask them a series of questions to help them decide how to proceed.

Is this home for you or your family? Can you afford this property? Can you see yourselves living there for several years…raising your family, creating lasting memories? If the answers to all of these questions are yes, and there is still hesitation, I ask: who cares what you pay for the home? What you want to brag about is your interest rate!

For those of you looking for a more scientific assessment of the market and data-based predictions, Jordan G. Levine, Deputy Chief Economist for California Association of Realtors (Car.org) shares the following insights.  Is the Election Going to Influence the Real Estate Market? CAR took a data-driven standpoint and did some modeling a few years ago. They looked at all elections going back 50 years. Once you control for what’s happening in the broader economy, job market, and interest rates (the big macro factors that affect people’s pocket books); there has not been a big statistically significant impact.  We often see some softening one to two months leading up to the election, but in terms of the overall market, it still comes down to those economic fundamentals.  Currently, the economy is in great shape. We’re at historic low levels of unemployment across the country, and we’ve just gotten past a big wave of financial insecurity.  For example, the trade war has died down, financial markets are strong, and consumer confidence has bounced back.  If this macro-economic state remains status quo, we should not expect to see real estate activity slowing down as a result of the upcoming election. What Can We Expect In Terms of Home Prices? Prices are poised to ramp up, based on the state of the economy.  We’re in a supply-constrained housing market in California.  Inventory, or supply, remains very low.  And with the buyers feeling confident about the labor market, the overall economy and interest rates still hovering below 4%, they’re ready to buy.  Demand currently exceeds supply, which will drive prices upward. It’s great news for sellers, especially those who have been considering moving but wanted to sit it out for a while.   Sellers can sell their homes more quickly, and with less discounting, and in-turn, when they become buyers, they can also take advantage of the low interest rates. Prices drop when supply exceeds demand. With inventory continuing to be at historic lows, where would the outside pressure for lower prices come from?  Where will the excess supply of homes that drives prices down come from? This is a question that all buyers hoping to “wait for a crash” should ask.  This is not to say there are no risks, of course. If something happens in the financial market or the broader economy that undermines the demand side of the equation (i.e., if people start to get laid off, if there’s a big global economic crisis, or the Coronavirus goes crazy, etc.,) that’s the only way we’ll see downward pressure. As long as the economy is going well, and there is not enough housing to go around there will be upward pressure on prices. It's tricky to "time the market."  The most important thing to consider when you're debating whether to buy or sell are your own personal needs.