The Impact of Politics and Presidential Elections on Real Estate

The Weekly Recap

Good morning and happy Friday! Joe Biden bowed out of the race for President, firms are still reeling from the Crowdstrike outage last week, US GDP accelerated more than expected in Q2, US existing home sales fell by a more than expected 5.4% in June except for in the luxury market where sales continue to surge. US home prices hit another record-high, Bank of Canada cut rates for the second straight month and Apple is likely to release a foldable phone by 2026.

If you missed last weeks newsletter on Becoming a Landlord you can check it out through the link.

The Impact of Politics and Presidential Elections on Real Estate

We have experienced one of the most intense weeks of presidential politics, probably ever, in the United States this past week. Between the assassination attempt of former President Trump, to the RNC convention to the current President Joe Biden backing out of the election amidst a revolt of power brokers within his own party. Historically, real estate markets have shown varying patterns around election cycles but are all thread together with some common themes.

Increased Uncertainty and Reduced Activity- in the months leading up to an election, most people adopt a wait and see approach which leads to reduced activity and even delaying transactions until political outlooks become clearer while post election, market activity typically rebounds as confidence returns with clarity in economic direction.

Market Volatility- Elections cause volatility in the stock market which can have a spillover effect into the real estate market. This is particularly true for luxury real estate markets and areas with high concentrations of investment properties. Concerns about the future of interest rates due to potential new policy implementation can also create short term volatility in real estate markets.

Policy Impact- The anticipation of changes in housing and financial regulations can also influence decision making as the impact of the potential for more stringent lending standards or changes in tax policy can lead to a rush of transactions before the new rules take effect (see the Mansion Tax law in LA and how that negatively impacted the market place since its passing).

Real estate markets around election cycles often experience periods of reduced activity and increased volatility due to uncertainty. The extent and nature of those impacts vary greatly based upon the broader economic context and specific policies by candidates. Coming off of an incredibly aggressive quantitative tightening exercise by the Fed over the past several years, the timing for the first rate cut in almost four years could line up succinctly with the election and completely alter historical behaviors in the real estate market.

If we see a rate cut in September (fingers and toes crossed), we could see an uncharacteristically cyclical increase in real estate activity so close to an election even with uncertainty looming about which party and economic ideology will come into power for the next four years.

Market Performance

Here are how some other indexes and asset classes have performed as of Wednesday’s opening bell, markets were closed yesterday.

NYC Market Update

Here is a view of new inventory that has come onto the NYC market over the past week as well as newly signed contracts in Manhattan.

Mortgage Rate Update

Mortgage Rates essentially remained flat from last week but have decreased nearly half a percent since their peak earlier this year.

News You Can Use

• Joe Biden Bows to Democrats Who Wanted Him Out, Upending US Politics Bloomberg

• US Home Prices Hit Record in June for Second Consecutive Month Wall Street Journal

• US Economy Grew at a 2.8% Pace In Q2, Much More than Expected CNBC

• US Existing-Home Sales Drop to One of Slowest Paces Since 2010 Bloomberg

• Real Estate Market is Broken for Everyone Except the Ultra Rich Bloomberg

• Insurers Face Business Interruption Claims After Global Tech Outage Reuters

• We Finally Know What Caused the Global Tech Outage - And How Much It Cost CNN

• The Economic Slowdown that Wasn’t Axios

• Bank of Canada Cuts Rates Again Reuters

• These 32 Charts Tell the Story of Markets and the Economy Midway Through 2024 Yahoo Finance

• Car Dealers Beef Up Incentives As US Inflation Takes Bite Out of Demand Financial Times

• The Fed Needs to Cut Rates Now Bloomberg

• As Rates Fall, European Banks Can Still Rise Reuters

• Apple Likely to Release Foldable iPhone as Early as 2026 Reuters

The Deep Insight

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