While factors like the economy, mortgage interest rates, and housing supply play significant roles in shaping the housing market, the outcome of the upcoming presidential election in November 2024 could also have a substantial impact.
The outcome of the November 2024 presidential election could influence the housing market, but the correlation is generally weak. Bankrate’s analysis of S&P CoreLogic findings found that presidential elections have a brief and shallow impact on the housing market, because general uncertainty “caused by an election pushes many would-be homebuyers to the sidelines.” This year, the New York Post said that election jitters are impacting housing sales—and there is some evidence that housing sales do dip slightly in November—but these effects are generally short-lived and minor.
And what about political parties? Does housing do better with one party in office more than the other? No, there’s no statistical evidence that shows that the housing market is affected by one political party over another.
There have been 11 presidential elections since 1978, not including 2024. With the exceptions of 1981 and 1989, home sales rose each year following the election, from data by the Department of Housing and Urban Development (HUD) and the National Association of REALTORS®. Does that mean that elections are good for housing? Or is that a post hoc fallacy? They’re interesting questions to explore as we examine more evidence of elections’ influence on housing.
In looking for compelling evidence that elections affect the housing market, we should start with the correlation and causation between elections and housing.
What is correlation? It’s a “statistical measure that reveals the extent to which two variables are linearly related.” Correlation describes the relationship between variables without implying causation. In simpler terms, just because two variables are correlated does not mean one causes the other. For instance, a positive correlation might be seen between having a college degree and higher earnings, or between smoking and lung cancer, or speeding and car crashes. However, correlation alone does not establish cause and effect.
A negative correlation means that as one variable increases, the other decreases. For example, regular exercise is negatively correlated with heart disease. But again, correlation only shows a relationship, not causality.
The post hoc fallacy refers to the mistaken assumption that if one event happens after another, the first must have caused the second. This brings us back to the idea that correlation doesn’t imply causation). It’s erroneous to conclude that if one factor (X) and another (Y) are correlated, X must be causing Y. False-causality fallacy is an illusory correlation. There may be many causes that create an effect. The Titanic sank because it hit an iceberg, but there were also many other factors that went wrong. The crow’s nest shipman didn’t have binoculars to see the iceberg in time; the ship was speeding to make a record crossing and couldn’t slow down in time to avoid the iceberg; and the ship makers used a lower quality steel that failed on impact with the iceberg.
In the housing market, numerous variables come into play, making it difficult for a single factor—like mortgage interest rates—to dictate trends on its own. However, when historically low mortgage rates combined with affordable home prices and limited housing inventory, the U.S. housing market surged, reaching record-high home prices. Although sales volume has slowed, home prices continued to rise nationwide until inflation prompted the Federal Reserve to raise interest rates. As the housing market cools, many wonder: Is this due to the Fed’s rate hikes, or is the upcoming 2024 presidential election having an impact?
Monetary policy can impact housing, but it’s affordability that makes the most difference to homebuyers. Sellers who purchased homes with 2.9% interest rates are reluctant to sell their homes, even at a handsome profit, because buying another home means paying a much higher price as well as a higher interest rate. This attitude has helped restrict the number of houses available for homebuyers to purchase, which in turn has increased demand for the remaining homes for sale.
According to The Conference Board Consumer Confidence Index, the fewest Americans in 12 years are planning to buy a home, likely due to the significant changes in mortgage interest rates, home prices and inventory. But what presumably makes these 36 million skittish are jobs—yet another variable that introduces uncertainty. The job market and wage growth are slowing down, which may help slow inflation, but they also make workers uneasy. Is consumer confidence to blame or the presidential election for flagging home sales? Is consumer confidence related to the candidates of the November election? No, but consumer confidence is yet another factor that impacts housing.
Remember those last 11 presidential elections? According to data from Freddie Mac, mortgage interest rates decreased from the July to November just before the elections eight out 11 times. As of the end of August 2024, benchmark 30-year fixed rate mortgages were down to 6.35% and many forecasters believe they’ll continue falling for the remainder of the year.
Home prices typically don’t drop during an election year and tend to follow their own trends. In general, home prices rise annually, which is one reason why real estate is a powerful wealth-building tool. A notable exception was the 2008 housing market crash, triggered by widespread mortgage fraud, which took years to recover from. Since then, lending requirements have tightened, and foreclosures remain low. Historically, since 1987, the annual price appreciation for homes has averaged 4.8%, well above typical inflation rates of 2–3% per year.
So, the upshot is that little can be attributed to election years with the regard to the housing market’s ups or downs. People have their own plans, goals, joys and problems. Unless there is something that impacts housing directly, like a lending crisis, widespread fraud, government incentives, housing supplies or a shortage of building materials and labor, home sales and prices tend to roll along with only minor bumps.
