U.S. Housing Market and the Election: What You Need to Know

The U.S. housing market has been on a rollercoaster in recent years. First, it cooled off, then heated up, and then cooled again—only to become more expensive than ever. These shifts have been tied to major headlines: "Pandemic!", "Inflation!", "Interest Rates!"

Now, the big headlines are all about the upcoming U.S. presidential election, which has already been full of surprises and with months of political drama still ahead, the question on everyone's mind is: How will all this affect the real estate market?

The answer may surprise you—elections and their surrounding drama typically have little to no measurable impact on the housing market. While this race to the polls is sure to be intense, when it comes to real estate, we're likely looking at a whole lot of… nothing. Here’s why:

1. The Role of the Fed

Mortgage interest rates are a primary driver of the real estate market, and while many assume that The Federal Reserve, or The Fed, sets these rates, that's not entirely accurate. The Fed sets the Federal Funds Rate, which influences, but does not directly determine, mortgage rates. Mortgage rates are more closely tied to the 10-Year Treasury Yield, but both tend to move in tandem, influenced by similar economic trends and data.

The Fed, though technically a government agency, is designed to be nonpolitical. It doesn’t base decisions on who’s in office but on the overall health of the U.S. economy. When the economy slows (recession), the Fed lowers rates to encourage spending. When the economy overheats (inflation), it raises rates to cool things down. Regardless of who wins the election, the Fed’s approach to managing the economy won’t change.

2. Executive Policy

While the future president's policies can impact the housing market, these changes take time to implement, and many campaign promises never come to fruition. The election determines who will have the opportunity to shape policy over the next four years, but not how those policies will impact the housing market.

One of the biggest challenges facing the housing market is low inventory, a structural issue that requires long-term solutions. The next president will likely address housing supply and affordability—after all, a healthy housing market benefits any administration. However, the approach will differ depending on the party, with one favoring regulatory measures and the other leaning towards non-regulatory methods.

Regardless of the approach, significant changes take time and often span beyond a single presidential term. Policies are influenced by numerous factors, and the election itself isn’t one of them.

3. Supply & Demand

The fundamentals of the real estate market, like all markets, are driven by supply and demand. While various factors can influence these forces, changes tend to be cumulative, gradual, and region-specific. Unless there’s a seismic event like a full-blown economic meltdown or a global pandemic, the housing market is unlikely to be significantly impacted by something as unpredictable as election cycles.

The Evidence

You don’t have to take my word for it. The team at Keeping Current Matters has compiled data from the National Association of Realtors (NAR) and the Department of Housing and Urban Development (HUD) to analyze the impact of recent elections on the housing market.

The data shows that in most years following an election, home sales and prices actually improved. However, this reflects correlation, not causation. If you want to understand what really moves the real estate market, ignore the flashy headlines and start following the underlying economic data and policies. Or better yet, keep following me—I’m immersed in the data and always eager to share insights.