Real Estate Values After an Election

Whether you believe that our long national nightmare has ended, is just beginning, or is somewhere in between, we can all get behind the fact that real estate values have been depressed in an election  year, historically, and therefore the years after presidential elections are good ones for value.  The attached chart shows the trend over multiple election cycles.  The most likely cause is uncertainty, which is probably why the stock market dipped right before this election and rebounded afterward, when the orderly transfer of power seemed much more assured.



Since uncertainty is bad for real estate, the opposite should be true, no matter what the certainty is.  Therefore, it wouldn't matter what opinions people held about the outcome, only that the outcome is now clear.  This leaves a window, before values likely go up next spring, when buyers should try to benefit from both the season, and the current lower prices.  The window of opportunity is apparent, so act now, before it closes.

Flash Sale on Homes

The phenomenon of the flash sale is relatively new, but the concept is not--it's a sale promoted quickly, and without much warning, designed to create a sense of urgency, as it will only last a limited time.  Well, that happens every year in real estate!  Every year, I remind buyers that the best time to buy a home is between Halloween and Thanksgiving.  Sellers are thinking about heating and snowplowing through the winter, and both buyers and sellers want to start off the new year with a major financial transaction finished. 

In addition to the time of year, buyers should be motivated by the fact that interest rates are usually at their lowest point right around Election Day, and this is especially true in a presidential election year.  Whether it's uncertainty on the part of some, or a subconscious desire to help the party in power make the economy look good, the end result is the same--savings that will last every month for the life of the mortgage.

In New England, it's also a time of year before ice and snow make showings and open houses difficult, as well as a breather before the holiday rush sets in.  For all these reasons and more, it's the best time of year to buy.  And it doesn't last long.  So let's call it a flash sale, and let the buying begin!

Mortgages, Real Estate, and Elections

Why has the market slowed down this fall?  The most obvious answer is that we often see a lull before elections, as people wait for a sign about the future of whatever district is voting that year.  We are seeing it now in Connecticut, where there is a heated battle for governor, with some real philosophical differences between the two candidates, about how to spur growth and recovery in our State. 


Another side effect of looming elections, however, is a good one for consumers, and we are also seeing that.  Mortgage rates tend to hit their lowest point in a year right before elections occur (surprise, surprise, if politicians have anything to do with it!), and that is true now.  Mortgage rates are currently at their lowest level since June of 2013, and it would be a very good idea for buyers to pay attention to that fact.  They almost always rise after elections, so there is a window here of a few weeks, when buyers may be able to qualify for rates that they won't see again.  If legislators are trying to put you in a good mood before you vote, why not take advantage of that fact, and get yourself a good mortgage while you're at it? And, since the market is in limbo waiting to see what happens, you can buy at a favorable price at the same time!

News from the West Coast

I just returned from my biennial meeting of The Leadership Council.  This meeting was in San Francisco, and, although the weather is actually better here, I found it well worth attending, as always.  Around the country, brokers are feeling that the market is improving.  Since prices are still declining in some markets (including Connecticut), that doesn't mean that real estate brokers are in clover, but more units are selling, and faster.  Buyers seem less concerned that prices will drop a lot further, and they are moving on with their lives and finding homes.  Mortgages continue to be a challenge for many, and the effects of the Dodd Frank bill will continue to hurt that industry for years to come.

Some markets are a great deal better, and San Francisco is one of them.  There prices are rising, and units are flying off the shelf, despite a median price of over 1 million in the city itself.  Many homes are selling for more than the asking price, and often before the marketing has really gotten underway.  I was surprised that, for a place known as a high-tech mecca, the agents don't seem to use a lot more technology than we do. It still comes down to signs, open houses, broker to broker marketing, and word of mouth.  The one real change is that the internet has largely replaced print advertising, although there is still some of that.

Two interesting side notes:  I was the only person there without an iPad, which tells you something about why Apple alone is raising the NASDAQ results; and, two, this group, of owners from around the country, plan to vote for Romney over Obama by two to one.  The real news there is that they went for Bush over Gore by 18 to 4, so you can see that the election will be close!

Rates Are Creeping Up

Here's a shout out to all those buyers out there who are waiting to be sure that real estate prices have hit bottom:  You may succeed in buying when prices have passed the bottom, but you may lose on rates.  Although the Fed has signaled that it won't be raising its rates any time soon, the mortgage rates are more creatures of supply and demand, as well as bank appetites for new loans.  Rates also tend to follow a seasonal pattern--lowest at election time (what a surprise!), and higher in the busiest spring buying season).

 I get rates sent to me on a weekly basis, and it's clear that they are headed up.  If you have waited this long to buy, don't make the mistake of continuing to wait.  They may go back down in the fall, but, by then, prices will have risen.  Buyers have increasingly begun to think of the cost of housing as the cost of the monthly payment, since that matters far more to them than the actual price of the home at any given time.  Not only are mortgage rates heading higher, but insurance and taxes have risen in most places as well.  Buy now, or regret it later!