How the 2024 election could impact the market

How the 2024 election could impact the market

Previous election years have often unfolded amidst significant global events, such as the pandemic and the Brexit referendum, leading to notable price fluctuations. Real estate economists caution that while electoral outcomes could impact economic policies, the election cycle itself may introduce hesitancy among both buyers and sellers due to uncertainties surrounding potential policy changes.

The present housing market landscape, according to Redfin Chief Economist Daryl Fairweather, might also influence the upcoming election results. Housing affordability remains a pressing issue for consumers grappling with persistent inflation and soaring interest rates. Recent weeks have witnessed mortgage rates climbing steadily, nearing 7%, intensifying the affordability challenge and constraining inventory as sellers who secured low mortgage rates pre-pandemic hesitate to sell.

Here's how the election year dynamics could reverberate in the housing market:

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Affordability: Fairweather emphasizes that the policies implemented by the ruling party could significantly impact homeownership affordability. Potential reforms, such as alterations to mortgage interest deductions, capital gains exclusions, property tax deductions, or income tax brackets, could reshape incentives and affordability for various demographic segments. Additionally, governmental funding for down payment assistance programs and other affordability measures might alter the homeownership landscape.

Demand: Uncertainty surrounding future economic policies stemming from the presidential election might instigate caution among buyers and sellers, albeit typically exerting only a minor influence on the overall market sentiment. However, in regions like Washington, D.C., where political affiliations strongly influence job prospects, election uncertainty could wield more substantial sway. Despite this caution, data suggests that most buyers and sellers ultimately proceed with their transactions.

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Re-election: Fairweather notes that public sentiment regarding the housing market could impact President Biden's re-election prospects if he fails to articulate a compelling strategy for housing market improvement in his potential second term. A scenario where inflation subsides and mortgage rates decrease could momentarily enhance home affordability, potentially favoring Biden's re-election bid. Nonetheless, sustained supply shortages remain a fundamental driver of the affordability crisis, indicating the complex and multifaceted nature of the housing market challenges beyond electoral cycles.

In summary, while electoral outcomes may influence certain economic policies, the broader housing market dynamics are shaped by a myriad of factors, including global events, economic conditions, and long-standing structural challenges.