How Presidential Elections – and Biden vs. Trump in particular – affect the real estate market in the DC Metro Area
Four years ago, we wrote what became one of our most popular blogs of all time. We discussed how the Clinton vs. Trump election could impact the local market. So, we thought it would be worth tackling the same question this year as we wait to see whether we will have a new administration in town or four more years of the current one.
What Typically Happens to the DC Real Estate Market in an Election Year?
It’s a common and widely-held misconception in our area that when a new administration comes into office after an election, the floodgates open and there is a frenzy of new inventory on the market and a plethora of new buyers ready to snap the houses up.
In reality? In a new administration, about 7,000 political appointments are made, but most don’t come from out of town. (Source)
Many people who are hired to be a part of the new administration are, as they say, “Washington Insiders,” already living in the area regardless of who is in power.
For those who do come in from out of town to work in the administration, most often they tend to keep their homes in their home state and return after they serve. Most end up renting while in DC. So these new area residents don’t really affect the housing market either way. The change in administration causes a small bump – but it is not significant in the resale sector. Four years ago, that small bump was in the ultra-luxury market in Kalorama in DC, where many of President Trump’s wealthy appointees (and Ivanka and Jared) took up residence.
But, even if a new administration doesn’t bring an overwhelming number of new sales, elections do have an impact on the DC housing market.
Every four years, in a normal election year, the local market slows down in the late summer and fall as we gear up for months of uncertainty, political mudslinging, and, depending on your viewpoint, excitement or anxiety over a potential change in power.
Typically, I would say that 2020 would be no exception as we face what is likely to be a messy and close election. Tensions are high, negative ads, debates and news segments are hard to avoid. The future is as uncertain as ever, which typically does not bode well for the housing market.
Why? People buy houses when they are happy and confident.
With the 24 hour news cycle, that happy, confident feeling has typically been more difficult to achieve in an election year.
However, as we all know, this year (not to mention this election) has been anything but normal! Instead of our typical July slowdown, we saw a summer surge in activity in the housing market with July, August, and September significantly busier than normal, regardless of whether or not it is an election year. So the question facing us is, what happens in the 4th quarter this year?
So, how does the Biden vs. Trump election compare to previous elections?
Our prediction is that local residents, who may face job uncertainty with a change in power, will likely pause their home search. However, the rest of our region has already been seized by the wild emotions of the last several months and there has been little impact on the DC market. In fact, new home mortgage applications are up 33% nationwide over last year! Ultimately, while there is bound to be a little dip right around the election, we don’t anticipate this year’s dip to be as significant as past election years. We also anticipate the same post-election rebound we’ve seen in past election years. But there are a few unique factors this year to explore, which we’ve analyzed below.
THE COVID EFFECT: Strangely, we have seen our local market surge since the start of the coronavirus. While we’ve seen an economic downturn, more negativity, and increased anxiety as a nation, more people are making housing decisions based on their individual circumstances, versus how the nation is doing as a whole. This trend is unprecedented, but so are the current times. While there is economic uncertainty, as long as an individual buyer feels confident in their job or economic position, they feel comfortable moving forward with the decision to move based on what is right for them.
WE KNOW THE PLAYERS: We certainly know a lot about both candidates, who have been household names for decades. At least from a housing market standpoint, this is a positive. While there is uncertainty around who will win, there is no uncertainty about how either of these candidates might lead.
24/7 MEDIA MACHINE: Perhaps, we’ve been “lucky” in that with fewer rallies and media soundbites, this campaign season has not turned as ugly yet as potentially could. Is this why we haven’t seen the local market slow down yet? I’m not sure it’s the cause, but it certainly doesn’t hurt. However, with the debates now in full swing, things could turn uglier soon.
GOVERNMENT SPENDING: Should Biden win, we will naturally see a shift in what type (and how much) government spending we will see. Should Trump win and remain in power, we will likely see continued spending on military and defense as well as infrastructure. Regardless of where federal dollars are allocated, continued government spending (whether or not you view this as a positive or negative thing for the country) does bode well for those in federal government positions, and in turn for our local real estate market.
POSSIBLE ADMINISTRATION CHANGE: A potential change in administration will continue to be an almost non-issue for the housing market, as likely many new political appointments will come from inside the beltway. However, as we have seen, this race is anything but ordinary! And if Trump wins again, that doesn’t necessarily mean we won’t see new people coming into town. Throughout his time in office, the Trump Administration has had a revolving door of advisors and staff.
The Bottom Line
We do hope to continue to ride this wave of a busier than normal fall market for an election year, though we anticipate a small slowdown will happen at some point before the election. The big question is when and for how long? As long as the election is not contested, we anticipate things will pick up again immediately following the election as it does in a typical election year.