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How Will the Presidential Election Impact Real Estate?

The year 2020 will be remembered as one of the most challenging times of our lives. A worldwide pandemic, a recession causing historic unemployment, and a level of social unrest perhaps never seen before have all changed the way we live. Only the real estate market seems to be unaffected, as a new forecast projects there may be more homes purchased this year than last year.

As we come to the end of this tumultuous year, we’re preparing for perhaps the most contentious presidential election of the century. Today, it’s important to look at the impact past presidential election years have had on the real estate market.

Is there a drop-off in home sales during a presidential election year?

BTIG, a research and analysis company, looked at new home sales from 1963 through 2019 in their report titled One House, Two House, Red House, Blue House. They noted that in non-presidential years, there is a -9.8% decrease in November compared to October. This is the normal seasonality of the market, with a slowdown in activity that’s usually seen in fall and winter.

However, it also revealed that in presidential election years, the typical drop increases to -15%. The report explains why:

“This may indicate that potential homebuyers may become more cautious in the face of national election uncertainty.”

Are those sales lost forever?

No. BTIG determined:

“This caution is temporary, and ultimately results in deferred sales, as the economy, jobs, interest rates and consumer confidence all have far more meaningful roles in the home purchase decision than a Presidential election result in the months that follow.”

In a separate study done by Meyers Research & Zonda, Ali Wolf, Chief Economist, agrees that those purchases are just delayed until after the election:

“History suggests that the slowdown is largely concentrated in the month of November. In fact, the year after a presidential election is the best of the four-year cycle. This suggests that demand for new housing is not lost because of election uncertainty, rather it gets pushed out to the following year.”

Will it matter who is elected?

To some degree, but not in the overall number of home sales. As mentioned above, consumer confidence plays a significant role in a family’s desire to buy a home. How may consumer confidence impact the housing market post-election? The BTIG report covered that as well:

“A change in administration might benefit trailing blue county housing dynamics. The re-election of President Trump could continue to propel red county outperformance.”

Again, overall sales should not be impacted in a significant way.

Bottom Line

If mortgage rates remain near all-time lows, the economy continues to recover, and unemployment continues to decrease, the real estate market should remain strong up to and past the election.

Three Ways to Win in a Bidding War

Three Ways to Win in a Bidding War

Three Ways to Win in a Bidding War | MyKCM

With so few houses for sale today and low mortgage rates driving buyer activity, bidding wars are becoming more common. Multiple-offer scenarios are heating up, so it’s important to get pre-approved before you start your search. This way, you can put your best foot forward – quickly and efficiently – if you’re planning to buy a home this season.

Javier Vivas, Director of Economic Research at realtor.com, explains:

“COVID-19 has accelerated earlier trends, bringing even more buyers than the market can handle. In many markets, fierce competition, bidding wars, and multiple offer scenarios may be the common theme in the weeks to come.”

Here are three things you can do to make your offer a competitive one when you’re ready to make your move.

1. Be Ready

A recent survey shows that only 52% of active homebuyers obtained a pre-approval letter before they began their home search. That means about half of active buyers missed out on this key part of the process.

Buyers who are pre-approved are definitely a step ahead when it’s time to make an offer. Having a pre-approval letter indicating you’re a qualified buyer shows sellers you’re serious. It’s often a deciding factor that can tip the scale in your direction if there’s more than one offer on a home. It’s best to contact a mortgage professional to start your pre-approval process early, so you’re in the best position right from the start of your home search.

2. Present Your Best Offer

In a highly competitive market, it’s common for sellers to pick a date and time to review all offers on a house at one time. If this is the case, you may not have an opportunity to negotiate back and forth with the sellers. As a matter of fact, the National Association of Realtors (NAR) notes:

“Not only are properties selling quickly, but they are also getting more offers. On average, REALTORS® reported nearly three offers per sold property in July 2020.”

Make sure the offer you’re presenting is the best one the sellers receive. A real estate professional can help you make sure your offer is a fair and highly competitive one.

3. Act Fast

With existing homes going like hotcakes, there’s no time to waste in the process. NAR reports how the speed of home sales is ramping up:

“Properties typically remained on the market for 22 days in July, seasonally down from 24 days in June and from 29 days in July 2019. Sixty-eight percent of homes sold in July 2020 were on the market for less than a month.”

In addition, NAR notes:

Total existing-home salesjumped 24.7% from June to a seasonally adjusted annual rate of 5.86 million in July. The previous record monthly increase in sales was 20.7% in June of this year. Sales as a whole rose year-over-year, up 8.7% from a year ago (5.39 million in July 2019).”

As you can see, the market is gaining steam. For two consecutive months houses have sold very quickly. Essentially, you may not have time to sleep on it or shop around when you find a home you love. Chances are, someone else loves it too. If you take your time, it may not be available when you’re ready to commit.

Bottom Line

The housing market is very strong right now, and buyers are scooping up available homes faster than they’re coming to market. If you’re planning to purchase a home this year, let’s connect to discuss the trends in our current area, so you’re ready to compete – and win.

Housing Trends: Why are Many Baby Boomers Deciding Not to Downsize?

USA Today recently reported on a new housing trend that has been gaining attention. It includes a growing number of older Americans in the baby boomer generation that are deciding not to downsize their homes as they near the age of retirement, as has been typical in the past. Instead, many are choosing to stay put in the homes where they raised their children. This reluctance to downsize is also contributing to the housing shortage around the country. Why are boomers choosing to remain in their sprawling abodes long after their offspring leave the nest to start lives of their own? Several factors come in to play, however, it appears that baby boomers are choosing to resist the traditional confines of what it means to advance in age just as they defied other establishment norms back in the 1960’s and 1970’s.

Other practical reasons have much to do with the decision to put off downsizing for many older Americans as well:

  • Many boomers are putting off retirement. Labor Department figures show that approximately 20% of Americans ages 65 and up are working or seeking employment, which is up over 12% from 1996.
  • Many have millennial children living with them well into adulthood, making the extra space a necessity. Statistics have shown that over the last decade, it has taken millennials longer than prior generations to launch their careers. According to Census figures, the percentage of senior households that have younger generations living with them rose 2% higher in 2016 from 14.4% in 2005.
  • Many older people are staying in the workforce longer because they are healthier and will need bigger retirement nest eggs to finance longer retirements, according to the AARP Public Policy Institute. This is in part due to a large number of people that lost or had to tap into a signifiant portion of their savings during the economic downturn a decade ago.
  • Sky-rocketing home prices, rising mortgage rates, and inventory shortages at the lower end of the market have the potential to create a new housing crisis for baby boomers. There is a serious shortage of less expensive, smaller homes in the country right now, which has resulted in an increase in prices for homes in this tier, making the tradeoff less attractive to those who are open to downsizing.
  • Many boomers who held off on renovating during and after the housing crash are now focused on making and enjoying those upgrades rather than downsizing.
  • Many want to enjoy bigger properties that they could not afford earlier in life that also offer more room for visiting family members.
  • For some, selling can result in a large capital gain which may negate the benefit of a downsize.
  • Many boomers have finally paid off their mortgages and don’t want to start making housing payments again.

Lastly, 54% of those surveyed by Merrill Lynch said that they don’t plan on downsizing because they feel comfortable in the house where they raised their children. Many feel that their current house has always been and for now, will continue to be “home”.

 

Older Couple

Image via Flickr by Stannah International