Elections are always a source of significant uncertainty for markets. This year is likely no exception. Not only do we have an especially controversial and drawn out election process, but all of it is happening during the unprecedented fall and winter surge of COVID-19.
We have a lot of historical data to show that elections do have some effect on the housing market. Markets nation-wide tend to slow down slightly in November, as people gear up for the holiday season. However, in election years, we notice that this slow down tends to be slightly more pronounced. Likely, due to uncertainty of the economic and political climate, homeowners delay making housing decisions until after the election is done.
This year however has been exceptional year in the real estate market overall. Driven by low interest rates and continued low housing inventory, all market indicators have been up year over year compared to 2019.
Furthermore, heading into election week, those indicators showed no sign that the market was slowing down. According to the Weekly Indicator report from the Minneapolis Area Association of Realtors (MAAR), new listings were up 8.1% over 2019, pending sales were up 27%, and listing inventory was down 29.7% for the week of October 27, 2020. Therefore, this election year, we’ve seen an increase in activity rather than the traditional decrease.
In the weeks after the election, we can expect that any change in behaviors from election week will be temporary. As noted by the BTIG Homebuilder Report, and caution due to the election is temporary, since “the economy, jobs, interest rates, and consumer confidence all have far more meaningful roles in the home purchase decision than the Presidential election result.”
So in the weeks that follow, I expect that the housing market will continue to truck along at levels higher than seen in 2019. With mortgage rates falling again to close to 2.78% nationally, housing inventory falling to 1.8 months of supply in the Twin Cities area, and consumer confidence in the housing market high, I do not expect a slow down any time soon.