Presidential Elections have no bearing on home sales…
…and here’s why according to Alex Shaban and Alex Thomas
A Long Held Myth BUSTED…
Key takeaways:
The annual seasonal decline in home sales is no worse in election years than in non-election years, according to 35 years of data.
Greater-than-expected seasonal declines in home sales mostly reflect poor economic conditions (recessions or other downturns).
Ignore the loudest voices in the room: home purchases are usually life decisions rather than political ones.
Presidential elections have little impact on home sales in the 5 months leading up to elections
Every 4 years, we and our clients are inundated with anecdotes about potential homebuyers who claim to be putting their home purchase decision on hold until after an upcoming election. Political uncertainty and negative campaigning undoubtedly weigh on consumer confidence, as evidenced by work from researchers at the University of Chicago. But do these potential buyers have any bearing on overall home sales?
We have found that this type of buyer is the exception rather than the rule. To assess the impact of presidential elections on home sales, we compared the non-seasonally adjusted, year-over-year change in new and existing home sales in the 5-month period* leading up to November (the month an election is held during an election year). We found the following:
In non-election years, new home sales decline by -14% on average, and existing home sales decline by -22% on average.
In election years, new home sales decline by -10% on average, and existing home sales decline by -19% on average.
Stop Blaming the Election
Presidential elections have little impact on home sales in the 5 months leading up to elections
This graph visualizes the lack of relationship between home sales and presidential election years. We find:
3 elections where home sales fell less than seasonally expected: 1992, 2004, and 2020
3 elections where home sales fell in line with seasonal expectations: Home sales appeared normal in 1996, 2012, and 2016.
2 elections where home sales fell more than seasonally expected: The lead up to the elections of 2000 (Bush vs. Gore) and 2008 (Obama vs. McCain) both coincided with recessions, which caused home sales to decline more drastically than normal.
A lagging economy or personal circumstances have more to do with slowing home sales…
Be wary of extrapolating broader trends from anecdotes—the data just doesn’t back it up.
Researchers from the University of Chicago found that elections influence consumer sentiment much more significantly than consumer spending. Our analysis of home sales in the months leading up to the presidential election supports this finding.
In fact, our New Home Trends Institute finds that just 8% of consumers claim to be deferring their home purchase specifically due to the presidential election (and this is likely an overstatement). Put another way, we find that 92% of consumers are not postponing a home purchase due to the presidential election.
Source: John Burns Research and Consulting’s Building Market Intelligence Newsletter, 07/39/2024