Political results impact the real estate industry. Yes or No?

[Urvashi Vasishtha]

Had an interesting discussion in the Department Heads group today where our CEO who has done more than 3000+ transactions and has an industry experience of 20+ years opined on the possibility of the election results impacting RE. 

When asked how do political results impact RE, he said, "the Real estate market slows in election years. Presidential election years are the worst, but any major election slows the market. Voters usually begin to believe that if their candidate loses, the world is going straight to hell. So they do not invest, but if their candidate wins, they go bullish! The voters whose prospect wins spend money, they believe the world will be awesome! The voters whose prospects lost spend money because they can’t do a thing about it until the next election lol!"

This got me thinking about how user behaviour changes per the market. To me, this falls under the category of complex buying behaviour triggered by a confirmation bias. 

Complex buying behaviour is encountered particularly when consumers are buying an expensive product. In this infrequent transaction, consumers are highly involved in the purchase decision. Consumers will research thoroughly before committing to investing. 

Confirmation bias takes over when the new information processed by the human mind confirms pre-existing beliefs. Here the pre-existing belief is that if their candidate wins the world will be amazing and if the candidate loses, the world will turn upside down. Humans tend to hold on to their beliefs strongly and look for confirmation of such beliefs. For instance, if a brand can create a situation where it can affirm the belief of the consumer pertaining to certain ingredients of the product, it is more likely to be a success in the market.

How do the election results impact buying behaviour in the market? Would love to know your take on the subject.

[Josh Green]

Quote from @Urvashi Vasishtha:

Had an interesting discussion in the Department Heads group today where our CEO who has done more than 3000+ transactions and has an industry experience of 20+ years opined on the possibility of the election results impacting RE. 

When asked how do political results impact RE, he said, "the Real estate market slows in election years. Presidential election years are the worst, but any major election slows the market. Voters usually begin to believe that if their candidate loses, the world is going straight to hell. So they do not invest, but if their candidate wins, they go bullish! The voters whose prospect wins spend money, they believe the world will be awesome! The voters whose prospects lost spend money because they can’t do a thing about it until the next election lol!"

This got me thinking about how user behaviour changes per the market. To me, this falls under the category of complex buying behaviour triggered by a confirmation bias. 

Complex buying behaviour is encountered particularly when consumers are buying an expensive product. In this infrequent transaction, consumers are highly involved in the purchase decision. Consumers will research thoroughly before committing to investing. 

Confirmation bias takes over when the new information processed by the human mind confirms pre-existing beliefs. Here the pre-existing belief is that if their candidate wins the world will be amazing and if the candidate loses, the world will turn upside down. Humans tend to hold on to their beliefs strongly and look for confirmation of such beliefs. For instance, if a brand can create a situation where it can affirm the belief of the consumer pertaining to certain ingredients of the product, it is more likely to be a success in the market.

How do the election results impact buying behaviour in the market? Would love to know your take on the subject.

Real estate, perhaps even more than stocks, is influenced by emotion for better or worse.  Overall buyer/seller sentiment is a strong indicator of that emotion and indirectly impacts the real estate market. 

I recently saw a graph depicting historical S&P 500 trends right before and after elections and it was interesting to see the distinct difference in share value trends.  Not to spark a causation v. correlation argument but I wouldn't be surprised if real estate, if only for a short period of time (3-5 months) also showed a distinct fluctuation before and after election periods.

For readers and investors, it's still more important to understand that time in market > timing the market and I always advise my clients that a deal makes you money on the purchase.  Make sure in times of uncertainty or volatility that your purchase is less speculative and cash flows day.