Will the Election Result Impact the Housing Market?

[Eric Fernwood]

As Election Day nears, many individuals halt their major financial activities because they feel the uncertainty of the election results may have adverse effects if they act now. In this post, I will explore the historical impact of the election results on the housing market, if any, and share my view of the current election impact.

Historically, U.S. investors have seen similar annual stock market returns regardless of which political party is in power. Major economic downturns, such as the Great Depression and the 2008 Financial Crisis, occurred under both parties and were driven by factors unrelated to the party in office.

The following table shows the DJIA's performance during each presidential administration.

DJIA Percent Change (%)

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President	Date of Inauguration	Last Day in Office	Percent Change (%)	Annualized Return (%)
Johnson	11/22/63	1/20/1969	30.9	5.3
Nixon	1/20/69	8/9/1974	-16.5	-3.2
Ford	8/9/74	1/20/1977	23.4	8.9
Carter	1/20/77	1/20/1981	-0.9	-0.2
Reagan	1/20/81	1/20/1989	135.1	11.3
Bush I	1/20/89	1/20/1993	45.0	9.7
Clinton	1/20/93	1/20/2001	226.6	15.9
Bush II	1/20/01	1/20/2009	-24.9	-3.5
Obama	1/20/09	1/20/2017	149.4	12.1
Trump	1/20/17	1/20/2021	57.3	12.0
Biden	1/20/21	1/20/2025	26.4	7.7

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Median	26.4%	7.7%
Median Republican	22.5%	7.9%
Median Democratic	30.9%	7.7%

​[Source: The Bahnsen Group]

S&P 500 Presidential Term Performance

Since the Great Depression, 78% of four-year presidential terms have seen positive S&P 500 results, with an average return of 33% per term—regardless of which party holds office.

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Election Year	Election Winner	% Since Previous Election	% YTD on Election Day
1964	Johnson	54.56	13.54
1968	Nixon	21.04	6.87
1972	Nixon	10.55	11.65
1976	Carter	-9.55	14.31
1980	Reagan	25.16	19.55
1984	Reagan	32.06	3.32
1988	Bush	61.46	11.36
1992	Clinton	52.61	0.68
1996	Clinton	70.07	15.94
2000	W. Bush	100.5	-2.54
2004	W. Bush	-21.04	1.67
2008	Obama	-11.04	-31.51
2012	Obama	42.02	13.58
2016	Trump	49.79	4.68
2020	Biden	57.47	4.28

​[Source: The Bahnsen Group]

Housing Prices

Median sales prices of houses sold since 1963-1-1 (the earliest data I could find).

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​[Source: Federal Reserve Bank of St. Louis]

Below is a breakdown of SFR price change for each presidential term.

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End of Term	President	SFR Home Price Increase	Party
1968	Johnson	29%	Democrat
1972	Nixon	17%	Republican
1976	Nixon	37%	Republican
1980	Carter	36%	Democrat
1984	Regan	15%	Republican
1988	Regan	35%	Republican
1992	Bush	6%	Republican
1996	Clinton	13%	Democrat
2000	Clinton	19%	Democrat
2004	W. Bush	28%	Republican
2008	W. Bush	-5%	Republican
2012	Obama	14%	Democrat
2016	Obama	16%	Democrat
2020	Trump	6%	Republican
2024	Biden	12%	Democrat

​

Historical data reveals no correlation between the presidential party in office and housing price growth or stock market performance.

The stock market is driven by emotions in the short term and by corporate performance in the long term. Single-family home prices and rents are primarily driven by supply and demand dynamics, with interest rates playing a crucial role.

Supply:

Existing homes for sale have hit a near 30-year low.

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​[Source: TradingEconomics.com]

The number of new homes built for the last 10+ years has been chronically lower than the previous decades.

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​[Source: Federal Reserve Bank of St. Louis]

Single-family home building permits serve as a leading indicator of future housing supply trends. And it is not trending up.

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​[Source: National Association of Home Builders]

Demand:

The chart below illustrates the steady increase in household formation, a key driver of housing demand. The U.S. is forming more households than ever, and that trajectory will likely remain the same due to population growth.

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​[Source: Federal Reserve Bank of St. Louis]

A comparison between household formation and new home construction shows a significant housing shortage. Below are estimates of the housing shortage by different institutions:

• The National Association of Home Builders (NAHB) estimates a shortage of 1.5 million units (2021 data).
• Freddie Mac’s estimate is a 3.8 million unit shortfall (Q2 2020 data).
• A report commissioned by the National Association of Realtors (NAR) (2021 - Rosen Consulting Group) suggests a 5.5 million unit housing shortage.

No matter which data source you choose, there is a massive shortage. And, regardless of which party takes the White House, the housing shortage will not change.

The only way to boost supply is for builders to significantly increase home construction. However, this seems unlikely given the current high interest rates.

I don't anticipate significant interest rate fluctuations for the next 6 to 9 months. Here's a summary of the reasons: With inflation now in the 2% range, the Fed needs to lower interest rates from their current "restrictive level" (Powell's words) to prevent a recession. However, there's a floor for interest rates due to fears of inflation resurgence, particularly in housing prices. These factors are independent of any presidential candidate's policy promises.

It's worth noting, however, that in the long term, housing markets with abundant vacant land can significantly increase their inventory if policies and economic conditions favor builders.

In markets like Las Vegas, where undeveloped land is limited, and population growth is strong and steady, housing inventory will continue to tighten. This scarcity will drive both property prices and rents upward.

Housing supply and demand dynamics are more determined by interest rates and state/local economics than by the president and Congress.

Summary

Waiting for the election outcome won't give you an advantage. In fact, now may be the best time of the year to buy properties due to reduced buyer competition and seller motivation (those selling now are probably committed.) Prices and rents are driven by supply and demand, which does not change with who is elected, at least in the short term.

[Jay Hinrichs]

Quote from @Joe S.:

That’s a pretty jam up article. Did you write yourself or did AI?🧐

Erik usually writes some pretty comprehensive posts and he does mention Vegas so maybe not AI ...

when it comes to elections I just remember this one interaction I had.. I was in Jackson MS on the night of the 2016 election went to bed thinking no way Trump can win.. Woke up and he won.. So I was down at the buffet getting my made to order omelette and asked the gentlemen who was making my eggs what he thought.. He said "Son I have been cookin eggs here for 20 years and well come tomorrow and the next day I will still be cookin eggs" As in nothing is going to change in his world.

I fly home and get into Portland in the evening only to see all the portland weirdos and antifas and who knows what rioting breaking windows setting fires. It was the first time there were ever riots in PDX.. And of course we know what happened with G floyd they rioted for over 100 straight nights.. I just wonder if Hilary had won do you think the 27 conservatives that live in Portland would have rioted ???  those peaceful protesters are really something.