By far, the most common question that I received in the last month has been how will the presidential election affect our real estate market? Will new economic policies help or hurt real estate activity? According to the California Association of Realtors® (C.A.R.), “Presidential elections have historically had little or no negative impact on the California housing market.” While sales data dating back to 1990 confirm this conclusion, I can’t help thinking that this year might be different.
One of the items on the new administration’s agenda is job and wage growth. The aim is to not only put more people to work, but to put more money in their pockets. If successful, more people will have more money to make larger purchase decisions.
A reduction in the corporate tax rate is another item on the agenda that might help real estate activity. A lower rate is supposed to help companies grow and expand. That not only helps with the job and wage issue, but it also improves the stock of the companies. A lot of people are tied into the stock market via stocks, 401k programs, and mutual fund investments. As personal portfolios grow, more people might move their money into real estate either by improving their living situation or purchasing investment properties.
While the new agenda may give reasons to believe there will be more
real estate activity, there are opposing forces that cannot be ignored. The biggest factor is interest rates. As the current economy is already on course for future interest rate hikes (as signaled by Fed Chairperson Yellen), the new agenda may accelerate the pace of those rate hikes. Just as low rates have fueled the housing market’s recovery over the last 5 years, higher rates can really slow things down.
Like most things in the world of prognostication, compelling arguments can be made for a thriving real estate market or a slower one. Regardless of what unfolds, I know this: It will be interesting to watch and I will work diligently to help guide you in making the best real estate decisions that suit your agenda.