How will the outcome of this Presidential election affect housing? The research all points to positives. The Meyers Research group looked at the past 13 election cycles and found an approximate 15% drop in sales activity in the November of a federal election year. But their research notes that “the year after a presidential election is the best of the four-year cycle.” Furthermore, the report states, “This suggests that demand for new housing is not lost because of election uncertainty, rather it gets pushed out to the following year as long as the economy stays on track.”
One piece of the housing puzzle that has been incredibly consistent is interest rates. This week, Freddie Mac reported a twelfth historic low with the average on a 30-year fixed-rate mortgage hitting 2.78%. This time last year, rates averaged 3.69%. Freddie Mac’s Chief Economist, Sam Khater, attributes the low rates to continued economic and political ambiguity. However, Khater adds, “Despite the uncertainty that we’ve all experienced this year, the housing market, buoyed by low rates, continues to be a bright spot.” Keep in mind, interest rates vary based on factors like credit score, loan type and debt.
The drop in rates spurred a lot of refinancing, with the Mortgage Bankers Association Refinance Index showing an increase of 6% week-over-week. Refinance activity was 88% higher than this time a year ago. Purchases have slowed from their hot streak, however. The MBA’s Associate Vice President of Economic and Industry Forecasting, Joel Kan, said in his weekly release, “After a solid stretch of purchase applications growth, activity decreased for the fifth time in six weeks, but was still over 25% higher than a year ago, and has increased year-over-year for six straight months. 2020 continues to, overall, be a strong year for the housing market.”
Wall Street saw significant gains this week, putting the markets on pace for their best performances since April. Spurred by tech gains, the Nasdaq picked up nearly 9% leading into Friday morning trading. The Dow Jones and S&P 500 were both up 7% heading into Friday. FAANG stocks performed exceptionally well, with Facebook shares seeing a 12% gain this week with Amazon and Apple both gaining more than 9% each. Microsoft, meanwhile, jumped up by more than 10%.
Many of you might be curious about why the markets would perform so well despite no clear election victor during the week. Well, quite simply, investors typically like to have a divided government because that means the different branches are limited in power to change the current system. Less chance of a system change means less volatility. One investor told CNBC, “More than anything, the market is looking for a peaceful transition of power.” As of Friday morning, the markets had already priced in a Biden presidency with a Republican Senate. We are definitely divided based on the numbers in the election with a record turn out.
Overall inventory is down 25% in the Houston market and we are seeing an increase in average price, as well as multiple offers on properties. It is a great time to be a seller. Regardless of your feelings on the election, the market is HOT in our area and now is a good time to place your home on the market with one of our Connell Team Agents. We can walk you through the process and connect you with our mortgage provider who can help you on the purchase so we can time it all together.