With the recent 2024 presidential election, there’s one big question on the minds of homebuyers and sellers alike: Will the outcome change the direction of the real estate market? Many in the market are in “wait-and-see” mode, uncertain about the future while navigating higher interest rates and economic shifts. In this post, we’ll explore the factors to watch post-election and how they could impact home prices, inventory, and affordability.
1. Potential Policy Changes: Will They Support Buyers or Sellers?
Every administration brings new housing policies, which often shape the trajectory of the market. Over the years, different administrations have introduced various tax credits and incentives. For instance, during the 2008-2010 period, first-time homebuyer credits helped some buyers manage closing costs. This time around, if new policies offer tax incentives, subsidies, or even adjustments to mortgage interest deductions, these could provide some relief for buyers.
Another significant factor is housing supply. With a persistent shortage, any policies aimed at boosting construction or incentivizing home development could help stabilize or even reduce prices in certain areas. But lower prices don’t automatically translate to improved affordability—especially if mortgage rates remain high.
2. Interest Rates and Affordability: The Double-Edged Sword
Interest rates have a tremendous impact on affordability, and many potential buyers are sitting tight as they watch rates climb. Even though the Federal Reserve recently lowered its rate, mortgage rates have continued to rise. For the market to pick up momentum, mortgage rates would likely need to come down closer to 5%, making homeownership more feasible.
With higher rates, some current homeowners find themselves locked in. If your mortgage rate is below 5%, it may not make sense to sell and take on a much higher monthly payment. This “rate lock” effect is keeping homes off the market and contributing to the inventory shortage.
3. Consumer Confidence: Will the Election Impact Sentiment?
Election results can also influence consumer confidence. If there’s an uptick in economic stability and a sense of optimism, buyers may feel more confident about making a move. Conversely, if uncertainty lingers, we may see a continued slowdown. For many first-time buyers, confidence is key. They’re often motivated when they feel prices will hold steady or rise. Right now, however, many are choosing to hold off until there’s more clarity.
4. Market Data and Cooling Trends
Market trends in many metros show a cooling effect. Properties are staying on the market longer, with some averaging 50-90 days, and pending prices per square foot have been decreasing in many areas. This signals a shift to a more balanced market—or even a slight downturn in hot markets.
5. Regulation and Deregulation: Finding a Balance
While free-market advocates often oppose heavy regulation, deregulation has its risks, too. Lessons from the 2007 market crash show that extreme deregulation can lead to problems, as seen when banks lent freely with minimal qualifications. The real estate market needs balance: enough oversight to prevent reckless lending while encouraging supply growth to meet demand.
Some believe that incentivizing new home builds and limiting excessive corporate purchasing could be one solution. In recent years, large institutional investors have aggressively acquired properties, competing with traditional buyers. In fact, it’s estimated that around 10-20% of offers on homes have come from institutional buyers. These companies often offer large down payments or even full cash, making it hard for first-time buyers to compete. If institutional buying is curbed, this could help level the playing field for regular homebuyers.
6. Foreign Investment and Housing Affordability
The influence of foreign investors is another hot topic, as foreign buyers sometimes acquire properties that might otherwise be accessible to local buyers. Some countries heavily regulate foreign investment to control home prices, such as Canada, where local residents in cities like Vancouver find it increasingly difficult to buy property. While heavy regulation isn’t ideal, a measured approach could help ensure that domestic buyers have fair access to housing.
7. Rental Market Trends and Purchase Prices
Lastly, keep an eye on the rental market. If rental prices decline, that often signals lower demand, which can put downward pressure on home prices. Higher vacancies or a reduced need for rentals can sometimes translate to better opportunities for homebuyers if sellers adjust their prices accordingly.
Final Thoughts: Key Takeaways
While we can’t predict the exact outcome of the election or the market response, several indicators will be worth watching. Policy changes, interest rates, and investor behavior will all play a part in shaping the real estate landscape in 2024 and beyond. As we navigate these changes, staying informed is key to making the best real estate decisions.
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Disclaimer: The content in any of Shawn Yu (Shawn Realty) Youtube videos or this website shall not be construed as tax, legal, insurance, construction, engineering, health & safety, electrical, financial advice, or other & may be outdated or inaccurate. Shawn Yu/Shawn Realty is a licensed principal real estate broker/brokerage doing business in Oregon. To contact Shawn Realty for selling, buying investing in Oregon, please email shawn@shawn-realty.com or call 503-515-4499.
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