As the uncertainty over who will be the next president of the United States drags on, it’s not just the country’s psyche that’s on edge. Not knowing whether President Donald Trump will be sworn in for a second term or Vice President Joe Biden will become the next commander in chief is hurting the housing market as well.
The market is on pause in many places as Americans wait to see who will ultimately prevail, real estate professionals say. Regardless of their political affiliation, sellers are holding off on listing their homes while buyers are delaying home closings, particularly in the cities. And that hesitation could be pushing mortgage interest rates down even further.
This situation could extend until a definitive victor is called in this fiercely divided election—and with the looming possibilities of recounts and lawsuits, that could mean days, weeks, or even months.
“A lot of people are just waiting to see how this plays out,” says Atlanta-area real estate broker Amy McCoy, of My Hometown Realty Group. She believes it’s affecting consumer confidence. “It has caused a little bit of a standstill, a little bit of nervousness.
“Everybody’s trying to figure out what’s happening with the economy,” she says. The only folks she’s seeing buying at the moment are those who have to relocate. “Because of the current environment, you are looking at two sides of a brick wall. You really don’t know which way it can go.”
Wealthier buyers want to know who’s going to be in charge so they can figure out the financial impact to their portfolio before signing on the dotted line. For example, a Biden win could change how much folks pay in taxes.
“In the higher income brackets, people are a lot more sensitive to changes in taxes and the investment market,” says realtor.com® Senior Economist George Ratiu. “The uncertainty is causing a likely delay in transactions.”
Fears of election-related rioting in the big cities also have led many buyers to delay closings in urban areas, says luxury real estate broker Dolly Lenz.
Sellers are also holding off on putting their properties up for sale until the specter of unrest has passed and they can score the best possible prices. Deals are likely to be moving ahead in the suburbs, which are perceived as safer.
“We are very, very much, at least in New York, on pause,” says Lenz, who is based in New York City, but does deals throughout the country. “People want to invest in certainty.”
It doesn’t matter which candidate ultimately becomes the next U.S. president. Her clients, the majority of whom are Democrats, want to make sure they’re not ultimately going to lose money on their purchases. And the year’s upheavals, from the coronavirus to the resulting recession to the social justice protests that erupted over the summer, have left many on edge.
“The election is adding fuel to the fire, resulting in paused closings,” says Lenz. “If this goes on for months, are we going to have a lot of unrest?”
The election is temporarily exacerbating the housing shortage
The reluctance of many sellers to list their homes until a presidential winner has been declared is making the already historic housing shortage worse.
The dearth of available properties has pushed up prices across the country amid the high demand for larger homes from folks cooped up in too-small abodes during the pandemic.
The number of homes for sale fell 38% in the week ending Oct. 24, according to the most recent realtor.com data. Meanwhile, the median home list price was $350,000 nationally in September, according to realtor.com.
The election has led to one bright spot in the housing market
On the positive side for buyers, mortgage interest rates may continue to slide until Trump or Biden is declared the definitive winner. Like others, investors don’t like it when things are up in the air, so in troubled times they typically move money out of the stock market and into safer bonds and mortgage-backed securities. When that happens, mortgage rates usually fall.
Rates fell to a new all-time low, to an average of just 2.78% for 30-year fixed-rate mortgages in the week ending Nov. 5, according to Freddie Mac. Those lower rates are likely to help buyers contend with fast-rising home prices by keeping their monthly housing payments manageable.
“We saw investors react to this uncertainty by really piling into bonds and mortgage-backed securities,” says Ratiu. “That’s what’s driving the rates low.”