We are in the midst of what will certainly be remembered as a crazy election cycle, characterized by unexpected candidates and their antics. And although there is less than a week before the outcome for the next President is decided, there is still great uncertainty as to who that will be and what implications that decision will have on our economy as a whole and the real estate market in particular.
The economic and employment policies of the incoming President will have lasting, although not immediate, effects in the U.S. and abroad. A survey by national real estate entity, Redfin, showed that 27% of buyers thought the election would have a negative impact on real estate, up from just 15% only 3 months earlier. Although this sentiment was not shared by the majority, it does show an upward trend of anxiety among buyers about the future stability of the real estate market.
So, lets look at how the election and its candidates may affect the real estate market in the short and long term. Aside from buyer hesitation due to uncertainty before a candidate is announced, there are not many short term implications. One area of the market, the office sector, may experience tenants delaying resigning their leases until after the election is decided. However, the main concerns are more long term impacts such tax implications, which wouldn’t really take effect until 2018. Proposed changes in the tax code, would likely hurt small businesses most, as many lack the financial resources to hire a tax specialist in order to navigate the new regulations. Additionally, interest rates, access to capital and financing, and employment and job growth, will all factor into the long term health of the economy and the housing market.
There is generally more turmoil or losses in the markets, when the current President is not seeking reelection, as is the case this term. But the uncertainty of a new President and a new party coupled, has shown in the past to incur more of a down market than when an incumbent party takes office. Furthermore, markets also respond well to proposals to reduce corporate tax rates, which are currently 39% and the highest in the developed world.