You may be wondering how the upcoming election could affect the value of your home or the affordability of buying in Sarasota. The truth is the impact might not be as immediate or significant as you think.
As we enter the homestretch in what will most likely prove among the most unusual and contested presidential elections in our lifetime, I’m frequently asked which administration would be most favorable to the housing industry. Now I hope all voters are formulating preferences based on assessments across a wide spectrum of political philosophies, policy, and observations on individual character rather than a single topic, but back to real estate.
At present we are witnessing a slowing pace of sales activity across the country, growing inventories, high but declining interest rates, and enormous challenges with affordability for young people and moderate-income earners. At the same time, homeowners have recently enjoyed unprecedented growth in equity, which has sustained robust consumer spending, strengthened the overall economy and aided sizable employment and salary gains. More than likely your perspective in this arena will be shaped by which of these two sides of the coin best describes you.
Unquestionably, the economy and interest rates are profoundly influential on the demand for housing yet suggesting one party is preferable than the other based on record is perilous, arguably more a factor of your channel selection for news content than historical precedent. Economies are cyclical, and often the performance of housing during an administration is not simply a matter of current policy but actions taken during the prior administration. In addition, presidents are limited in terms of control when one considers the necessity of congressional approval for major fiscal policy shifts and the independent nature of the Federal Reserve. The latter is, in my opinion, a critical separation never to be compromised by a President despite its imperfect track record.
There are some eras during which the political policies of a President carried undisputed weight in the direction of housing. Whether the New Deal under Roosevelt that led to the FHA and FNMA, creating home loan platforms to greatly expand housing; the GI bill under Eisenhower assisting servicemen with down payments; deregulation under Reagan; or the Community Reinvestment Act under Clinton, all delivered on the promise of expanding home ownership. Yet keep in mind that not all policy was positive, as some of the housing renewal programs championed in the 1950s led to significant disruptions and relocations of the underprivileged and the unregulated lending environment triggered the Great Recession and foreclosure crisis in the 2000s, for which many years were required to fully recover.
Unsurprisingly, there is a consistent philosophical disparity between the parties related to how they view housing. One advocates for more direct government involvement to address housing affordability with tax credits for first-time homebuyers, subsidies for lower-income housing, and regulations around creating more supply. The other believes deregulation, creating a more favorable environment for investing, and tax cuts are the answers. In the end, both are right and wrong as each strategy has a history of producing winners and losers in the game.
Most housing policies are well intended with the admirable desire to help more people realize the American dream, yet ultimately serve to distort the market and favor some over others. History shows the undeniable importance of government involvement in housing and housing finance, which fostered the middle class and allowed so many to build generational wealth, but it’s the fine art of knowing just how far to go before putting down the pencil.
Each party has espoused certain platform goals, yet most will be impossible to enact with a divided Congress and lack of control at the municipal level, where key decisions are made on zoning and permitting. Neither has proposed any fundamental change to one of the most meaningful programs in the mortgage interest deduction.
The reality is that we need considerably more supply to catch up with demand to obtain lower prices, yet lower prices can negatively impact the value of existing homes and most communities are weary of the intensive zoning to help make it possible. Builders say they wish to build more and require less regulation and relaxed zoning to control costs, which is undoubtedly true, yet most will focus on building units at higher prices to maximize profit margins. It is what happens in a free market, and it is a continuing conundrum that is beyond even the immense power of the presidency.
In the end, who wins the presidential race appears to have less direct impact on the performance of housing than the uncertainty prevalent in advance of an election. Many people carry such firm beliefs in how the world will look if one party wins vs. another that they tend to delay major asset investment decisions until the outcome is clear. Their decisions are largely based on party preference and a general philosophy rather than a detailed understanding of housing economics and specific policy details. Once the dust has settled, most people simply go back to living and taking actions based on the fundamental drivers of real estate such as finding a partner, having kids, moving for work, retirement, and other motivations such as wanting the Florida lifestyle.
Clear distinctions exist between the current presidential candidates and their parties, yet my ultimate decision is not dependent on what either may or may not claim to do for housing, which may or may not happen. More than likely, yours will not either.
Budge Huskey is chief executive officer of Premier Sotheby’s International Realty.
This article originally appeared on Sarasota Herald-Tribune: How will upcoming presidential election affect real estate, mortgages?
