The 2020 Election and Home Ownership
For myself- and most of the people reading this article that are my age- elections before 2016 didn’t really matter. Yea, I voted in 2012, but who won wasn’t of much consequence to me because I was still in college, without a “real” job, and my tax accounting final was a lot more important to me than a federal budget shortage or a healthcare crisis. Before we get in to all of this, we’re gonna do a symbolic juice cleanse of our political biases. Left or right, democrat or republican, this is not about that. Yes, I’ll probably touch on the topic and my opinions are going to lean conservative because that’s how my overall ideology lies; especially fiscally. But the point comes down to this- we’re ten months away from an election, and historically, a year of a much more volatile housing and mortgage market. I’m going to talk about why that happens, and how best to handle and prepare for what’s to come over the next couple of years. If you’re a homeowner, a renter, or someone who’s thinking about becoming a homeowner, this will probably be of some interest to you, and hopefully it’s helpful information.
Yes, I know this is Larry David. But he does a better Bernie impression than Bernie himself.
As I’ve probably said a couple of times throughout writing in the last year, I was working for a mortgage company in 2016 and the first half of 2017. The election was a really interesting time for the business as a whole. Leading up to the election, the incumbent party is obviously doing everything in their power to maintain positive news. That obviously includes a strong housing market, stock market, jobs, new healthcare ideas and initiatives; anything that could possibly pull a vote from one side of the aisle (or the middle) to another. In 2016, the stock market didn’t do the Democrats and Hillary Clinton any favors. One of the main reasons behind that is because companies- and other countries economies that have obvious interests in our own stock market that drives global business- do not like uncertainty, which is exactly what a general election provides. When there is stagnant growth, the incumbent party is going to see the majority of the blame. History shows us that conservatives run on a capitalism platform, with free markets and less governmental restriction on competition. Being that the stock market is made up of publicly traded companies trying to make as much money as possible, big business is generally going to trend toward the right, despite how their billionaire owners might vote or speak out in the media about federal, or even state, policy. Fast forward to 2020, and Donald Trump is tweeting at least one thing a day about the economy buzzing, the job market trending upwards, or how his tariff policies are helping farmers and manufacturers; it’s the name of the game and everyone plays it.
Let’s look at the whole of 2016 on the DOW stock exchange leading up to the general election and the couple months beyond. To start the year, the DOW was at around 17,000. Mid-January, it nose-dived and produced the worst start to the year ever recorded on the exchange. Production had greatly slowed in China and they were having their own money problems; oil prices crashed through the floor. These were all things that were completely out of the control of Obama or our government, but those numbers matter to voters. It took a full two months for the market to recover and break even. In June, Brexit happened and caused a 611 point drop in the snap of a finger. At that point, we were at the height of our own election season, producing constant uncertainty and conservative fiscal practice by investors, holding the market relatively steady without much growth. When Trump won the election, the DOW jumped 257 points. It continued for the next two months to rise basically every week to finish off the year. While Trump takes full credit for the stock market surge post-Super Tuesday, there is honestly no way to know if the market would have gone either way with a Hillary win. Beside the point. Whether you love Trump, hate him, or are indifferent, there is no denying the positive fiscal growth that has organically (or with government help) blossomed over the last few years. Mortgage rates took a large jump in the first six months post-election (because the stock market was gangbusters and investors had no reason to put money into bonds), but have slowly and steadily driven themselves down to all-time lows. Housing prices have increased across the country, and suburbs are benefiting from growing industry in industrial centers.
All those words, now what do they mean for home ownership four years later, with all of the turmoil the world has seen, the thousands of Trump tweets, the current issues with Iran and the Middle East? I think history in general is on the side of “one in the hand is better than two in the bush”. Meaning- currently, the housing market- especially in Middle Tennessee- is as robust as it’s ever been. If you’re currently a homeowner that is considering a move, do it before we get to peak election time. As we get closer to November, and polls get tighter, and who’s to say that it looks like Trump will be unseated, markets could potentially shift. Say interest rates slowly glide up half a point; that makes it harder for people to qualify that could potentially buy your home. I spoke with a friend last week that’s considering moving and downsizing and taking advantage of the equity they have built over the course of the last few years. She’s going to have a lower mortgage payment due to lower interest rates than mid-2017, a potentially larger down payment to put down on their next house, and will still get top dollar on the sale of their current home. If you’re on the buying side of the market, say you wait until next year for a reason other than necessity of doing so. Trump wins again, the market continues to go the way it’s going (as I’ve said before, I don’t see any possible way that rates can get any lower, but industry experts have been proven wrong there for the last six months) and home prices continue to escalate. That $250,000 home that you could buy in February of this year could be $275,000 next year; money that could be in your pocket as equity if you didn’t wait.
There are articles out there that downplay the importance of elections on the housing market. As someone that was on the mortgage side of things in 2016 and the months after, I disagree to a pretty large extent. If the status quo of the last three years is kept, there probably will be a negligible change in the markets, housing and stock market. If there is a change in power, especially if Bernie ends up being the nominee, promising great change to our market and financial structure overall, the market could go either way. Housing market could strengthen as investors run away from the inevitable stock market dip that would ensue. Or it could take a decent dip downward along side the stock market. These are obviously all very unknown variables, and that’s why it’s also so important if you’re in the market for a real estate transaction in the coming months. We’re ten months away from the general election. If you’re planning on some type of move in the next 18 months, why leave your financial situation in the hands of something that you have no control over? I think it makes good fiscal sense to do something now before external factors that you’re not able to dictate affect your bottom line, whether you’re buying or selling. If you’re not at that point but know that it will be a consideration over the next couple of years, this doesn’t mean that you have no chance of buying a home or that if you sell you’re going to have to sell for 70% of the value. There are tons of unknowns, but in my opinion, the one that we have in the hand right now that says “the market is basically perfect right now” is a lot better than the two in the bush that doesn’t know how the election goes later this year.