Primary season is well underway in the United States and around this time of year many investors begin to wonder just what sort of an effect all of the campaigning and brouhaha will have on the property market there. 2016 is no different, although there are one or two factors that leave any hard and fast predictions difficult to put forward.
Firstly, there’s the fact that the candidate who’ll win the Republican nomination is still anyone’s guess. Many voters are sitting on the fence with this one, and the choice that they ultimately make will no doubt have an influence on the way the markets react.
Another key consideration is the way in which the senate control falls once the dust of electioneering has settled. While the House of Representatives looks likely to remain in Republican hands, the race for the Senate majority is a much more open one, largely due to the sheer number of seats that the Republicans have to defend.
Will any of this really make any difference?
Despite the fervent belief of many people – both media correspondents and the average Joe on the street are guilty of this – the result of presidential elections actually makes very little difference to how markets behave over the long term. Party affiliation is rarely demonstrative of a sizeable swing either way, as the history books prove. Whether we find that the good people of the United States have opted for a Democrat or Republican will ultimately have little bearing on the markets – the key mover is something else. It’s the economy.
While you can argue that the result of the race will have a bearing on the economy, purely judging things as red or blue is misguided. Both parties have had good and bad times whilst being the overseers of the biggest economy in the world, so to say that one group will definitely cause markets to move in a particular direction is foolhardy. However, the economy can affect how a nation votes, so maybe the question should be How Will the Markets Affect the Presidential Election?
What the economy means for the real estate market
In a bullish economy, voters are naturally more confident and homeowners and investors act in exactly the same fashion. This boldness engenders a belief in all markets and pushes consumer spending skywards, bolstering the real estate market as buyers rush to invest in the American Dream.
On the other hand, an uninspired and feeble economy will usually run concurrently with low employment figures, slow wage growth and poor consumer confidence. All of which mean that house prices are only going to head one way.
While presidential years can prove to be divisive for families, friends, co-workers and neighbours, the long-term effect from the race to become the ‘Leader of the Free World’ will likely be minimal on the real estate market. People are generally more cautious in election years so sales could slow a little, but over the course of time this will balance out.
What will have an effect is the way in which the new President handles the economy, and for the answer to that question we can only wait and see.