According to a recent report by Redfin, activity in the housing market is expected to remain in a lull as many potential homebuyers are waiting until after the upcoming presidential election to enter a bid.
Despite a recent drop in mortgage rates that has made monthly housing payments more affordable than a year ago, pending home sales have declined by 7.8% annually, the sharpest drop in nearly a year. That hesitation among buyers comes at a time when the median U.S. monthly housing payment has fallen to $2,558, down 1.3% from last year.
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David Palmer, a Redfin agent in Seattle, said he is "seeing people postponing until after the presidential election; buyers tend to be more careful about major financial decisions around a consequential election."
The caution is not unprecedented. A study issued in early 2023 by the Journal of Real Estate Research found that homeowners in counties where prices had climbed four years before an election were likelier to “vote-switch” to the incumbent party. The study’s findings suggest that residential real estate performance impacts national elections.
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Alan Tidwell, co-author of the study and associate professor of finance at the University of Alabama, told Newsweek, “Voters consider their financial circumstances when making decisions at the ballot box. Typically, economic prosperity benefits the incumbent, while economic downturns increase support for the opposition party.”
While mortgage rates have fallen to their lowest level in over a year, home prices remain stubbornly high. The median U.S. home sale price is $388,085, up 3.7% year over year and just shy of July’s all-time high. The price resilience is partly due to limited inventory, with the total number of homes for sale down nearly 30% from pre-pandemic levels.
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The upcoming election has sharpened housing policy. Vice President Kamala Harris has pledged to address the housing shortage by building 3 million new homes over four years and creating tax breaks for homebuilders targeting first-time buyers. Former President Donald Trump, while offering fewer specifics, has suggested that reducing illegal immigration would decrease housing demand and free up properties for Americans.
The policy proposals come at a time when housing affordability is a growing concern. A May analysis by Zillow found that rent prices had increased 1.5 times faster than wages in most major U.S. metropolitan areas over the previous four years.
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While some potential buyers are waiting for political clarity, others are hoping for further drops in mortgage rates. “One of my buyers is under contract on a home, but he’s trying to hold off on closing until the end of the month in hopes that rates will come down and he can get more bang for his buck,” Palmer said.
Despite the current hesitation, there are signs of underlying demand. Redfin’s Homebuyer Demand Index, which measures tours and other buying services, has been near its highest level since May, and mortgage-purchase applications have risen by 2% weekly.
As the election approaches, many potential homebuyers seem to be in a ‘wait and see' mode, potentially swayed by political winds.
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This article Potential Homebuyers Are 'Postponing Until After The Presidential Election,' Redfin Says: Here's Why originally appeared on Benzinga.com
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