A large part of 2020 has been defined by politics for Americans: preparing for the presidential election, having the election, and dealing with the aftermath of the election. In addition to its many other impacts, the election will affect real estate and construction. While housing may not have been a major issue in this election cycle, there are some key policy changes to watch regarding the housing market in 2021. The simple fact that this was an election year and the next year begins a new administration impacts real estate. Here’s what you should know if you’re in the industry.
History of How the Election Impacts Housing
Presidents play a key role in setting the tone for the economy, which has an impact on mortgage rates. Because of that, if you look at virtually any election year, you will see a lot of fluctuation in mortgages, which of course impact the real estate industry as a whole.
Typically, the year after an election comes with a significant drop in home sales followed by a rebound by the end of the following year. If this trend holds true for this election, we might see fewer home sales for about a year, but recover by the end of 2021 unless big policy changes make the market bounce back sooner.
What’s Happening in the Market Right Now?
To understand the potential of the housing market in 2021, you have to understand how 2020 has defied all odds. Usually, home sales are down leading up to a presidential election because people don’t like to make large purchases at a time of uncertainty. But this year, even in a pandemic, home sales have been booming since the summer!
Typically, sales pick up strong in December to offset the lack of transactions leading up to the election. This may be another area where 2020 proves to be different. Even with the Biden-Harris transition team preparing for a January inauguration, Trump is still attempting to contest the election results. This could lead to more people feeling anxious about how the tumultuous political times may affect their ability to purchase a home. And this could lead to fewer transactions in December than normal.
It’s important to note that most of the home sales in 2020 have been high-income housing. Looking ahead to 2021, some of Joe Biden’s policies include helping first-time buyers with down payments and expanding affordable housing options. If these changes can be made, low-income and middle-class families may have an easier time purchasing housing. However, a major factor is how realistic Biden’s proposals actually are and whether or not Congress will actually fund these policies.
How Construction Costs Might Change
2020 has come with skyrocketing materials prices for construction projects. This is largely because of the tariffs that the Trump administration has imposed. If the Biden administration does away with the tariffs, that could mean the cost of materials goes down again. Even if Biden does not actually remove these tariffs, Biden has pledged to improve relationships with foreign entities, which could still decrease materials prices.
However, the cost of materials isn’t the only thing that affects the cost of construction. Regulation contributes to the price of a home. Under the Trump administration, there’s been heavy deregulation, and, with that, comes a decrease in home prices. The Biden administration is likely to impose more regulations, which could contribute to increased construction costs.
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