10 months ago
How the 2024 Presidential Election Could Impact Real Estate and Farmland Markets
With the 2024 presidential election fast approaching, many buyers and sellers are feeling a sense of uncertainty. This is not uncommon, as election years historically bring a degree of hesitation in the real estate market. However, understanding how elections have affected real estate values in the past can offer insights into what we might expect this time around. Here we’ll take a look at the potential impact of the election on both residential real estate and farmland investments, drawing from historical data, expert analysis, and current trends.
1. Residential Real Estate: A Temporary Slowdown, But No Major Disruption
Historically, residential real estate experiences only minor and temporary shifts during election years. As buyers and sellers hold off on major decisions in the weeks surrounding an election, home sales may see a slight dip, particularly in November. According to research from the Department of Housing and Urban Development (HUD) and the National Association of Realtors (NAR), this slowdown tends to be brief, with home sales typically rebounding in December and continuing to rise into the following year. Data shows that after nine of the last eleven presidential elections, home sales increased in the year that followed.
-Home Prices Remain Stable or Rise
Home prices trend towards resilient during election year. NAR data shows that home prices rose in seven of the last eight presidential election years, with the only exception being during the 2008 financial crisis. The combination of strong market fundamentals and buyer demand often helps sustain home prices, even in periods of political uncertainty.
-Mortgage Rates May Ease
One of the key factors influencing real estate in an election year is the trend in mortgage rates. Historically, mortgage rates have declined in the months leading up to an election. Freddie Mac data shows that in eight of the last eleven presidential election years, mortgage rates decreased between July and November. This election year has followed a similar pattern with mortgage rates decreasing from 7.09% on July 3rd to 6.82% as of October 28th.
2. Farmland: Resilient but Regionally Dependent
Farmland, a different beast from residential real estate, shows resilience in election years but with more variability depending on regional and political factors. As agricultural economist David Widmar notes, farmland’s appeal comes from its dual benefits: annual income (e.g., cash rents) and long-term value appreciation. While election years introduce uncertainty around policies like agricultural subsidies and tax laws, the farmland market has historically demonstrated stability and strong returns over the long term.
-Policy Expectations and Market Uncertainty
Election cycles can bring uncertainty as candidates propose different policies that may affect farmland, such as changes to subsidies, tax laws, or environmental regulations. However, long-term farmland investors tend to focus on the broader picture. Widmar highlights a key political issue this year: major tax legislation, including inheritance tax exemptions, is set to expire in 2025. Depending on the outcome of the election, these policies could have significant implications for farmland owners and investors.
-Interest Rates and Borrowing Costs
Much like residential real estate, farmland values are influenced by interest rates. Lower rates make borrowing for land purchases more affordable, supporting higher land values. The Federal Reserve’s decisions in the months leading up to the election typically have more of an impact on the cost of financing land than the election results themselves.
-Regional Differences
The impact of an election on farmland values can vary widely by location. Regions heavily dependent on agriculture may see different trends compared to areas where other industries dominate. For example, trade policies or rural development programs proposed by candidates may boost sentiment in some agricultural areas while causing uncertainty in others.
3. Historical Trends and Market Sentiment
Looking at historical trends, farmland has performed well during previous election cycles, with land values often increasing due to positive market sentiment. According to data from the National Council of Real Estate Investment Fiduciaries (NCREIF) and AcreTrader, farmland investments have shown resilience and strong returns, even in periods of political uncertainty. Investors with long-term horizons, particularly those focused on generational wealth, often find that the farmland market weathers political shifts well.
4. Conclusion: A Focus on Long-Term Stability
While the 2024 election may bring temporary shifts in both residential real estate and farmland markets, history suggests that these changes will be short-lived. For homebuyers and sellers, the key takeaway is that home prices are unlikely to drop significantly, and any slowdown in sales will likely be brief. For farmland owners and investors, keeping an eye on policy changes, particularly around tax laws and subsidies, will be crucial, but the long-term outlook remains strong.
As always, staying informed and consulting with real estate and farmland advisors can help buyers, sellers, and investors navigate the uncertainty of an election year with confidence.
