Elections Impact Home Prices

Home prices in Diamond Bar, in California, and in the United States in general, have risen substantially over the last 7 years.  As reported previously in this column, the Median Sales Price of a Single Family Residential detached home (SFR) had reached a post Great-Recession high of $735,000.00. This being an election year in California, the question arose “How do elections affect home prices?”

In researching this question, I found that there are varied opinions as to the effect of elections on home prices.  Some research supported the belief that elections tend to create uncertainty in the market, and therefore either slow the market down, or at minimum dampen the increase in sales prices.  Homes.com, a real estate data aggregator, published a report that claimed that in election years, the prices of homes are impacted to the negative by 1/4 to 1/2 of one percent, causing prices to rise more slowly in an election year than in a non-election year.

This afternoon I attended the Quarterly Luncheon meeting of the Real Estate Research Council of Southern California (RERCSC) at Cal Poly Pomona.  The information presented by RERCSC Executive Director Dr. Gerd Welke on the California Housing market and real estate trends seemed to show a fairly steady “real price” value of housing until the last few decades. The “real price” value of housing saw a dramatic increase since the 1990’s. The California legislative policies of the last few decades have resulted with over regulation, causing a decrease in number of units being built annually across the state. While the population of California grew 29 million from 1990 to the now current 39 million residents, the addition of new housing units did not keep up with the growth in demand.

Basic economic theory provides that a growing demand for a product, without the corresponding increase in supply, will cause prices to increase.  We have definitely seen that in the last 30 years, and will continue to see housing price increases without easing up, until the legislature makes it easier and less regulatorily constrained to build new housing. Policies implemented statewide by the legislature are a direct result of who gets elected.  In summary, “Who” gets elected will impact what legislation gets passed, and whether or not it is conducive to new construction or not.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca DRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.