How Does the Election Affect Real Estate?

With another presidential election on the horizon, housing has emerged as a central issue, driven by rising mortgage rates, high prices, low supply, expensive construction, and growing homelessness. Vice President Kamala Harris recently proposed measures like a $25,000 downpayment assistance program, while former President Trump criticized the Federal Reserve, with some of his allies even suggesting abolishing it altogether. Despite both candidates emphasizing housing, their plans still lack detail, raising questions about the actual influence a president can have on the housing market. Matt Myre at BiggerPockets reviewed 30 years of data, starting with President Bill Clinton, and argues the housing market is primarily driven by supply and demand, not presidential policies. Housing prices have generally increased over time, with the only major disruptions being the 2008 financial crisis and a stable period under Trump. This trend indicates that no single president has significantly influenced housing prices. Homeownership rates have also remained stable since 1993, challenging the idea that corporate landlords are taking over the market. Rental vacancy rates have fluctuated, but these changes are more closely tied to housing supply than to presidential actions. Overall, the data shows that the housing market's fundamentals are shaped by supply and demand rather than by who is in office. The Federal Reserve, which controls interest rates, plays a more significant role in short-term housing trends. While the president can nominate the Fed Chair, the institution operates independently, limiting the president's direct influence. However, through the "bully pulpit," the president can shape public discourse and influence policy indirectly. Historically, presidents have impacted housing policy, such as Franklin D. Roosevelt's creation of the Federal Housing Administration (FHA) during the Great Depression, which had lasting effects on the housing market. Subsequent administrations have continued to build on this foundation, establishing agencies like Fannie Mae, Freddie Mac, and the Department of Housing and Urban Development (HUD), which play key roles in housing finance. However, the effectiveness of presidential housing policies is often mixed. For instance, President Clinton's efforts to increase homeownership contributed to the subprime mortgage crisis. In recent years, presidents have been more cautious, with Trump’s tax cuts and Biden’s Housing Supply Action Plan showing limited results. All this to say, while the president can influence housing through policy and appointments, the market's trajectory remains largely dependent on supply and demand. As the nation faces ongoing challenges in housing, the focus should be on creating conditions where supply meets demand, rather than relying on political promises.   - JL

View more

Vacant and Work-Needed Homes Increasing

As of April 2024, the U.S. Census Bureau estimates there are about 15.1 million vacant homes in the United States. Additionally, 25 million homes built before the Great Recession are now between 20 and 40 years old and will soon need significant repairs. These issues include roofing problems, lead and mold concerns, and below-the-slab PVC plumbing that requires extensive work to fix. This new market segment will soon make up about 20 percent of listings. Real Estate Agents may need to adjust to this climbing trend, affecting 1 out of 5 homes, Inman reports. There is one group that is stepping up to the challenge: investors. Investor purchases now make up 29 percent (and increasing) of all single-family residential sales.   - JL

View more

Zestimates + Instant Valuations: How reliable are they?

In the age of digital convenience, it's tempting to use online tools to simplify complex tasks. One such tool in the real estate world is Zillow's "Zestimates," which provides an estimated market value for homes across the country. While these estimates can offer a rough idea of a property's worth, they should not be relied upon as definitive pricing targets. Here's why: 1. Public Data Used to Generate Values Is Often Incorrect Zillow's Zestimates are based on publicly available data such as property tax assessments, recent sales, and user-submitted information. However, public records are not always accurate or up to date. Misreported square footage, outdated renovation records, or even incorrect property classifications can significantly skew the estimated value. For example, a home's assessed value might not reflect a recent kitchen remodel or the addition of a swimming pool. Inaccurate data leads to inaccurate valuations, which can mislead both buyers and sellers. 2. Off-Market Deals and Non-Arms Length Transactions Aren't Factored Another limitation of Zestimates is their inability to consider off-market deals or non-arms length transactions. Off-market deals, which occur without being publicly listed, often do not reflect true market conditions. Similarly, non-arms length transactions—sales between family members or friends—may not represent market value as they can be influenced by personal relationships and are often conducted at below-market prices. These types of sales can distort the data Zillow uses, leading to valuations that do not accurately reflect the current market conditions for similar properties. 3. Seller Concessions Such as Seller-Paid Closing Costs Aren't Factored Zestimates also overlook seller concessions, which are a common aspect of real estate transactions. Seller-paid closing costs, for instance, can significantly impact the net sale price of a home. If a seller agrees to cover closing costs or offer other concessions to facilitate a sale, the gross sale price recorded in public records will not reflect these adjustments. Therefore, a Zestimate based solely on the gross sale price will be inflated compared to the true market value, which accounts for such concessions. The Bottom Line While tools like Zillow's Zestimates can provide a starting point for understanding property values, they are far from infallible. Relying solely on these estimates can lead to misguided pricing strategies, whether you're buying or selling a home. For a more accurate valuation, it's essential to consult with a local real estate professional who can provide a comprehensive market analysis, taking into account the nuances that automated models simply cannot. As a real estate expert, I can offer personalized insights and a more precise evaluation of your property's value. Contact me today for a thorough market analysis and the guidance you need to navigate your real estate journey successfully.   - JL

View more