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7 Nov 2012
Today I want to look at what Obama’s re-election means for real estate? Now that President Obama has won his re-election bid for the presidency, what does this mean for you as a buyer or seller? I had a gentleman recently express an interest in a home, but he said he wanted to wait until after the election before deciding to draft an offer. I do not know what he was thinking. But now that we know who will be in the White House for the next four years, how will that effect real estate values, the mortgage market, and interest rates?
Efforts thus far to help people in foreclosure have not seen measurable results, and The Home Affordable Refinance Program “fell vastly short of its goals” according to the New York Times. [See Obama Housing Plan News] I don’t know anyone who has expectations that the real estate market is on the verge of a strong recovery. But if you are planning to buy a home, or if you are planning to sell a home, what should you expect in the months ahead?
I’ve been saying for sometime that we can expect interest rates to begin a slow process of climbing upward from this historical low (3.5% fixed for a 30 year loan). Under Romney I believe interest rates under less government control would have meant interest rates would go up sooner rather than later. Under Obama I believe interest rates will still go up, but perhaps not as quickly. If you plan to buy a home, I would suggest that you might be motivated to buy now rather than later, because it is inevitable that interest rates will go up. How soon? Increasing Federal debt, the Federal Reserve’s efforts to keep interest rates low with the use of various monetary policy tools, European economic woes, the continuing economic stress of this recession on unemployment, all point to a slow recovery, but certainly to the eventual increase in artificially low interest rates.
Likewise if you are hoping to sell your home, or if you have it currently listed for sale, you are undoubtedly contemplating what Obama’s re-election means for real estate. When interest rates increase, buyers’ ability to buy homes will be hindered. First, many buyers may not qualify for a loan at a higher interest rate. Second, many retirees simply don’t want a huge monthly mortgage payment, so they may put off buying altogether. My recommendation to sellers is that you put together a hard core strategy to get your home sold within the next few months, but certainly within the next six months. After that, you may be stuck with it for a long time. In my opinion, this has less to do with who is elected president than it does market forces and monetary policy.
What does Obama’s re-election mean for real estate with respect to other concerns, like the foreclosure market, short sales, the health of the mortgage market, the strength of Fannie Mae and Freddie Mac, and the secondary mortgage market? It remains to be seen, but Obama’s approach will be more government involvement than Romney’s approach would have been, that much is clear. Whether the President can have an impact, positive or negative, on these broader issues is probably a subject with a thousand labyrinthian trails. Connecting the dots between a president and the health of the mortgage market is very hard to do. There are broad economic forces at work that have few direct connections to a president’s policies.
The re-election of Obama does not settle all the questions about what national economic policies will be implemented, or how they will reverberate throughout our complex economic system. While his re-election settles one big political question, it still leaves retirees with a feeling of uncertainty on many fronts. The DOW’s 300 point drop the day after the election was an indicator of the uncertainty. Many tax increases are set to automatically kick in, health care is a confusing issue for most, and political gridlock has become the rule, rather than the exception. Perhaps one could say that Obama’s re-election raises more questions than it answers.
We simply do not have sufficient data to be able to say the real estate market is in recovery, or that the economy will begin to recover now. We also do not know if we will avoid a further decline in what could be a slower economy in the months ahead. There are International and national variables that could surprise us. With respect to buying and selling real estate, I suggest focusing right now on buying a specific home or selling a specific home, and let the rest of the world take care of itself.
Suffice it to say here, if you are a buyer, you ought to be motivated to buy sooner rather than later, or not at all. If you are a seller, you ought to be motivated to quickly develop an effective strategy to sell sooner rather than later, or not at all. I hope this helps answer the question, “What does Oabama’s re-election mean for real estate?”
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