Yesterday, Wall Street got hammered with the Dow Jones tumbling 372 points, the biggest percentage loss since September of last year.
The global sell-off was blamed on uncertainty around the Trump presidency, impairing the prospects of tax cuts, infrastructure spending and banking reforms.
Chatter about impeachment hearings could compound the uncertainty.
How about real estate? Are there any lessons from history?
During the President Nixon impeachment trial in the early 1970s, the housing market was already limping along as a national recession took hold and the economy was beset by hyperinflation. Politics could not be blamed for an ensuing and bitter economic period.
During the President Clinton impeachment trials of the late 1990s, the economy was booming as the tech surge accelerated full force and unemployment hovered low. Clinton’s shenanigans didn’t seem to rattle Wall Street or the housing market.
Epic disasters like 9/11 have also had minimal influence on housing demand. Even in New York City, the housing market picked up quickly and remained strong until the national recession several years later.
“In the weeks that followed 9/11, the housing market was a virtual ghost town with little contract activity,” wrote New York real estate guru Jonathan Miller in an analysis for the Wall Street Journal. But, “when the Federal Reserve pushed rates to the floor shortly after the attack and mortgage rates fell sharply, consumers responded. We observed a surge in demand about five weeks after the attacks — the market restarted at the entry-level priced apartment segment.”
Atlantic Shores real estate agent Tony Vitale said events like the current turmoil are a short-term phenomenon: “Anytime Americans feel stress, the
first thing they do is cocoon until they feel it’s safe to come out.
“It happened during Nixon, Carter and the Iran hostage situation, Clinton impeachment and 9/11. Today the stock market signaled that they are in fear and that will reverberate until peace is restored.”
Windermere Chief Economist Matthew Gardner says that housing will be isolated from yesterday’s events, at least for now. “Financial markets hate one thing more than anything else, and that is uncertainty,” Gardner told Inman. “Yesterday’s sell-off was a clear response to the appointment of a special counsel and markets were clearly on edge.
“As far as housing goes, the downside will likely be muted, at least for the time being. Yesterday’s news headlines cast further doubt on the new administration’s ability to rapidly enact the legislation that prompted investors to make big bets on higher stocks and interest rates.
“Unsurprisingly, investors pushed stocks and interest rates lower following the news. This triggered mortgage rates to drop significantly, as part of the broad-based sell-off in equities. At least for the time being, I do not see any long-term housing related issues following the political turmoil that currently embroils Washington.”
Ralph McLaughlin, chief economist at Trulia, points to more potent forces at work that stand to keep the housing market operating in its current state, defined by high prices and buyer demand that may continue to intensify.
“If uncertainty in the White House is hurting the housing market, we’ve yet to see signs of it,” McLaughlin said. In fact, we’ve
seen just the opposite.
“Since the election and the uncertainty that it brought, growth in house prices has continued on an upward trajectory. Our belief is that any uncertainty brought about by the White House pales in comparison to the massive demographic and economic forces that are waiting to be unleashed by the largest cohort of potential homebuyers in the U.S. — millennials.”
Michigan Realtor Cindy Knight is optimistic. “People get married, have families, become empty nesters, move away and die,” she said. “People move real estate, not politics.”
In the business for 30 years, she has “seen small glitches but even during the crash (2008-2009) people still bought and sold.”
However, during that period, home prices collapsed and sales skidded to a halt in many markets, as people lost their jobs, their homes and their livelihood.
Miller summarized: “Unlike the 9/11 timeline, the Manhattan housing market took nearly two years to reach levels seen in September 2008. Unlike the months following 9/11, residential mortgage credit remained unusually tight. Hard to rally the consumer when the Fed continued to keep rates too low for banks to be incentivized to lend.”
Global real estate speaker and Canadian citizen Valerie Garcia is less sanguine about current events.
“The entire world sees the effects of political uncertainty, and it’s going to become a reality for Americans soon too — it is going to keep having an impact on the stock market, and it’s going to have an impact on major decisions like moving, changing jobs and relocating.”
She points to statistics from the U.S. Census Bureau’s Geographical Mobility Survey showing that one in 10 household moves in the U.S. are due to job changes.
If political uncertainty has an effect on a person’s decision to change jobs and move, that will have an effect on how many homes are bought and sold.
Benchmark Realty CEO Phillip Cantrell says fear not: “The stock market movement was a blip and the media used it to fit their desired narrative. A real estate trend can never be correlated to one day (or even several days) in the stock market.”