There’s no doubt that 2020 has been an interesting year. As we cruise into the final months, the presidential election 2020 is likely to shake things up even more.
With election day rapidly approaching, many investors are currently asking themselves, “How will the presidential election 2020 impact real estate?”
This is a tough question to answer with many moving parts. In this article, we will look at some of the main factors influencing real estate in this upcoming 2020 election.
Leading up to the presidential election 2020, both President Donald Trump and contender Joe Biden have made their positions on real estate clear. Through his policies, Trump has set a precedent for what will come should he be reelected. And, Biden has also made some proposals that are sure to affect the real estate industry.
Let’s take a look at how each candidate of the presidential election 2020 hopes to shape real estate in the United States.
Presidential Election 2020: Joe Biden
Biden has proposed a few different policies that real estate investors should be aware of for the presidential election 2020. Several of these proposals could act in favor of new investors looking to get into real estate, as well as investors who purchase Class C or Class D homes. Others may directly affect rent collection and income.
Assistance for Renters and Homeowners
Among Joe Biden’s ideas is the hope to support first-time homebuyers by initiating up to $15,000 in tax credit. Likewise, he is pushing for down payment assistance for service workers. In an attempt to ease the financial burden the coronavirus pandemic has placed on low-income citizens, Biden would also supply tax credits for renters, as well as increase Section 8 vouchers.
Depending on an investor’s position, some of these policies could increase access to property ownership. The proposed tax deductions COVID-19 could bring, along with down payment assistance, might be the boost some aspiring investor’s need. However, increasing the affordability of homeownership on a large scale could backfire for real estate investors attempting to keep their rental units full. Though, with Section 8 vouchers, occupancy rates for low-income rental units could increase.
Rent and Mortgage Forgiveness
Another concept Biden has supported is the notion of rent and mortgage forgiveness. Should it come to pass after the presidential election 2020, real estate investors could potentially struggle. While mortgage payments would also be forgiven, they are only one expense real estate investors face. Collecting rent ensures the coverage of utilities, property maintenance, and real estate taxes. In some cases, property managers’ and maintenance workers’ salaries are paid with rent. Not to mention, many investors rely on rent as their sole source of income.
Increased Tax Rates for Investors
Depending on the result of the presidential election 2020, tax rates may go up.
Finally, another proposal for real estate investors is Biden’s wish to eradicate the 1031 tax loophole. This portion of tax law allows investors to offset their real estate taxes by claiming losses due to property depreciation. This loophole is often used even when investors are experiencing real estate appreciation.
Presidential Election 2020: President Donald Trump
If Trump is reelected in the presidential election 2020, we can predict more of the same policies he has enforced over the last few years, possibly with some new developments.
Real Estate Growth and Construction
The theme of Trump’s presidency in regards to real estate is a push towards growth and stimulating the economy. Trump has been reluctant to lift strict zoning laws on single-family residences. This is an effort to retain the value of homes and communities. Some of his policies during this term include the creation of “opportunity zones,” designed to support real estate growth in underdeveloped communities.
A Mixed Take on Tax Rates
Trump used his presidency to limit the allowable deduction for mortgage interest. He decreased write-offs from 1 million to $750,000- a sigh of relief for lower and middle-class homeowners who saw a decrease in taxes, though upper-middle-class Americans saw an increase in taxes. Depending on where an investor falls within this range, this policy could be either an advantage or a burden.
Good-Bye Fannie and Freddie
An initiative Trump would like to see pass is Fannie Mae and Freddie Mac transitioning from federal to private. This is a proposition with uncertain consequences and critics worry that this move could have a negative effect on home buyers’ ability to secure 30-year, fixed-rate mortgages. However, the exact repercussions of such a move would remain to be seen.
Elections and the General US Real Estate Market 2021 Forecast
Real estate market trends tell us that election years lead to a drop in home sales from October to November by 15%, according to findings by BTIG. In non-election years, typically home sales only drop by 10% for these months. Buyer uncertainty is almost a given during any election, and in the near future, we will certainly see a slow down in home purchases.
In the short run, we may see difficulty for those selling an investment property and, conversely, decreased competition for those buying an investment property. However, these trends will likely not continue into 2021.
Related: Will There Be a Real Estate Boom Post COVID-19?
A Few More US Housing Market Predictions 2021
The good news is, the US housing market predictions 2021 aren’t as dismal as one would expect, given the pandemic and election uncertainty. Most experts are not anticipating a housing market crash after the presidential election 2020. And, mortgage rates have been at an all-time low. It is a fine time to purchase a rental property for savvy and financially stable real estate investors.
Related: Investment Property Mortgage Rates 2020: COVID-19 Update
In addition, the coronavirus pandemic has had a negative financial impact on many potential home buyers. In particular, first time home buyers and the economically disadvantaged have been affected. Income levels have been dramatically reduced in many cases, impeding buyers’ ability to save for large purchases.
The current market forecast suggests that home prices will remain relatively stable through 2021. However, income levels will not match up to home prices, which will decrease the affordability of buying a home for many people. Despite the consequences the presidential election 2020 will bring, this stall in home buying could increase the demand for rental units. In turn, it may have a positive effect on real estate investors, who could see higher occupancy rates and have an easier time finding tenants as a result.
The Takeaway:
What the presidential election 2020 has in store for us will certainly impact various facets of the real estate industry. However, the overall forecast for investors looks positive, regardless of the outcome. Both candidates pose ideas with the potential to change the way real estate investors operate, for better or for worse.
As always, there is never truly a “bad” time to invest in real estate. As long as you have the financial security to do so, it is always advisable to invest in rental properties. That being said, make sure your investment decisions are backed by real estate investment analysis. Mashvisor provides cutting-edge real estate investment software to help you.
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