How Will the Presidential Transition Affect DC-Area Real Estate?
The federal government is far and away the largest employer in the Washington DC area, employing almost 300,000 people. In the coming days and weeks, as the Biden Administration replaces the Trump Administration, this dominant employer will experience significant turnover — which will make a significant impact on the area’s real estate market.
What does the presidential transition mean for residential buyers and sellers? First and foremost, it means opportunity. Here’s a look at DC-area real estate trends around past presidential transitions, as well as what to expect in the first quarter of 2021 — and beyond.
Real Estate Trends in the 21st Century
Throughout the 21st century, the months just after a new president’s election have been periods of high velocity in the National Capital Region, including Washington DC and parts of Maryland and Virginia. From November 2000 to March 2001, home sales in the DC area spiked 36.5% year over year. These, of course, were the months of President George W. Bush’s election, inauguration and first full months in office. From November 2008 to March 2009, when President Barack Obama was elected and took office, the DC area experienced year-over-year growth of 24.6%.
This trend isn’t limited to the DC area. Across the country, home sales between June and October of election years are 12.7% weaker than in non-election years. This lull in home sales occurs because of the uncertainty around Election Day. Americans go into wait-and-see mode, which means fewer big decisions and a slowdown in the real estate market. Once the election ends, the pent-up demand creates a flood of home transactions. This is especially true in Washington DC and surrounding areas, where an incoming administration’s employees are looking for places to live — and, in many cases, outgoing administration employees stick around for a variety of reasons. (More on this in a moment.)
What drives the spike in real estate activity? Newly elected congressmen and senators seek out high-end condos in the Capitol Hill area, as well as in Georgetown and the West End. Keep in mind that the median senator had a net worth of $1.76 million and the median congressman had a net worth of $510,000 as of 2018 — far more than the average American. The politicians who won their races in 2020 are likely to be people of means who can afford high-end real estate near the Capitol.
What Makes the Biggest Transition-Year Boom?
Not all elections are equal in their impact on the real estate market. For example, in 2012 the presidency and Senate remained in Democratic hands while Republicans held onto the House of Representatives. This meant little change in the workings of the federal government, as well as diminished hope for the passage of significant legislation.
Now, compare 2012 to 2008. In 2008, the Democrats took the presidency and built on existing majorities in both the Senate and House. With unified control of the executive and legislative branches, the Democrats were likely to pass more legislation than in a divided government. This meant more lobbying activity, and more interested parties moving to the DC area.
The same was true in 2016. Republicans held both the Senate and House, and they also picked up the presidency, creating a unified government and hopes for more legislation. Again, this unified government presumably stoked movement to Washington DC and activity in the real estate market.
Things are similar in 2020 and early 2021. The Democrats took back the presidency and held the House of Representatives. And, thanks to two victories in Georgia’s runoff elections, the Democrats will also have control of the Senate — giving them a unified government. The margin is small, as the Senate is split 50–50, which means Vice President Kamala Harris will vote to break ties. But the Democrats still have the ability to bring whatever legislation they like to the floor.
But legislative activity isn’t the only factor (or even the primary factor) driving real estate activity around this presidential transition. The pandemic and other external factors still matter — and these external factors could create a bustling real estate market, the likes of which the DC area has never seen in the year after an election.
Coronavirus, Amazon and More: External Factors Affecting the DC Market
Of course, there’s no single factor that boosts the real estate market or drags it down at any given moment. Yes, the 2020 election and the influx of politicians, appointees and lobbyists to the DC area should spark the market. But there are other factors to consider as well, including:
- The Sprint to the Suburbs: The COVID-19 pandemic has driven homebuyers across the nation to consider spacious homes in suburban areas over smaller homes closer to city centers. If that trend continues in 2021, popular suburbs in Virginia (Alexandria, Arlington, Reston and others) as well as Maryland (Bethesda, Frederick, Gaithersburg, Rockville, Silver Spring, etc.) could see a spike in demand.
- Amazon’s HQ2: In years past, Washington DC was predominantly a single-industry town, and that single industry was government. The city itself and its surrounding suburbs were filled with politicians, bureaucrats and others who drew their paychecks from the federal government. But that’s changing in the 21st century, as evidenced by Amazon choosing the Crystal City area of Arlington for its second headquarters. Amazon’s entry into Crystal City has made this portion of Northern Virginia a hot bed for real estate activity.
- Stimulus Spending: In December 2020, Congress passed a $900 billion stimulus package aimed at lessening the economic impact of COVID-19. While only time will tell what effect the stimulus spending will have on the economy, it’s likely that much of this spending will take place in the DC area, further stoking the real estate market.
At this time last year, no one could have predicted the spread of COVID-19 and how it would transform life in America. Similarly, new factors could emerge that influence the real estate market for better or worse during the transition from a Trump Administration to a Biden Administration.
What Will the Transition Mean for Luxury Properties?
Presidential transitions typically mean greater activity in the luxury market, too. During the transition to the Trump Administration, incoming Secretary of Commerce Wilbur Ross purchased a $12 million home in the Massachusetts Avenue Heights area, and Jared Kushner and Ivanka Trump moved into a $5.5 million residence in Kalorama.
And it wasn’t just members of the Trump Administration who were snatching up high-end real estate in late 2016 and early 2017. President Barack Obama rented an 8,200-square-foot Kalorama home, later purchasing the house for $8.1 million.
It remains to be seen who will fill all key posts in the Biden Administration, but noteworthy cabinet secretaries are typically high net worth individuals with the ability to afford the upper end of the luxury market. This could mean a higher velocity of sales in urban areas like Georgetown and Kalorama, or it could also mean more real estate transactions in luxury areas close to DC in Northern Virginia and Montgomery County, Maryland.
Get Expert Guidance From Lockard + Smith
The effect a presidential transition on the local real estate market will be more gradual than sudden. It’s likely that the impact of the incoming Biden Administration will stretch out and last well into 2021.
Are you looking to buy or sell in the DC area this year? If so, let the experienced real estate professionals at Lockard + Smith help you navigate the market. With more than 3 decades of combined real estate experience, we use our market knowledge, our understanding of values and trends, as well as an exclusive suite of tools to help buyers and sellers get the most out of their transactions.
Learn more about Lockard + Smith, and contact us when you’re ready to buy or sell a property in the Washington DC area.