8 min read
Have you felt something different in the air with your leads lately? Election years tend to create uncertainty, especially for industries like construction and remodeling, where big financial decisions often hinge on market stability. As the 2024 U.S. presidential election approaches, homeowners, builders, and remodelers are left wondering how political shifts might influence key factors such as interest rates and housing demand. While elections don’t directly cause dramatic changes in mortgage rates or home improvement trends, the period of uncertainty can slow decision-making, delaying new projects.
Since we only serve builders and remodelers, we’re uniquely focused on trends like these that affect our clients across the continent. We want you to be armed with the right information to prepare for the challenges and opportunities that 2024 holds.
Historical Perspective on Election Years and the Housing Market
Historically, the housing market experiences a noticeable slowdown during election years. This phenomenon is driven by widespread uncertainty about the future. Homeowners' tendency to hold off on large-scale projects like moving or remodeling during election years is often driven by the perception of instability. Everyone wants to know the election's outcome before making substantial financial commitments, especially when interest rates are in flux. While many factors influence the housing market, including inflation and Fed policies, elections can amplify these concerns.
As a result, the first few quarters leading up to an election can be slow for builders and remodelers. Clients may hesitate to green-light large renovations or home purchases due to fears about future economic conditions. However, this period of hesitation is often followed by a release of pent-up demand once the election is over and uncertainty dissipates. Whether their candidate is elected appears to be less relevant. When the election results are clear, homeowners typically feel more comfortable moving forward with their plans.
Despite the short-term pause, the overall impact of election years on the housing market is temporary. Once the political landscape stabilizes, the housing market tends to recover, often with an uptick in activity. Builders and remodelers can expect to see this bounce in inquiries and projects following the election as people feel ready to make those postponed decisions.
Interest Rates and Their Role During Election Years
Interest rates are pivotal in shaping homeowner decisions during election years, but the election itself isn’t the main driver of these fluctuations. Instead, broader macroeconomic factors—like inflation and Federal Reserve policies—are the true influencers. However, the political climate can indirectly affect rates by altering market confidence and economic forecasts.
The Federal Reserve and Interest Rate Trends
During election years, the Federal Reserve often aims to maintain stability by keeping interest rates relatively unchanged to avoid adding more uncertainty to the market. Historically, elections haven’t directly caused significant swings in interest rates. For example, in the lead-up to past U.S. presidential elections, interest rate changes were more influenced by the state of the economy than by the political race.
That said, 2024 is an interesting case. The Fed has been gradually raising rates to combat inflation over the past couple of years, and any decision to cut or maintain these rates will likely hinge on economic indicators rather than election outcomes. However, some experts suggest that if inflation continues to stabilize, we might see minor rate cuts in the months following the election. These cuts could encourage more borrowing, which is particularly relevant for the remodeling and home construction industry.
Homeowners’ Financial Choices During High-Rate Periods
With interest rates currently higher than in recent years, many homeowners who locked in historically low mortgage rates opt to stay in their homes rather than face the higher borrowing costs of a new mortgage. This trend leads to a surge in remodeling projects as homeowners choose to invest in upgrades instead of moving to a new house.
The Wall Street Journal recently declared, “America is primed for a home-renovation resurgence.” Homeowners who secured rates as low as 2-3% are reluctant to give them up. Moving to a new home would mean taking on a much higher mortgage rate, making it financially less attractive to upgrade by buying. Instead, these homeowners are tapping into their home equity or savings to remodel, ensuring they improve their living spaces without sacrificing their favorable mortgage terms. For instance, homeowners who would traditionally upgrade to a larger home to accommodate their growing families or changing lifestyles instead invest in remodeling projects like home expansions, kitchen upgrades, or adding home offices.
Regional Differences in Housing and Remodeling Trends
Geographical Impact: How Election Cycles Vary by Region
Election cycles don’t affect all housing and remodeling markets uniformly across the U.S. Certain regions may experience more pronounced slowdowns in the lead-up to an election, while others remain relatively stable or even see growth. A combination of local economic conditions, housing market trends, and political landscapes will shape how builders and remodelers fare in different parts of the country.
Regions Likely to Experience a Slowdown
Coastal and High-Cost Housing Markets
Areas like California, New York, and parts of the Pacific Northwest often have high-cost housing markets, where homeowners may be more cautious about large-scale investments, especially during periods of uncertainty. With higher property prices and larger loans, even small interest rate changes or economic shifts can significantly impact remodeling budgets. Additionally, these areas tend to be more politically active and sensitive to election outcomes, leading to further hesitation in committing to major projects.
Swing States and Politically Volatile Regions
States like Florida, Pennsylvania, Ohio, and Arizona—where elections are hotly contested—may experience more pronounced market slowdowns due to uncertainty. Homeowners in these states are often more attuned to the political climate. They may be more likely to delay major financial decisions like remodeling or moving until after the election results are clear.
Energy-Dependent Regions
States with economies tied to energy production, like Texas, Oklahoma, and North Dakota, could also experience volatility during election cycles. Changes in energy policies, often debated in elections, may create economic uncertainty in these regions, leading to reduced remodeling activity as homeowners and builders take a "wait-and-see" approach.
Washington D.C. Metro Area
The Washington D.C. metro area, which includes parts of Northern Virginia and Maryland, is uniquely sensitive to election cycles due to its proximity to the federal government. As a hub for political activity and government-related jobs, the region often experiences heightened uncertainty during election years, leading to cautious consumer behavior. Homeowners may delay large-scale remodeling projects as they wait for clarity on potential policy changes that could impact federal employment, housing, and economic stability in the area. However, with its consistently strong real estate market and high demand for housing, any slowdown in the D.C. region tends to be temporary, with a rebound likely once election outcomes are determined.
Regions Likely to Remain More Resilient
Southeast and Sunbelt States
The Southeast, including states like Georgia, North Carolina, and Tennessee, has seen significant population growth and housing demand in recent years. The Sunbelt region, which spans states like Texas, Arizona, and Nevada, is experiencing sustained growth due to factors like warmer climates, lower taxes, and a favorable cost of living. These areas may be less affected by election uncertainty as demand for housing and remodeling continues to be driven by migration and population growth. Builders and remodelers in these regions may see continued project inquiries, particularly for smaller or mid-sized renovations that homeowners can complete without significant financial risk.
Midwestern Stability
The Midwest, including states like Wisconsin, Minnesota, and Indiana, tends to have a more stable housing market than the coasts. Lower housing prices and less speculative real estate activity mean that election cycles may not disrupt remodeling projects as dramatically as in higher-cost markets. Homeowners in these regions may continue to invest in their properties, especially in smaller, affordable remodeling projects like kitchen or bathroom upgrades.
Tourism and Second-Home Markets
Regions that rely heavily on tourism or have a strong second-home market, such as Florida’s Gulf Coast or parts of Colorado and the Carolinas, might also be somewhat insulated from election-related slowdowns. These areas attract buyers and homeowners who are less reliant on primary residences. They may be more willing to invest in remodeling projects to enhance vacation or rental properties, regardless of the political climate.
Local Political Influence
While federal elections often dominate national conversations, local and state politics can have an equally significant impact on the housing and remodeling markets. For example, changes in local zoning laws, property tax rates, or green building regulations can directly influence the cost and feasibility of remodeling projects. Builders and remodelers should keep a close eye on state and municipal elections in their areas, as these can result in new regulations or incentives that either help or hinder business growth.
In regions with strong local government support for housing development or renovation (through tax breaks, grants, or streamlined permitting processes), builders may find it easier to secure new projects, even during election cycles. Conversely, in areas where local governments impose stricter building codes or environmental regulations, the remodeling market may slow as homeowners navigate more complex and costly renovation processes.
Forecast for 2024-2025 Interest Rates
While it’s difficult to predict exact interest rate trends, many experts believe that we could see modest rate cuts in late 2024 or early 2025, depending on how inflation evolves and what post-election policies are implemented. These potential cuts would have a significant impact on the remodeling industry, making financing larger projects more affordable for homeowners. According to Kiplinger’s analysis, the post-election economy might see a small rate dip as market confidence is restored. Builders and remodelers should be ready to take advantage of this shift, as lower rates would likely drive demand for bigger, more expensive renovation projects.
Industry Outlook for 2024 and Beyond
The remodeling industry is on track to grow, even if at a more moderate pace. Industry forecasts suggest that by mid-2025, remodeling activity will continue its upward trajectory despite a brief slowdown in 2024. Harvard’s Joint Center for Housing Studies projects that remodeling demand will increase steadily, with spending expected to hit $466 billion by mid-2025. Although this growth will be gradual rather than explosive, the remodeling sector will continue to see sustained interest as more homeowners turn to renovations as the financially viable option.
Strategies for Builders and Remodelers in an Election Year
Navigating an election year as a builder or remodeler requires strategic planning and a keen understanding of how market uncertainties impact homeowner behavior. While the lead-up to the election may bring a temporary slowdown, the period immediately following is often ripe with opportunity. By adjusting your marketing strategies, client communication, and service offerings, you can stay ahead of the competition and prepare for the uptick in demand that typically follows.
Prepare for a Pre-Election Slowdown
It’s too late to change course this year, but election cycles are predictable, and you can be ready for the next one. As homeowners tend to delay major financial decisions during election years, builders and remodelers may notice fewer inquiries and slower project starts in the months leading up to the election. While this can be a challenge, it also presents an opportunity to focus on internal operations, build up your pipeline, and prepare for the post-election surge.
- Tip: Use this time to nurture potential leads. Keep the conversation going with homeowners who are showing interest but may be hesitant to commit due to the uncertainty of the election year. Share content that reassures them, such as blog posts, case studies, or emails about past clients who benefited from remodeling during similar uncertain times.
- Educate clients: Provide insights into why remodeling might be more cost-effective than moving, especially for homeowners locked into low mortgage rates. Help them see the long-term value of upgrading their current home, even during times of uncertainty.
- Optimize marketing efforts: Adjust your digital marketing campaigns to focus on smaller projects or remodeling services that require less upfront investment. Highlight financing options, including home equity loans or flexible payment plans, that can make remodeling more accessible even with high rates.
Post-Election Opportunities for Builders and Remodelers
Once the election is over and the political landscape becomes clearer, there is often a burst of activity as homeowners regain confidence in the economy and move forward with delayed projects. Builders and remodelers can capitalize on this by being ready to handle the influx of inquiries and projects.
- Plan for an uptick: Ensure your business is fully prepared for increased demand after the election. Consider ramping up your workforce, securing material supplies in advance, and streamlining your project management processes to handle multiple projects efficiently.
- Proactively market: Launch post-election marketing campaigns focusing on renewed economic stability and potential interest rate reductions. Remind clients that now is a great time to move forward with larger projects they may have postponed due to pre-election uncertainty.
- Offer discounts or incentives: To encourage homeowners to commit to projects early, consider offering limited-time post-election discounts or incentives. These could include financing deals, free consultations, or add-ons like free design services or upgrades for larger projects.
Highlight Interest Rates and Financing Options
Since interest rates are a significant factor in homeowners' remodeling decisions, especially during periods of uncertainty, offering guidance on financing options can help alleviate concerns. Homeowners may be more inclined to move forward with projects if they understand how to tap into their home equity or find favorable financing terms.
- Provide financial education: Provide clients with guidance on financing their remodeling projects, whether through home equity loans, refinancing, or other funding options. Create educational resources, such as blog posts or downloadable guides, that explain how to make remodeling more affordable during uncertain economic times.
- Partner with lenders: Collaborate with local financial institutions to provide clients competitive loan or financing options. Promoting these partnerships shows potential clients that you care about their financial well-being and can help them make sound decisions.
- Remodeling as an investment: Emphasize how remodeling can increase home value and improve long-term quality of life, framing it as a smart investment rather than a financial risk.
The Answer is Strategic Digital Marketing
The election may bring some trepidation, but with the right strategies, builders and remodelers can turn uncertainty into opportunity, ensuring their businesses are prepared for whatever 2024 has in store. Builder Funnel is your strategic digital marketing partner, uniquely equipping your business to win in every market. What can we do for you? Schedule a meeting to find out.