I went to Wilton Manors City Hall and voted early. Soon we will know the outcome – some will be pleased, many will be relieved that it is finally over.
Last Friday we had the news of additional FBI investigations of some type (still as of this writing not sure what) regarding Secretary Clinton’s email. On the announcement of that, the stock market dropped by one percent in one hour, suggesting that the market was already expecting a Clinton victory. That got me to thinking: if we look at historical price behavior of real estate here in Broward County, has having one party in power in Washington been better than another?
Fortunately we have the data to perform that analysis. Previously I have shown what I call the “bubble chart” based on data from the Federal Housing Finance Authority, showing price history going back to 1975. We can also adjust that for inflation so that we can see real (inflation adjusted) returns.
We also know who the various presidents were, and which parties controlled Congress (and the times when control of Congress was divided). My concern, of course, was what to say about the 2001-2006 bubble. Real prices more than doubled, and the Republicans were in full control in Washington (pretty much the only time they were). I’m concerned that might be so anomalous as to be misleading.
So what I’ve done is considered – separately – the issues of which party has the Presidency, and which party has the Congress. This gives many more observations, and when averaging the results produces a more credible and I think more significant result.
First, consider the difference in real estate returns in times when we have had a Democratic President versus a Republican President. With a Democratic President, the average real (inflation adjusted) quarterly return in Broward real estate prices was 0.35%, with a standard deviation (a measure of variability) of 4.58%. When there was a Republican President (which included the time of the bubble)(and the start of the crash) the average real quarterly return was a bit lower – 0.28% – with slightly higher variability as the standard deviation was 5.06%.
So in other words, looking at the experience of the last 41 years – and past performance cannot predict future results – having a Democratic President has been a little better for Broward real estate prices, both in total returns and in overall stability of prices.
How about control of Congress? Here the situation is very different and much more clear cut.
Over the last 41 years, we have had 70 quarters (much more than just the bubble) with Republicans in control of Congress, 68 with Democrats in control, and 24 quarters of divided control. Having the Republicans in control of the Congress has been associated with far, far better real estate price performance here in Broward. The average real quarterly gain during periods of Republican control was 1.67%. That’s almost seven percent per year after inflation.
Average real returns during periods of Democratic control of Congress, or divided control of Congress, were negative.
I realize this news will not please some of my readers. Yes I know there is more to life than money. I just find these sorts of things interesting and share them with you for your information and education. And as I said, just because it happened before does not mean it will happen again.by