Will election night become election odyssey?
Tuesday’s election could be a potential windfall for property investors – if the stars align properly, that is. According to John Heilemann’s political article in New York magazine ( “The Zombie Election,” 11/5/12) in which he lays out four doomsday scenarios in Tuesday’s upcoming election for President, one is especially intriguing for real estate investors. The four scenarios he lays out include:
1) The Romney squeaker scenario, where he wins both the popular vote, and the electoral college.
2) The reverse Gore scenario, where Romney wins the popular vote (like Gore in 2000) but loses the electoral college to Obama.
3) The Recount (or recounts) scenario, which could make the 2000 Florida recount look like a day in the park by comparison
4) The Tie goes to Romney scenario, in which the electoral college is actually tied, and the states would have an equal weight in deciding the election – 50 total votes, based on each states’ Congressional majority (yes, Romney would most definitely win in this , the remotest of the scenarios).
The scenario to watch for
However, the one scenario that really would affect property investors, is The Recount (or recounts) outcome. In this remote, but plausible scenario, Heilemann presages a repeat of the 2000 election fiasco (where Florida recounted on their own terms, and the Supreme Court had to ultimately hear arguments as to “hanging chads.”) This naturally held up the process for over a full month before a winner could be decided. Well now, races are so close in several key swing states, that the possibility exists for recounts to be asked by the losing party – but in multiple states, thereby holding up the final decision of a President–elect for at least a month, or maybe two.
Of course, there will be court challenges, a closer examination of some states new voter registration laws, as well as potential new judicial rulings on the constitutionality of some of these registration requirements. Translated: a mess to be unraveled, taking an inordinate amount of time. Time in which the presidential election would remain in the balance, undecided. And this, of course, would create great uncertainty in financial markets.
Uncertainty = death
And if there’s one thing Wall Street does not like, it’s political uncertainty. An extended period of waiting could throw the stock market into a selling frenzy. The result of stocks taking big dips could be erosion of consumer confidence – which the real estate market has been helping to slowly build back up this entire year. Without consumer confidence, buyers sit on the sidelines, and everyone waits again. Meanwhile, house prices stagnate or deflate.
Add in one more key ingredient to this little doomsday scenario: the coming sequestration by the federal government if no deal is reached by Congress and the President to prevent severe automatic cuts to the federal budget – including deep cuts to the defense budget, for example. This “fiscal cliff” could easily be reached without a President-elect being chosen by mid-December. It’s a truly ugly thought…
The net effect for property investors
As house prices deflate after a year of building back up, consumer confidence drops, buyers sit on the sidelines, Wall Street tanks, and the federally mandated Draconian sequestration occurs, property investors should have a plan to make lemonade out of these potential lemons.
And the best lemonade a property investor could make in the event of this scenario, is to be ready to hunker down, hold properties, do not sell, and if possible, buy as the market begins to depress yet again. The window may be a short one though – say December through January – the normally slow house buying period anyway. But the double whammy of seasonality coupled with this Armeggedon of Presidential-elect deadlock due to all the recounts that may take place could be quite a boon for property investors savvy enough to plan for this remote eventuality. So on Tuesday, get ready for a potentially long and bumpy night into day(s) – or weeks – or months.
photos courtesy of pennlive.com, latimes.com, worldoil.com, nola.com, thewallstreetexperience.com, avenuecdc.org