What The Government Shutdown Means For The Housing Market
Now that the U.S. government has been shutdown, what will the impact be on the U.S. housing market? Much of it depends on how long the shutdown lasts, but here are four ways the housing market will be impacted…
1. FHA Loans
After originally announcing on Friday that all applications for government-backed mortgages would be placed on hold, the U.S. Dept. of Housing and Urban Development reversed course and said it will endorse new loans. The Federal Housing Administration will see a reduction in staff, but says it will continue to operate, but certainly not at maximum efficiency. However, if the shutdown lasts long it will impact other aspects the agency’s mission.
2. Fewer Loans Processed
Because of the government shutdown, it will be hard for those processing new loans to have the IRS verify tax returns or the Social Security Administration verify social security numbers. On top of that, it will be a challenge for government workers to have their employment verified for mortgage applications.
The mortgages that Fannie Mae and Freddie Mac purchase and scrutinize won’t be affected because they aren’t funded by the government, but instead by fees paid by lenders. User fees cover the Department of Veterans Affairs guarantee of mortgages for veterans so those won’t affected either.
The US. Department of Agriculture did announce no new housing loans or guarantees will be issued via its Rural Development program during the shutdown
3. Reduced Consumer Confidence
Given the tepid economic recovery, anything that harms consumer confidence is bad news for jobs, the stock market, and the housing recovery. Economic uncertainty is the reality for the 800,000 federal workers whose paychecks are being withheld until the government shutdown concludes. Do you think those people are rushing to make the biggest purchase of their life right now?
4. Bad News For Cities With Most Federal Workers
Because it has so many federal workers the shutdown is obviously bad news for the housing market in Washington, DC, but it’s also bad news for other cities with large numbers of federal workers, including Atlanta, San Antonio, New York, Philadelphia, Dallas/Ft. Worth, Chicago, Baltimore, Tampa, and Denver. There’s also a decent chance that many of these federal workers will spend their newly-acquired free time looking for new jobs, possibly in other cities. How might that change the real estate landscape?
