{"id":3447,"date":"2023-09-29T02:09:36","date_gmt":"2023-09-29T02:09:36","guid":{"rendered":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2023\/09\/29\/a-government-shutdown-would-disrupt-the-housing-market-in-these-surprising-and-painful-ways\/"},"modified":"2023-09-29T02:09:36","modified_gmt":"2023-09-29T02:09:36","slug":"a-government-shutdown-would-disrupt-the-housing-market-in-these-surprising-and-painful-ways","status":"publish","type":"post","link":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2023\/09\/29\/a-government-shutdown-would-disrupt-the-housing-market-in-these-surprising-and-painful-ways\/","title":{"rendered":"A Government Shutdown Would Disrupt the Housing Market in These Surprising (and Painful) Ways"},"content":{"rendered":"

<\/a><\/p>\n

Matt McClain\/The Washington Post via Getty Images<\/p>\n

<\/p>\n

The housing market is facing a new threat: a looming government shutdown.<\/p>\n

If Congress doesn\u2019t reach an agreement by Saturday, the many federal government services could grind to a halt. That could bring new challenges to Americans, the economy\u2014and a housing market hobbled by high home prices, mortgage rates topping 7%, and a critical shortage of homes for sale.<\/p>\n

\u201cThe housing market is in a very fragile state right now,\u201d says Jim Tobin<\/strong>, president and CEO of the National Association of Home Builders. \u201cWhat we don\u2019t need is a government shutdown that further damages the housing market.\u201d<\/p>\n

The biggest impact on residential real estate could be mortgage rates, which are primed to go even higher<\/em>. Homebuyers could run into delays closing sales and have trouble securing popular loans. Government employees and contractors might have trouble making their mortgage and rent payments.<\/p>\n

The length of a shutdown will determine the amount of damage done to real estate.<\/p>\n

Four shutdowns have occurred over the past decade. The last one was in late 2018 and stretched into early 2019. It lasted 34 days as President Donald Trump <\/strong>had wanted funding to build a border wall, which Democrats had opposed.<\/p>\n

\u201cIf the government shutdown lasts two to three weeks, it\u2019s not great, but it isn\u2019t a big deal for the economy or housing market,\u201d says Mark Zandi<\/strong>, chief economist at Moody\u2019s Analytics. But \u201ca longer government shutdown could cause the economy to flatline, costing jobs and thus, hurting housing demand. Home sales may also be affected directly by the shutdown if homebuyers and builders aren\u2019t able to get permits and insurance they may need.\u201d<\/p>\n

Mortgage rates could rise<\/h2>\n

A government shutdown could also lead to higher mortgage rates, says Bill McBride<\/strong>, author of the Calculated Risk economics blog. He correctly predicted the last housing bust in the 2000s.<\/p>\n

Shutting down the government would inject a certain amount of uncertainty into the economy. Inflation, unemployment, and other data that the U.S. Federal Reserve considers when deciding whether to hike its rates<\/a> could be affected.<\/p>\n

Investors purchasing mortgage bonds (which are mortgages that are bundled together and sold so lenders can free up funding to make new loans) are likely to want higher mortgage rates<\/a> to compensate them for the unpredictability in the market.<\/p>\n

\u201cThe uncertainty is one more element that could lead to volatility in the mortgage and other financial markets,\u201d says Realtor.com\u00ae Chief Economist Danielle Hale<\/strong>.<\/p>\n

However, rates, which were above 7.5%<\/a> on Wednesday, are likely to come down once the government reopens.<\/p>\n

\u201cAs soon as it gets resolved, mortgage rates will return to whatever they would have been without the shutdown,\u201d predicts McBride.<\/p>\n

A long enough shutdown could also lead to lower<\/em> mortgage rates.\u00a0If a shutdown lasted long enough to hurt the economy significantly, the Fed could cut its rates. That could result in mortgage rates going down.<\/p>\n

Home sales could be delayed<\/h2>\n

A shutdown would likely slow down the trickle of home sales, frustrating buyers and sellers eager to close.<\/p>\n

The problem is lenders need to verify buyers\u2019 income before approving loans. That could become trickier if the Internal Revenue Service doesn\u2019t provide income verifications, which is what happened in previous shutdowns.<\/p>\n

Buyers purchasing properties in flood zones could also be affected. Lenders providing mortgages often require insurance coverage to protect their investments in flood-prone areas.<\/p>\n

But during a shutdown, buyers would not be able to secure and homeowners would not be able to renew National Flood Insurance Program policies.<\/p>\n

There are workarounds.<\/p>\n

Sellers could have their policies assigned to buyers and buyers can still find policies on the open market, according to the National Association of Realtors\u00ae. But transferring policies isn\u2019t ideal and private flood insurance might be pricier than what\u2019s offered in the national program.<\/p>\n

Claims after a disaster are expected to continue to be paid until the money in the program is used up.<\/p>\n

Homebuyers in rural areas may have trouble with USDA loans<\/h2>\n

Buyers might have trouble securing USDA home loans<\/a> in more rural parts of the country. USDA loans are popular because buyers might not have to put any money down if they are approved.<\/p>\n

\u201cIt\u2019s not just about farm loans. It\u2019s about newlyweds who have decided to purchase their first home in a rural small town. Perhaps they\u2019re getting a loan guarantee from a bank that is guaranteed by USDA or perhaps they\u2019re getting a direct loan from USDA to be able to purchase that home,\u201d Secretary of Agriculture Tom Vilsack<\/strong><\/a> said at a press briefing on Monday.<\/p>\n

\u201cWith a shutdown, those loans don\u2019t take place. And it\u2019s conceivable in those circumstances \u2026 that they may lose the deal,\u201d he said.<\/p>\n

Renters and homeowners could struggle to make housing payments<\/h2>\n

Many federal workers, contractors, and those whose employment relies on federal funding will not get paid during a shutdown. Some will be furloughed, others will be required to work without\u00a0a paycheck. Typically, government workers get back wages, but most other workers do not.<\/p>\n

If the shutdown stretches out, that could make it difficult for some homeowners to make mortgage payments and renters to pay their landlords<\/a> as many live paycheck to paycheck. Buyers might not be able to go through with a home purchase.<\/p>\n

\u201cWorkers [may] face a cash crunch that could make buying a home unfeasible,\u201d says Hale.<\/p>\n

However, foreclosures and evictions aren\u2019t expected unless the shutdown drags on.<\/p>\n

In the unlikely situation that the shutdown stretches into 2024, housing assistance provided to renters could be affected. Repairs in government-subsidized buildings could be put off.<\/p>\n

In addition, a shutdown could also affect developers and builders who receive government funding for their projects, slowing down new construction, says Tobin. Most of these projects are larger, multifamily developments, such as apartment buildings and complexes.<\/p>\n

\u201cBottom line is there is nothing good that comes out of a shutdown for the economy and housing market,\u201d says Zandi.<\/p>\n

The post A Government Shutdown Would Disrupt the Housing Market in These Surprising (and Painful) Ways<\/a> appeared first on Real Estate News & Insights | realtor.com\u00ae<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

Matt McClain\/The Washington Post via Getty Images The housing market is facing a new threat: a looming government shutdown. If Congress doesn\u2019t reach an agreement by Saturday, the many federal government services could grind to a halt. That could bring new challenges to Americans, the economy\u2014and a housing market hobbled by high home prices, mortgage…Read More→<\/a><\/p>\n","protected":false},"author":0,"featured_media":3448,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3447","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/3447","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/comments?post=3447"}],"version-history":[{"count":0,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/3447\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media\/3448"}],"wp:attachment":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media?parent=3447"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/categories?post=3447"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/tags?post=3447"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}