Since December 21, several parts of the U.S. government have been shut down due to President Donald Trump and Congress not coming to an agreement on the provisions of a Continuing Resolution to fund the federal government. With no immediate resolution in sight, the partial shutdown’s impact is growing beyond just the federal workers—and beginning to influence the housing market. Homebuyers, realtors, and lenders may all start to experience some closing delays.
Before we get into the impact the shutdown is having, let’s circle back to the condition of the housing market before it happened. Many realtors and lenders were noticing a strain in the market—home sales and price growth were on their way down as interest rates were rising. The winter months bring less activity, of course, but compared with 2017 numbers there was definitely a difference. Then add the shutdown to the mix, and real estate professionals are seeing the worry of economic uncertainty curbing normal activity—increasing the strain of the market. According to The National Association of Realtors’ (NAR) Chief Economist, Lawrence Yun, “The housing industry was already facing market challenges before any government closure…the shutdown has made matters worse.”
The National Association of Realtors’ Government Shutdown Survey Results
A new study from the NAR sheds light on how the partial shutdown is impacting the housing industry. NAR surveyed its 2,211 members and found the following:
- 11% are reporting an impact on current clients, along with another 11% reporting an impact on potential clients.
- The study of 2,211 members did find that 75% of agents found no impact. However, there are still several ways the government shutdown impacted the housing market.
- The most common impact, at 25%, was the buyer decided not to move forward with their purchase because of economic uncertainty—even though they were not a federal government employee.
- The survey found 9% of agents said they were impacted because a federal government employee opted not to buy.
- 17% of realtors were affected by the delay of S. Department of Agriculture loans.
- 13% experienced a delay due to Internal Revenue Service verification (which recently announced will be resumed again.)
9% reported a delay in their closing because of a hang-up for their FHA loans.
Originating Mortgages During the Shutdown
The government shutdown has impacting the mortgage side of real estate so much, that new regulations have been released by Fannie Mae and Freddie Mac, in consultation with the Federal Housing Finance Agency. According to Fannie Mae in its letter to lenders, “With the shutdown extending for a longer period of time, we are concerned about the impact that continued income interruption may have on borrowers’ ability to meet their mortgage payment and other monthly obligations. In light of this, we developed this Lender Letter jointly with Freddie Mac and in consultation with FHFA.”
Fannie Mae goes to on explain the GSEs are imposing a minimum reserves requirement which serves as a compensation factor that offsets the associated risks with the interruption of income. To learn more, click here.
The Shutdown and Economic Growth
It’s safe to say, the partial shutdown is showing just how much the varying roles of the federal government can impact the housing market. Mr. Yun with the NAR sums it up well with the following statement, “A home purchase is a major expenditure that simultaneously involves a high level of excitement and anxiety, and the current government shutdown adds another layer of unnecessary complication to the home buying process. The shutdown is causing tangible harm to potential buyers, the real estate market and economic growth.”
In the midst of the shutdown, Velocity Title is still focused on streamlining the closing process while providing the best customer experience possible. Like many of your colleagues, you can trust Velocity will utilize the very best closing technology, services, and expertise to save you and your clients valuable time and resources. To learn more, click here.
Velocity Title Moves Your Business Forward
Velocity Title supports the real estate industry with a comprehensive line of title services including purchases, refinances, commercial, title insurance, attorney consulting, 1031 exchange, and short sales. With a focus on the best CUSTOMER EXPERIENCE, Velocity Title incorporates leading title TECHNOLOGY and EXPERTISE into every transaction—enabling the final step in the home buying process to be EASY, EFFICIENT and INFORMATIVE. To learn more, contact us today!