Since December 21, 2018, the US government has been in partial shutdown. Now in its 3rd week with no end in sight, experts worry about the impact on the national housing market.
The President, the Congress, and the Spending Bill
At the end of 2018, the US Congress was set to pass the spending bill. It was to include President Trump’s request for $5 billion of funding for the border wall. As Congress didn’t pass the bill and the president refused to sign any bill that didn’t include his desired funds, the partial shutdown of certain government agencies ensued.
On Wednesday, January 9, the House finally passed a financial services bill in an attempt to reopen parts of the government. This includes covered financial services such as the Treasury Department and the IRS. It’s the first of four appropriation bills that the House will vote on this week in hopes of ending the shutdown. However, despite this vote, there is a high chance the bill won’t be passed by the Senate and will be vetoed by President Trump.
How This Affects the US Housing Market
As President Trump has reportedly said that the government shutdown could go on for months or even years, the fear over the negative impact on the US housing market is growing.
NAR released its assessment of the situation, reporting that the shutdown has impacted 25% of home sales- 11% on current clients, 11% on potential clients, and 8% on other impacts. The major reason for this is coming from the effect on consumer confidence of both homebuyers and real estate investors. 25% of homebuyers have decided to put off buying a home due to the economic uncertainty the lingering shutdown brings with it as well as a fear that this could lead to a recession. This fear will affect the buying and selling process of homes and investment properties across the US housing market.
On the other hand, 17% of homebuyers were affected by a hold-up in US Department of Agriculture loans and 13% from IRS verification delays. Luckily, the IRS has decided to resume verification of mortgage applications amidst the shutdown. And FHA and VA loans are continuing to push through as well. So, for now, the impact on the mortgage market should be kept to a minimum. The problem will be with delays in the already long mortgage process due to limited staff.
The issue then comes if the government shutdown lasts any longer than it has already. Experts speculate on how already rising mortgage rates will be affected as well as house prices. As home sales decrease leading to more inventory sitting on the market, there will be significant pressure on prices.
The effect on the US housing market could be seen in different areas like construction startup as well. With the issue of limited housing supply already affecting the US housing market, this could become a major problem, especially in rural areas.
As the shutdown continues, experts will keep watch of the market closely in hopes there is no slowdown in its continuing recovery.
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