The government shutdown mildly affected real estate, and the repercussions may have been worse if it was down longer - here's how:
It is no secret that many businesses are affected by government shutdowns. Closing down the government, even for just a few days, throws off the balance of a multitude of markets. We have seen it happen before, and the recent government shutdown last week proved to be no different.
Essentially, during a shutdown, the Social Security Administration, Internal Revenue Service (IRS), and the Department of Housing and Urban Development (HUD) face large quantities of employee absences. As a result, mortgage approval is drastically delayed until work continues as usual. The HUD has approximately 8,000 employees who are required to abstain from work during a governmental shutdown. This delays any loan applications that clients file through the Federal Housing Administration or the Department of Veteran Affairs.
In addition, while banks and private lenders are not affected, the mortgage applications that they review are. These also include tax records and financials that require a certification that is unable to be approved until the government re-opens. This creates a large hindrance on the housing market as well.
Luckily, this shutdown wasn’t very long. Real estate and housing markets faced a few minor pains from it, but didn’t suffer any long-term impediments. Elizabeth Mendenhall, the president of the National Association of Realtors (NAR) made a statement during the shutdown: “The government shutdown will have an impact on real estate transactions should it continue for an extended period of time.”
If mortgage approvals are delayed for too long, real estate professionals, along with their clients, will suffer. We are fortunate that this shutdown did not extend past a few days, and that we didn’t have to see the large impact that it would have had on the housing market. We are crossing our fingers that we will not have to face any sort of extended shutdown in the future.