With the current headlines focused on the federal government shutdown, a serious question arises: What does this mean for buyers and sellers of real estate?
The most important factor to consider is duration. The longer the shutdown lasts, the larger the potential hurdles become for transactions currently in progress. As we navigate this period in October 2013, here is a breakdown of the impact on our local market.
1. The Impact on Consumer Confidence
When the government is not "open for business," there is an almost immediate deterioration of consumer confidence. For an economy like ours that is just beginning its recovery from the 2007 downturn, confidence is the engine that drives the housing market. Uncertainty often leads buyers to hesitate, which is never a positive sign for the broader economy.
2. Hurdles for First-Time Homebuyers
For many of our younger or first-time homebuyers, the shutdown presents a direct obstacle. Certain USDA loans and other government-backed guarantees cannot be finalized for approval while federal offices are closed. Because the staff responsible for approving these loans have been furloughed, the process is effectively on hold.
3. Uncertainty for Sellers
For sellers whose buyers are utilizing government-backed financing, the shutdown creates a "waiting game." The uncertainty of not knowing exactly when a house will close can disrupt moving plans and financial transitions.
4. Conventional vs. FHA Loans
If you are a borrower of a conventional loan, it is important to check with your lender. Some banks have delegated in-house underwriters who can continue to approve FHA loans; however, those without this delegation will see their FHA files put on hold until the government reopens.
Looking Ahead
The last time the U.S. experienced a government shutdown, it lasted 21 days. While we are all hopeful that this 2013 session will be resolved much sooner, the situation serves as a reminder of how closely the real estate market is tied to federal policy.
Regardless of where you stand on the issues at hand, one thing is certain: a healthy real estate market needs a government that is open for business.
Are you currently in contract and worried about your closing date?
