With the federal government shutdown closing in on its third week, the impacts on home buyers, sellers and the real estate economy as a whole continue to grow.
Flood Insurance Gaps
Following a lapse in authority on Sept. 30, the National Flood Insurance Program (NFIP) is currently unable to write new policies for homeowners and for those purchasing homes in the high-risk floodplain. However, as REALTOR® Magazine has previously reported, existing policies remain active and transferable, with a 30-day grace period for renewal.
Most lenders also suspend the flood insurance requirement during a lapse, reducing the impact on home sales for the first few weeks. But as the 30-day mark for the shutdown creeps closer, many policies issued in October could begin to expire, leaving homeowners and buyers exposed in the midst of hurricane season as fewer active policies become available to transfer, and depending on the availability of private flood insurance options. This only compounds the uncertainty and hardship if the lapse continues into November.
Impacts on Rural and Other Lending Programs
It was also reported by Samantha Delouya of CNN that USDA-backed loans have been held up due to the shutdown. The U.S. Department of Agriculture “offers Americans in rural areas and small towns zero down-payment mortgage financing in areas where private lending is often limited,” according to NAR.
Additionally, the shutdown could delay IRS income verification and create bottlenecks in FHA and VA loan processing, potentially slowing or even halting transactions across the country.
“NAR continues to urge Congress to pass a clean, bipartisan continuing resolution or long-term funding bill to reopen the government,” says NAR Executive Vice President and Chief Advocacy Officer Shannon McGahn. “Every day the shutdown continues, thousands of Americans face uncertainty, whether they can close on their dream home, access flood protection, or count on the economic stability that a functioning government provides. The longer the shutdown continue, the greater the strain on families, businesses and the overall economy.”
A Hit to Local Economies
Beyond the direct impact on individual homeowners and buyers, complications and delays to closings may have additional adverse economic effects on local communities. NAR research shows that the median home sale generates around $125,000 of economic impact, adding that “the housing market is not just a sector of the economy but a significant force driving economic activity.”
