NAR Chief Economist Lawrence Yun says the partial shutdown of the federal government is hurting real estate markets, mainly because of the uncertainty it's causing. In addition, some homebuyers are seeing a delay in their transaction, especially among those using mortgage financing backed by the federal Rural Housing Service, according to NAR Director of Federal Housing Policy Megan Booth.
The government shutdown is an ambiguous negative for the real estate market just from the fact that it is delaying some commercial activity that could occur. Closings are not happening due to some delays related to mortgage availability and in some cases like the rural housing loans are simply not available, other shortage of staff may be delaying and causing bottleneck process. So what we are finding is that 75 percent of REALTORS® indicated that they are seeing no impact of the government shutdown. However, 11 percent are indicating there are some issues whether there are delays or even cancellation and another 11 percent indicating that their buyers are getting cold feet from the greater economic uncertainty caused by the government shutdown, so these are not necessarily federal government employees not getting their paychecks but general Americans in the private sector are just more concerned about the direction of the economy. Some perception of chaotic environment in Washington is not helping people make a firm decision for a major expenditure like home purchase.
We are a few weeks into the government shutdown and so far most home loans programs are running smoothly. Conventional loans are closing, FHA loans are closing and VA loans are closing. Also, there was a little bit of hiccup with the IRS issuing income verification statements but starting on Monday, January 7, the IRS has restarted issuing those so that people who had to have the income verified such as self-employed people should be able to get those again.
The problems that are not working as well right now are more specialty programs. For example, the USDA Rural Housing program none of those loans are able to close right now and the reason why as of right now all USDA personnel have to sign off on all of those loans. We did get them delegated-lender authority which would let lenders approve the loans like they do for FHA but USDA has not yet implemented that so those loans can’t close.
Also, there’s a few specialty programs under HUD that also requires a HUD official to sign off on the loan such as the Native American Home Loan Program, the Native Hawaiian Home Loan Program, and the HECM also called the reverse home loan program those loans currently are not closing. The rest of the loans should be operating well at this time. The other good news is other programs The National Flood Insurance Program there was a concern that the program could be shutdown. NAR worked vigorously to make sure that program was continued to be up and running, so you shouldn’t have problems getting Flood Insurance with any of your loans. We hope the government shutdown ends soon and that all loans programs are back open and running.