Oops, THEY Did It Again!

How Will The Shutdown Impact Markets?

The federal government shut down began at 12:01 AM today. For the first time since 2018, US Congress has failed to pass a budget, preventing many non-essential operations from functioning. How will this impact every day Americans and, more specifically, the mortgage and real estate markets?

Federal Loan Programs – Most home loan programs involve the Federal government in some form or fashion, so it’s possible loan programs will be impacted by a shutdown. The likeliest problem areas will be obtaining Flood Insurance Policies from FEMA and Tax Transcripts from the IRS. Most other underwriting and funding functions should continue as usual.

Interest Rates – The last shut down in 2018-2019 lasted for 35 days, the longest in modern American history. During that time, the average 30-yr fixed mortgage rate dipped initially, but ultimately ended up at a similar level as at the beginning of the shut down. After the shutdown, mortgage rates dropped nearly ½% in the following two months. That sudden rate drop in 2019 was largely due to recession fears, trade wars, and a policy shift from The Fed. Huh…sound familiar??!! Those are the same headlines in today’s market! Will a similar outcome occur this time around? It’s certainly possible!!!

Real Estate Market – While the shutdown won’t have a direct impact on most real estate transactions, it will potentially cast doubts over the real estate market as a whole. Will buyers and sellers alike hold off on making major financial decisions as a result of the shutdown? Surely there are millions of people employed by the Federal government who may feel uneasy about their jobs, but I think those of us outside of government employment will also become unsure about what the fallout of this government shutdown will look like. Uncertainty will squeeze the housing market, so lets hope the shutdown is short and a bipartisan agreement is reached quickly.