With the recent government shutdown, there are questions surrounding one important part of the economy: housing. This sudden change is creating trouble in the recovering housing market by slowing home sales and even making some buyers think twice before purchasing a home.
Housing won’t be hit hard unless the government shutdown continues for a long period of time. However, it’s creating a lot of insecurity for potential homeowners. Federal Housing Administration loans are insured by the government, and if the shutdown continues, this process could be stalled. More than 90 percent of all loan activity is underwritten, insured or owned by the government and its affiliated entities.
The Federal Housing Administration quite obviously plays a large role in the housing industry, endorsing about 15 percent of the entire single-family mortgage market. And if this government shutdown continues over time, there has been talk that the FHA would no longer be able to underwrite and approve new loans. However, the FHA’s Office of Single Family Housing will remain open for business–just with a smaller staff. They will still be able to endorse single-family loans, even during the government shutdown, but with a lower number of employees, obviously there are going to be some delays in the process.
It all comes back to the idea of money. If people aren’t confident in what they’re putting their money into, they are going to choose to wait it out and invest in a house when the market appears to be stronger. It’s simple: If people think the economy is headed toward a decline, they’re going to pull back on purchases, which is something that could definitely make an impact.
Chief Economist of Moody’s Analytics Mark Zandi predicts that a partial shutdown could shave as much as 1.4 percentage points off of a fourth quarter economic growth. With the government shutdown and mortgage rates already rising, only time will tell how much of an impact there will be on the housing market.