The effect of the government shutdown on the housing market

The federal government shutdown could begin to negatively affect the housing market if not resolved quickly.
The federal government shutdown could begin to negatively affect the housing market if not resolved quickly.

Yesterday, the federal government shut down for the first time in 17 years due to Congress' inability to pass a spending bill. While the shutdown has wide-reaching implications for national parks, monuments and agencies – not the least of which are the 800,000 federal employees currently on forced unpaid leave – many have also wondered how the event will affect the country's recovering but still fragile housing market. The answer seems to be that it won't, assuming that the shutdown is resolved quickly.

According to Forbes, while 90 percent of all home loans are "underwritten, insured or owned by the government" and related groups, the shutdown shouldn't prevent the approval of new mortgages. The country's largest mortgage backers, Fannie Mae and Freddie Mac, are funded by private lender fees rather than federal spending, so they can continue to issue new loans, albeit at a potentially slower pace. Additionally, the Department of Veteran Affairs and the Federal Housing Administration (FHA) – which accounts for 15 percent of all single-family home mortgages – are expected to be able continue operating fairly smoothly. Although both of these organizations are supported by the federal government, a short-term interruption in funding shouldn't cause any lasting or significant problems.

"The government doesn't generally approve loans, they basically just insure them," said Don Frommeyer, president of the National Association of Mortgage Brokers, in an official statement. "For the most part you aren't going to see much of a hit in the mortgage market unless it goes for a long period of time."

Which is where the real anxiety lies. According to the Zillow Real Estate Blog, a long-term shutdown could disrupt groups like the FHA from issuing new loans at all.

Buyers looking to scoop up new real estate in Rehoboth Beach before the shutdown begins having more adverse effects on the market are encouraged to talk to a Rehoboth real estate specialist today.

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