Quite how the largest economy in the world can be brought to its knees by political bickering resulting in the closing down of government while politicians come to their senses just does not make sense. However, this is where we are today with the US government shutdown amid a dispute over the immigration program DACA. The consequences are wide reaching in the short term, assuming this is only a short-term blip, with government departments such as the Internal Revenue Service, Social Security Administration and the Department of Housing and Urban Development all closing down.
Effectively workers are put on “leave” although they will be ready to return to work in an instant once an agreement has finally been reached on the budget.
Will this impact the US real estate market?
There are some scaremongering headlines suggesting that the US real estate market will come to a standstill and the impact could be considerable. The truth of the matter is that banks and private lenders will still operate as normal although there will be a delay approving or rejecting mortgage applications which require tax records and financial certification by government departments. Ironically, Fannie Mae and Freddie Mac, long seen as government controlled bodies, will not be impacted because they are “government-sponsored enterprises”.
As those who work for the Federal Housing Administration will be furloughed (to use the official US term) this will bring to a halt loan applications through the administration. When you bear in mind that this body employs over 8000 people there will be a sudden rush of business once the government comes “back online”.
Short-term worry, medium term back to normal
The National Association of Realtors has been extremely vocal in its concerns about the ongoing political stand-off which will impact every area of US life. There will obviously be an impact if the situation was to continue for a prolonged period of time but we have been here before and the last major stand-off resulted in a two-week government shutdown. There was a decline in real estate transactions during that period but once the government was back up and running the backlog was cleared in a few months. In reality a 16.9% downturn month on month as a consequence of the government shutdown led to a period of month on month increases when things were back to normal.
It is a big worry that politicians seem to take the everyday lives of voters for granted, placing their own political beliefs above those of the electorate. There is a feeling that this government shutdown has been timed to perfection on the anniversary of Donald Trump’s inauguration as president of the USA. Those in the process of applying for mortgages and attempting to close real estate transactions will be biting their nails at this moment in time. There is a chance that some transactions will not be completed because of mortgage approval issues but we can only hope that the political impasse is resolved sooner rather than later.
Do politicians ever think about the consequences of their phoney wars on the lives of everyday US citizens and businesses?