All everyone seems to be talking about these days is the government shutdown - and with good reason. At of the stroke of midnight on December 21st, 2018, President Trump and Congress were unable to pass a budget that made everyone happy. The result of this failure, which crossed party lines, was an indefinite government shutdown that has furloughed federal employees in many different areas of the workforce. With Northern Virginia’s proximity to the Capital, it makes sense that our community is feeling extensive shockwaves. This extends to the real estate market. Although it is being reported that 75 percent of current in-progress home sales are not affected by the shutdown, the National Association of Realtors determined that 11 percent of its members did report an impact on current clients and 11 percent on potential clients.
There is another problem brewing, however, which is consumer confidence in the market. The NAR found that some 25 percent of potential buyers have essentially been scared off by the shutdown, which has had a ripple effect throughout the industry resulting in fewer approvals, fewer contracts, and fewer closings. It’s nowhere near time for a panic, but it would be a good idea to keep an eye on the situation as it develops and impacts would-be homeowners’ mentality and disposition towards settling down.
As for the mechanics of home sales, the FHA will maintain operations in a limited capacity. It will stamp new loans in the Single Family Mortgage Loan Program, with the exception of HECM loans. It will not make new commitments in the Multi-family Program during the shutdown. FHA will maintain operational activities including paying claims and collecting premiums, although some delays are to be expected due to short staffing. The FHA will carry on encouraging providers to offer forbearances to borrowers impacted financially by the shutdown, though these providers may or may not honor their requirement to due so. It remains to be seen what the shutdown will do to the number of delinquencies and foreclosures happening.
The IRS, Fannie Mae, and Freddie Mac are all not impacted by the shutdown, and will continue business as usual. From the NRA regarding flood insurance through federal programs:
"FEMA and the Administration deserve credit for hearing our concerns and acting swiftly to address them," says NAR President John Smaby. "This new decision means thousands of home sale transactions in communities across the country can go forward without interruption, as Congress intended when it renewed the flood insurance program earlier this week. Our research has shown that 40,000 home sales are lost every month that flood insurance is not available."