How the Government Shutdown Will Impact the Real Estate Market
As the U.S. government shutdown over border control continues, with no foreseeable end date on the horizon, we can expect a couple of changes to the real estate market. And with both parties at an impasse over whether or not to fund a $5.7 billion dollar wall, it’s unclear when a resolution would reopen the government and its normal procedures. So far, it isn’t clear whether or not these changes will be of extreme positive or negative impact. But there will be an impact nevertheless to real estate. Here are the three areas that will be affected by the shutdown.
Interest Rates May Drop
During shutdowns, mortgage companies are uncertain about the tides of real estate values and the speed with which loans will be processed. For this reason, interest rates are expected to decline. In the government shutdown of 2013, mainly over disputes over the national budget, interest rates dropped from 4.8 to 4.25, remaining there for the majority of the shutdown, according to the Federal Savings Bank. CNBC online expressed, on January 9, 2019, that though the interest rates plunged from 4.84 to 4.74, the overall mortgage applications spiked a whopping 23.5% the previous week! However, there have been reports of government employees being unable to continue with loan applications due to reported loss of income or simply pulling out of the process altogether.
Loans May Be Processed Slower
Though Fannie Mae and Freddie Mac will continue on with their normal functions and processes, the United States Department of Agriculture (USDA) will not be processing any rural loans. USDA is managed by the Department of Housing and Urban Development (HUD), which is closed until further notice according to HUD.gov. And though the department will process single family loans, national economist with the National Association of Realtors, Lawrence Yun, expects delays because the U.S.D.A. is not expected to be staffed adequately.
Because the Federal Housing Association (FHA) is managed by the Department of Housing and Urban Development, one can expect delays in loan processing. According to HUD, single family home loans will be funded, however home equity conversion mortgages will not. The Veterans Administration is also managed by HUD and will continue to be processed, though delays can also be expected.
IRS Tax Refund Processing May Be Delayed
Russell Vought, director of the White House office of Management and Budget, indicates that tax returns will be processed as usual, beginning January 28, 2019. According to a statement released by IRS commissioner Chuck Rettig, “We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown.” However, there may be delays as only a portion of the IRS will be staffed during the shutdown. IRS.gov indicates they have the authority to issue payment refunds through a permanent, indefinite appropriation directed by Congress. Any delays that are created by the IRS not being fully staffed might also delay the processing of mortgage loans, as lenders will require that homebuyers present their tax returns in the processing of a loan application.
For more questions about how you might be able to take advantage of lower interest rates and/ or how to best begin and manage a home loan during the government shutdown, please contact Theresa Barron at 614-778-8503 or shoot us an email at firstname.lastname@example.org.