On December 21, 2018, Congress did not pass a spending bill that included the president’s requested $5 billion in funding for a border wall, and President Donald Trump refused to sign any bill that did not include that funding, resulting in a partial government shutdown.
Here is a good summary of the direct and indirect impacts over the Real Estate Industry.
Direct Impact
This government shutdown means, so far, 420,000 federal employees working without pay and 380,000 federal employees furloughed.
It is clear that the direct impact are those individuals working without pay and furloughed including: janitors, security guards, cafeteria servers among others federal administrative employees, are at risk of being unable to cover their monthly rent or mortgage payments.
The Center for American Progress and Zillow estimates that the partial government shutdown will cause almost $500 million in missed mortgage and rent payments.
Yesterday, Tuesday Jan 08th, the Federal Housing Administration urged lenders to be “sensitive to the financial hardships” experienced by borrowers due to the shutdown, particularly those who’ve been furloughed or have had a reduction in income due to it.
The FHA called on lenders to work with those affected, such as by extending special forbearance plans or, if necessary, any available loss mitigation options to help them avoid foreclosure. The FHA also “strongly” urged all lenders to waive any late fees and suspend credit reporting on those affected.
Indirect Impact
The National Low Income Housing Coalition started a campaign expressing their concerns over the shutdown’s immediate and long-term impact on affordable housing programs and low-income people.
Because several Federal agencies and programs are reducing their staff, many residents living in HUD-subsidized properties are the most vulnerable people – the clear majority are deeply poor seniors, people with disabilities, and families with children.
The longer the shutdown the greater the risk of eviction and potentially homelessness.
The National Association of Realtors also released its own assessment of the shutdown’s impact. NAR estimates the shutdown is having an impact on about 25% of potential home sales.
NAR estimates Home Buyers prefer to postpone the home buying process. Here are some estimations:
• 25% of them due the uncertainty on the economy.
• 17% of them due the delay of US Department of Agriculture loans
• 13% of them due the delay of Internal Revenue Service verification
NAR Chief Economist Lawrence Yun says: “The shutdown is causing tangible harm to potential buyers, the real estate market and economic growth”.
Sources:
• Affordable housing leaders call for
https://www.housingwire.com/articles/47874-affordable-housing-leaders-call-for-end-to-government-shutdown
• Government Shutdown: 800,000 federal employees affected
http://www.cbs8.com/story/39754689/government-shutdown-800000-federal-employees-affected
• Feds could lose up to $2B in pay during
https://federalnewsnetwork.com/federal-newscast/2019/01/federal-employees-could-lose-total-of-2-billion-in-pay-during-government-shutdown/
• The Federal Shutdown Is Costing You Business
https://magazine.realtor/daily-news/2019/01/09/the-federal-shutdown-is-costing-you-business