Two full weeks have passed since the government shutdown[1] began. And as of Thursday, there still was not much hope that the stalemate in Congress would come to a close anytime soon.
Democrats on Thursday blocked a bill that would have funded the Pentagon for a year, citing objections to spending on the military without also funding other important programs, including healthcare and housing. Senate Majority Leader John Thune sent the upper chamber home for the weekend after the vote on Thursday, ensuring that a funding lapse would last at least until Monday.
As the shutdown continues, it is also increasingly impacting parts of the real estate industry, including government-backed loan programs, operations at the Department of Housing and Urban Development (HUD), mortgage rates, select state economies and more.
“Real estate accounts for nearly 20 percent of the U.S. economy, touching every community and driving millions of jobs,” NAR Executive Vice President and Chief Advocacy Officer Shannon McGahn said in an op-ed for HousingWire[2]. “Each additional day of uncertainty threatens programs that help buyers, sellers and property owners navigate an already challenging market.”
Previously, Inman reported on how the shutdown was impacting things[3] like access to housing data, decision-making on home moves, mortgage rates, and government-backed home loans and flood insurance policies. Since then, new complications have come into play across the real estate industry. Here’s the latest.
Layoffs at HUD
A total of 442 HUD employees were included in the last round of the Trump administration’s layoffs.
On Wednesday, U.S. District Judge Susan Illston granted a temporary restraining order requested by federal workers unions, which has halted the layoffs for now.
Cuts at HUD were mostly concentrated in the Office of Fair Housing and Equal Opportunity, where over 100 workers were given notice. The offices of Public and Indian Housing, Housing Counseling, Housing Operations, and Community Planning and Development were also impacted by the layoffs.
Fair housing advocates and Democrat lawmakers condemned the layoffs and how they would negatively impact efforts to prevent housing discrimination.
“President Trump has once again chosen to attack working families and the very public servants who help keep roofs over their heads,” Rep. Maxine Waters, the Democrats’ ranking member of the House Financial Services Committee, said in a statement. “Let’s be clear: Trump, with full support from Republicans, is illegally using this shutdown as a pretext to undermine our housing system and dismantle programs that protect millions of families in dire need of federal assistance.”
USDA loans
Homebuyers who are looking to finance their new home with a government-backed mortgage now have fewer options available to them, at least for the foreseeable future.
Due to the government shutdown, the U.S. Department of Agriculture has stopped issuing new loans[4] and will not advance funds for loans that it has approved during the shutdown, the department detailed in its Lapse of Funding Plan[5].
USDA home loans require no down payment, and are available for homebuyers in select communities, which are typically in rural areas. They are also designated for individuals with low or moderate incomes.
FHA and VA loans continue to be issued during the shutdown, but may also be disrupted because of staffing shortages. Delays in IRS income verifications can also trickle down to delays in processing FHA and VA loans. The USDA’s loan processing has been paused because most of the agency’s staff has been furloughed.
With the timeline of the shutdown still uncertain, real estate agents need to prepare their homebuyers who are counting on a USDA loan with realistic expectations, since there’s not a clear timeline for when they might again be available.
States taking a hit
Virginia, Maryland and the District of Columbia are, not surprisingly, taking a significant hit now because those states contain some of the largest shares of federal jobs and contract workers. Government-related job disruptions continue to slow real estate markets in those areas.
A handful of other states that people might not traditionally associate with the federal government are also being significantly impacted, specifically when it comes to real estate as a percentage of gross state product (GSP), according to a report released this week by WalletHub[6].
Those states include Florida, Delaware, Arizona, Hawaii and Nevada, according to WalletHub’s data.
In Florida, the real estate industry accounted for $381.4 billion, representing 24.1 percent of the gross state product in 2023, the National Association of Realtors said in a report[7] from May 2024. It was the top state for economic contributions through real estate that year. With mortgage processing slowed as a result of the shutdown, the state’s economy could take a significant hit.
The typical home sale in Florida adds roughly $123,000 to the local economy and supports about two jobs across construction, retail and home services industries, according to NAR.
“Given Florida’s large share of national housing activity, even a modest pullback in buyer engagement could visibly nudge national sales and inventory metrics,” Realtor.com Senior Economist Anthony Smith said in a story by the portal’s news site[8].
The remaining top five states impacted the most by real estate as a percentage of GSP represent less in dollar amounts, but a similar share of each state’s GSP. In Hawaii, real estate makes up $24.8 billion in GSP, which represents nearly 23 percent of the state’s total.
Mortgage rates
Mortgage rates have remained relatively steady as the government shutdown has continued, but ticked down slightly to 6.22 percent[9] on 30-year fixed-rate mortgages this week.
Federal Reserve Chair Jerome Powell said this week that policymakers are open to another rate cut this month, which means rates could come down even further. Another interest rate cut is also expected in December.
If the shutdown continues for some time and investors start to lose more faith in the economy, they may invest more in Treasury bonds, which are generally considered a stable investment. As demands for those bonds grows, their yields decrease, impacting the metric by which mortgage lenders set rates.
References
- ^ government shutdown (www.inman.com)
- ^ HousingWire (www.housingwire.com)
- ^ Inman reported on how the shutdown was impacting things (www.inman.com)
- ^ U.S. Department of Agriculture has stopped issuing new loans (www.inman.com)
- ^ Lapse of Funding Plan (www.usda.gov)
- ^ WalletHub (wallethub.com)
- ^ a report (www.nar.realtor)
- ^ the portal’s news site (www.realtor.com)
- ^ ticked down slightly to 6.22 percent (www.inman.com)
- ^ Email Lillian Dickerson (www.inman.com)