The Government Shutdown may affect Real Estate over the coming weeks. Perhaps not market values, but existing transactions, and buyers looking to make offers. Being a Realtor, I’m certainly not furloughed and neither are most other private sector jobs. But in a community like Newport RI, it may end up affecting us more directly than we’d like.
Nearly 900,000 federal employees were told not to come into work on Tuesday. That’s nearly a third of all persons being paid directly by the US. These people include members of the DoD, National Parks, Memorial Administration, FHA and IRS. Since 1975 there have been 17 government shutdowns, averaging nearly a week. Ranging from 1 to 21 days each.
How it Affects Newport County:
Here in Newport County, the Department of Defense is a major industry. Many local citizens may see a smaller paycheck this week, and if it continues, no paycheck. This comes out to less spending at restaurants, stores, gas stations and even some people putting buying a house on hold. This will hit our local economy minimally, but as everyday marches on the more we’ll see it in our day-to-day lives.
How it Affects Purchasing a Home:
It may delay closings for home owners or buyers currently under contract. With as much as 90% of the FHA furloughed, and 2/3rds of the IRS not coming to work, much of our mortgages written in the US will have to be postponed. Every FHA loan needs to be approved by the Federal Housing Administration. Everyone acquiring a loan needs to provide tax documents to their lender. This time a year this typically is not much of an issue, but if you’ve asked for extensions, the wait could be much longer than usual. These are all taken for granted in our day-to-day activity of selling real estate, but without them, we could road blocked for some time.
How it Affects the Marketplace:
A major reason of the shutdown is the “Raising of the Debt Ceiling”, the US’s ability to increase our borrowing amount to continue functioning as a country. If we can’t increase our borrowing amount, we’ll have to cut spending or we will default on our debt obligations. Not unlike you and me with making credit card payments, if we miss a payment, our rates go up. Same goes for the United States. If interest rates go up, this will cause mortgage rates to rise as well. In short; higher rates mean less buying power.
What To Do:
If you’re under contract to buy a home contact your mortgage broker/lender. Make sure he has everything, his underwriter doesn’t expect any hiccups and any documents needing to be OK’d by FHA are already stamped. If you need anything from the IRS or FHA anticipate delays, ask for extensions now so there are no surprises. Call your State Rep and explain to him how this gridlock has hit you personally. In short, everything will be OK as long as we’re prepared, but the longer this shutdown goes one, the more it will effect us all.
Jeff Brooks, Realtor, Hogan Associates, 129 Bellevue Ave, Newport, RI 02840 401-484-7368, Jeff Brooks the REALTOR