By now, you have most definitely heard that the government shut down at the end of December because Democrats refused to fund President Trump’s construction of “the wall.” No matter where you stand on politics, a government shutdown can have multiple adverse effects on various industries. So, what exactly is the government shutdown’s impact on real estate?
1. Loan Applications
In order to process a loan, lenders have to verify the income and identity of their clients through the IRS and the Social Security Administration. However, during a government shutdown, the IRS will not process any new requests for these documents. As for the verification of Social Security Numbers, expect significant delays. This means that home closing dates will be delayed until these documents can be verified.
2. Unexpected Changes in Plans
The longer the buying and selling process is delayed, the higher the chance of something unexpected occurring – causing the lender, buyer, or seller to change their mind about moving forward on a deal. To illustrate, a buyer that showed interest in a property may change their mind about it the longer they wait to move forward in the process. In the same way, a seller who wished vacate their home on a certain day may be forced to stay longer or explore other options.
3. Increased Mortgage Rates and the “Domino Effect”
If the government shutdown continues, we can expect mortgage rates to rise and from there a “domino effect.” To put this into perspective, rising mortgage rates can turn away prospective buyers, who will likely decide to hold off on purchasing a home until the rates go down. If no one is buying any homes, then the overall demand for homes decreases and causes home values to fall. This could be catastrophic in an economy that has already taken a beating.
4. FHA and VA Loan Delays
Home buyers and sellers who plan on applying for FHA or VA loans can expect delays if this government shutdown continues. While loans insured by FHA and VA have been impacted by government shutdowns in the past, they have minimal staff left working in these offices. Thus, loan turnaround times will be increased, delaying any hopes of buyers and sellers wishing to close a deal on time.
As you can see, the government shutdown has widespread effects on everyone, not just government employees. While we haven’t seen any detrimental effects on the real estate market thus far, we can expect to see some if this shutdown isn’t resolved soon.
Lakeside Title Is Here to Serve You!
Lakeside Title provides title insurance and numerous title-related services, all while making sure your transactions and funds are protected and secure. Our processes streamline residential and commercial real estate transactions for lenders, realtors, buyers, and sellers. To learn more, give us a call at 410-992-1070. We look forward to the chance to serve you!