The Shutdown and its impacts on the mechanics that allow real estate and construction buyers and sellers of all kinds do deals with financing involved–it’s the big story of the moment. It’s also one–due to the unpredictability and intense polarization in partisan politics on Capitol Hill and the White House–that could flip like a switch at any moment from a status of relatively “far apart” on a deal, to one that at least temporarily serves as an acceptable compromise.
By the time we publish and push BUILDER Pulse to you Monday, a funding measure of some sort could be inching into place, and federal offices could open like they do most non-holiday Mondays, when there’s an inch or so of snow that delays the opening.
Here’s a piece from Zillow that calculates, based on a fairly recent look-back to a Federal Government shutdown in October 2013, what the daily tally might look like for the number of home property borrowers whose mortgage processes and approvals might stall out in the throes of the current government shutdown, which began at 12:01 am, Saturday, Jan. 20.
Congress’s failure to pass a stopgap continuing resolution measure to fund the government for a six-week period this past Friday night closed down the offices of many federal workers, and they’ll stay shut until a funding measure gets a green light from both the House and Senate.
Meanwhile, Zillow estimates that Vets and borrowers from FHA and Rural Housing Service mortgage lenders are going to be dealing with snags in their loan process, since federal government workers staff these lending operations. If the shutdown lasts about the same number of days as the recent one in October 2013–16 days–Zillow researchers suggest that as many as 42,000 mortgage loans may head into a black hole of delays on these federally-backed mortgages.
Here’s a couple of qualifiers worth noting from Zillow:
Fannie Mae and Freddie Mac are under federal conservatorship and do have federal backing, but they operate outside the government and their workers are not federal employees and so would not be furloughed in the event of a government shutdown. Loans backed by these two entities represent roughly two-thirds of all federally backed loans written nationwide, according to federal data. Any federal shutdown, while certainly bothersome, would have limited direct impact on the bulk of the for-sale housing market.
It is less clear how renters reliant on federally funded vouchers to help pay their rent will be affected by this closure. The timing of this shutdown roughly in the middle of the month may provide some cushion for these renters: Vouchers needed to pay January rent have already very likely been funded, and those needed to pay February rent would come into play only if the shutdown were to last more than a week.
Gulp.
With considerable political risk on all sides of the temporary Continuing Resolution to fund the government, you can bet all sides are bent on pursuing a path forward to a deal to kick the government back into gear before long.
Over the weekend, Senators on both sides of the aisle traded accusatory rhetoric and at the same time swore they were working to avoid allowing the shutdown to last into the new week starting Monday. Wall Street Journal staffers Siobhan Hughes, Kristina Peterson and Byron Tau reported:
Senators said Sunday they hoped to be able to reopen the government before the shutdown’s effects expanded Monday and both parties became more entrenched in their positions.
“It is absolutely our goal to make sure there are discussions today with opportunity for compromise yet tonight,” Sen. Heidi Heitkamp (D., N.D.) said. “That is absolutely critical that we not continue this, number one on behalf of the country, but I think also, resolution gets more difficult the longer we wait.”
For builders, this too shall pass. Heads focused more on the weeds, especially those new communities opening the weekend after Super Bowl LII.
