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Shutdown Over? The Impact on Real Estate



Senate leaders agreed to a compromise bill Monday to reopen the federal government for three weeks, and a final vote to approve it was expected later in the day. That’s good news for real estate because home sales could stall if a shutdown persists, although the impact would be limited. “We urge Congress to come together and reach an agreement so we can avoid any negative effects on our military, federal employees, housing markets, and the economy,” Elizabeth Mendenhall, president of the National Association of REALTORS®, said in a statement over the weekend.

Access an NAR memo on how the shutdown impacts federal programs important to real estate.

The last government shutdown occurred in 2013, and the impasse lasted almost two weeks. During that period, 17 percent of real estate professionals said their transactions were delayed or impacted in other ways.

The current shutdown is in its third day. If lawmakers pass a short, three-week budget extension, the disruption will be short enough to have minimal impact on home sales. But if another shutdown occurs in three weeks, here’s what could happen.

  • Some home sales, such as new construction in special flood hazard areas, could see a delay because the National Flood Insurance Program won’t be able to issue new policies or renew existing policies during the shutdown. However, most transactions involving homes with existing policies won’t be affected because their policies will transfer over to the new owners. Existing policies that expire during the shutdown won’t be affected for 30 days. There will be no impact on homeowners filing flood insurance claims; they will get processed as usual.

  • Home sale transactions involving FHA mortgage insurance should proceed without interruption. The agency can continue to endorse new insurance commitments, although processing could take longer because of staff shortages. Commercial investment projects using FHA multifamily insurance will face delays, because the agency won’t make new insurance commitments for those projects during the shutdown.

  • All mortgage transactions, including those involving conventional mortgage financing, could face longer processing times simply because of staff shortages at the IRS, notably those who process mortgage lenders’ requests to verify applicants’ tax returns and Social Security Administration staff who verify social security numbers.

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