The 2019 Government shut down continues and concerns are growing for the real estate market, government backed mortgages, insurance, closings in general. In fact, I have been personally affected, and not just as a real estate agent, but as a home seller.
I listed my home for sale in December and it went under contract quickly – prior to the shut down. I had already moved out into my new home, so it’s sitting vacant, just waiting for closing. Never have I experienced the emotions my clients must go through more than with this home sale. We are scheduled to close on 1/18. The problem is the buyer is using a VA government backed loan and he is Coast Guard. He got paid his 12/31 paycheck but apparently paychecks have stopped to the Coast Guard due to the government shut down. We are now in limbo on when we can close because we need his next paystub of 1/15 for the VA loan – something the VA requires to underwrite the loan. We are having trouble getting through via phone to the VA because they are on a skeleton crew and we are in unchartered territory as to what happens if the government does not reopen soon. Will my closing on 1/18 happen? Who knows. I’ll update later as to if and when we get a hold of the VA and see what they say. But if this closing gets delayed into February, this means I am paying now two mortgages (the old house and the new house), not just one – something most Americans can not afford to do.
Side note: A cousin of mine is also Coast Guard. He and his wife just had their second baby and she’s a stay at home mom. They’ve been told to “have a garage sale or try babysitting” to help get them through this furlough. Are you serious right now?
The powers-that-be on the Hill have got to end this madness. Fighting over the border wall is putting our own citizens in harms way. It’s taking money out of their pockets used to feed their families, and is taking away the American Dream of owning a home – and shelter is a basic need that is now in limbo for many like the buyer of my home. This shut down is also making our own borders – via our airports – more vulnerable, as TSA agents have walked off duty since they aren’t getting paid. When does this madness end?
Without trying to get overly political or choose a side (no pun intended) publicly, I just want my government reopened. Here are some stats we are hearing about how the government shut down is affecting real estate.
SHUTDOWN FAST FACTS
- Started on December 22
- Second-longest on record in the US
- More than 800,000 federal workers affected in nine departments, as well as several agencies
- Trump demands $5.7bn in wall funding – a demand Democrats oppose
- Key parts of the US government shut down on December 22 after President Donald Trump and Democratic politicians hit an impasse over the president’s request for $5bn in funding for a wall on the US-Mexico border, a demand Democrats oppose.
- Trump has so far refused to back down on the request, pushing the shutdown into its 20th day and making it the second-longest in US history.
As talks continue in Washington, DC over the partial shutdown, we break down what you need to know:
What departments are affected? What does the shutdown mean for federal workers?
The shutdown affects more than 800,000 federal workers in nine different departments, as well as several federal agencies. This includes the departments of Agriculture, Commerce, Justice, Homeland Security, Housing and Urban Development, Interior, State, Transportation and Treasury.
Federal workers deemed “essential” are required to work without pay. Others are furloughed, or placed on temporary leave.
Federal employees have sued the US government over the requirement that some workers must work without pay. After past government shutdowns, Congress has approved back pay for federal workers, but the American Federation of Government Employees, which launched the recent lawsuit, called the requirement to work without pay “inhumane”.
The IRS has stopped many of its services, but officials said the agency would continue issuing tax refunds.
Immigration courts have also been affected, worsening an already existing backlog, which includes more than 800,000 cases.
MarketWatch.com and the National Association of Realtors surveyed Realtors to find:
- 11% reporting an impact on current clients and another 11% reporting an impact on potential clients.
- The study of 2,211 members did find, notably, that 75% of agents found no impact. Still there were a number of ways the government shutdown impacted the market.
- Of those that reported an impact, 25% was when a buyer decided not to buy because of government uncertainty. That question specifically excluded federal government employees deciding not to buy.
- The survey did find 9% of agents said they were impacted because a federal government employee opted not to buy.
But there are other factors at work as well: some 17%, for instance, reported a closing delay due to a USDA loan, 13% reporting a delay due to IRS income verification (my scenario!) and 9% reported a closing delay due to a hang up for their FHA or VA loan (this too!), all showing the outsized role the federal government plays in the housing market.
How could the shutdown affect potential foreclosures?
With no end in sight, the government shutdown has many federal workers are going without pay. But they’re still facing rent and mortgage payments. Or like me, with their home under contract and a “who knows when closing date” they stuck are paying TWO mortgages until the one under contract closes (or not paying one of them which brings about a whole other host of problems).
The 800,000 furloughed workers owe about $438 million in mortgage and rent payments this month, Inman.com reported. In many parts of the country, home affordability is already stretched and missing a single payment can begin the long process towards eviction or foreclosure. This will have a long term economic impact on our own citizens. At a time when the mortgage delinquency has hit an 18-year low, furloughed workers struggling to make payments could potentially cause an uptick in delinquencies. Mortgages in serious delinquency, or more than 90 days late on their payment, fell to the lowest level since 2006.