The U.S. real estate industry is bracing for the impact of the first government shutdown in 17 years, which went into effect Tuesday morning.
In the short term, there should be minimal disruptions in the federal loan processing apparatus, government officials say.
The Federal Housing Authority FHA will continue to endorse single family loans, and underwrite and approve new loans during the shutdown, contrary to some media reports. But the agency will be working with a drastically reduced staff and all 80 Department of Housing and Urban Development field offices will be closed, “with some limited exceptions for a very narrow range of activities that are permitted during a lapse in appropriations,” according to the agency’s contingency plan.
“Because we are able to endorse loans, we don’t expect the impact on the housing market to be significant, as long as the shutdown is brief,” HUD says in its contingency plan. “We could also see a decline in home sales during an extended shutdown period, reversing the trend toward a strengthening market that we’ve been experiencing.”
But HUD is blunt in its assessment if the shutdown continues. HUD’s staffing will go from 8,709 to 349.
“If the shutdown lasts and our commitment authority runs out, we do expect that potential homeowners will be impacted, as well as home sellers and the entire housing market,” HUD says. “We could also see a decline in home sales during an extended shutdown period, reversing the trend toward a strengthening market that we’ve been experiencing.”
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