As many people have heard, the U.S. government shutdown occurred from December 22, 2018, to January 25, 2019. There were many factors affected by the government shutdown including the scientific community, the criminal justice system, the internal revenue service (IRS), and even the real estate market. For instance, homebuyers and real estate agents faced delayed closings.
With the already struggle to gain momentum, the government shutdown did not help the real estate market at all and only slowed things down, which could result in some long-term consequences. Here’s how the government shut down affected the real estate market.
The effect on the IRS – This was the largest issue that impacted the real estate market. Most loans require the form 4506-T, which is a document that has tax transcripts on file from the IRS. Due to the government shutdown, these files were delayed in delivery.
The housing market – From the buyer to the real estate agent, all factors in the whole housing market were impacted in some way. Many home sales were paused due to the standstill of new flood insurance policies, which was stopped by the Federal Emergency Management Administration. If the shutdown had continued any longer, there could have been a major decline in home sales, which would have prohibited the real estate market’s journey to improvement.
Economy effects – Everyone knows that selling your home or even buying one is a lengthy, time-consuming transaction that can cause serious anxiety. With the government shutdown in the picture, this did not help the situation. Delays in this process definitely made a negative impact on consumers and even the economy as a whole.
The USDA stopped processing loans – The USDA (U.S. Department of Agriculture) temporarily stopped issuing new USDA Direct Loans and Guaranteed Loans, while scheduled closings of Direct Loans were canceled. Some people who were planning to use the program for making a home purchase had to put their transaction to a halt depending on the lender.
Social Security reports stopped – This mainly affected homebuyers who wanted to process a mortgage application. This enables them to borrow money to buy a home. The application requires the applicant’s social security number, which is verified by the lender through the Social Security Administration. Since delays in this process were expected, government-sponsored agencies went easy on the rules for lenders submitting reports before delivering the loan.
The government shut down caused some negative impacts to the real estate market overall, but despite this event; it is still more stable than it was last year.