CoStar economist details housing risks of extended government shutdown

"Carl Gomez, chief economist and head of market analytics at CoStar Group, said the shutdown is already casting a psychological shadow across sectors that rely on federal operations, even if the housing market has not yet shown deep disruption. It has not necessarily translated much into the housing market directly yet, he said. It's early days. The rule of thumb that we usually say is, you know, attempt at GDP could be affected by a shutdown, if the shutdown is two weeks or more. That's the direct economic impact. The psychological impacts are another story. It definitely lends itself to some uncertainty for business, consumers and just about anybody who relies on the federal government to provide services."

"On Monday, Trump momentarily suggested he might enter talks with Democrats, but within hours reversed course declaring that Democrats would need to end the shutdown before any negotiations could take place. I am happy to work with the Democrats on their Failed Healthcare Policies, or anything else, but first they must allow our Government to re-open, Trump said on social media. During the 35-day shutdown from December 2018 to January 2019, existing home sales dipped from 5.18 million in November 2018 to 5.01 million in December and 4.97 million in January before rebounding to 5.31 million once the government reopened, according to Realtor.com."

"A study published by the American Land Title Association showed that among closings impacted at that time, 17% cited delays in USDA loan closings, 13% cited delays in IRS income verification and 9% cited other government-induced delays. In the 2013 shutdown, mortgage application activity dropped the Mortgage Bankers Association found applications declined 7% in the second week of disruption. A Zillow analysis from 2018 estimated that about 3,500 federally backed mortgage loans per business day could be delayed in a shutdown scenario."

A government shutdown casts a psychological shadow across sectors reliant on federal operations and creates uncertainty for businesses, consumers and service recipients. Short-term housing market effects have been limited so far, but historical shutdowns produced measurable impacts. The 35-day December 2018–January 2019 shutdown coincided with existing home sales falling from 5.18 million to 4.97 million before rebounding after reopening. Title and loan closings experienced delays from USDA, IRS and other government verifications. Mortgage application activity declined in prior shutdowns, and analyses estimated thousands of federally backed loan closings could be delayed per business day in a prolonged shutdown.

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