Government Shutdown Spurs Home-Seller Concern in Washington, D.C.

It is official. The government has shut down and if it doesn’t re-open soon, the Washington, D.C. real estate market is going to take a hit. While the shutdown is in effect, homebuyers across the country will see delays in loan approvals from the Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) and won’t be able to retrieve tax return records from the Internal Revenue Service (IRS). In D.C., where most of the 800,000 furloughed employees live and work, the impact of the shutdown is likely to be more pronounced. Here’s the short-term impact we’re already seeing and expect in the Washington, D.C. housing market:
Some sellers are pulling their homes off the market…
With a large portion of Washington, D.C. temporarily without a paycheck, many home sellers in the D.C.-area as of October 1 were unnerved about a potential drop in demand. According to Redfin D.C. Agent Jeremy Cunningham, “Home sellers in the D.C.-area are concerned. Those with active listings are considering pulling their homes off the market while those who planned to list this week are choosing to delay. These sellers are concerned that, while the government is closed, they are unlikely to get any offers, let alone attractive ones.”
…while others are anxious to find a buyer now…
For other sellers, the expectation of reduced demand could increase their urgency to find a buyer. According to Redfin D.C. Agent Alyssa Cokinos, “A seller’s agent told me that, in light of the government shutdown, his seller is planning to accept the first offer that comes in.”
…and sellers are less likely to consider buyers using FHA/VA loans
Delays and backlogs from the FHA and VA are likely to harm buyer competitiveness in the near-term. According to Cunningham, “While the government is shut down, sellers will be less likely to consider offers from buyers using FHA and VA loans because they’re more risky.” Redfin buyers in D.C. more frequently use FHA and VA-backed loans than in the rest of the country; over the past year, 15 percent of Redfin clients in the D.C.-area used a loan backed by the FHA or VA compared to 9 percent across Redfin’s 22 markets.
While market anxiety is likely to last only as long as the government shutdown, the timing and length of the shutdown could have a broader impact. In recent months, sellers have started to lose some confidence; Redfin’s Seller Survey in June found that 61 percent of D.C.-area respondents worried that higher mortgage rates would reduce demand for their home. A prolonged government shutdown would deal D.C.-area sellers another blow by robbing precious end-of-season selling time and potentially accelerating the end of the 2013 real estate cycle as some buyers shift their focus away from the housing market.