{"id":76840,"date":"2023-09-25T13:31:05","date_gmt":"2023-09-25T20:31:05","guid":{"rendered":"https:\/\/www.redfin.com\/news\/?p=76840"},"modified":"2023-10-16T11:00:50","modified_gmt":"2023-10-16T18:00:50","slug":"government-shutdown-impact-housing-market","status":"publish","type":"post","link":"https:\/\/www.redfin.com\/news\/government-shutdown-impact-housing-market\/","title":{"rendered":"How Would a Government Shutdown Impact the Housing Market? Low Demand in D.C., Temporary Dip in Mortgage Rates, Loan Delays"},"content":{"rendered":"

The impact of a federal government shutdown on the economy and the U.S. housing market would likely be small, unless it lasts much longer than expected. It could temporarily bring down mortgage rates, which would boost homebuying demand\u2013except in Washington, D.C., where many federal employees would be furloughed. Homebuyers relying on government-backed mortgage loans and flood insurance will also encounter delays. <\/span><\/i><\/p>\n

With less than a week to go before a <\/span>potential government shutdown<\/span><\/a>, many Americans are wondering what it could mean for the economy. The answer: The economic impact would be fairly small, as would the impact on the U.S. housing market\u2013except in the Washington, D.C. area, where it could have some ripple effects.\u00a0<\/span><\/p>\n

Impact on overall economy: Treasury yields likely to decline, Fed less likely to hike interest rates<\/h3>\n

The U.S. government has shut down four times since the 1990s, with an average length of 14 days. Several federal agencies stop nonessential work, and hundreds of thousands of government employees are furloughed.\u00a0<\/span><\/p>\n

Goldman Sachs<\/span><\/a> has estimated that each week the federal government is shut down equals a loss of roughly 0.2 percentage points of GDP. The shutdown only impacts discretionary government spending; it still spends money on mandatory services and debt servicing. Some departments <\/span>are funded<\/span><\/a> even during a government shutdown, as are some workers who are deemed essential.\u00a0<\/span><\/p>\n

The impact is also fairly minimal on the financial markets. Equities typically tick down a bit at the start of a shutdown, but then come back up to pre-shutdown levels by the time it\u2019s over. Treasury yields typically decline slightly. A shutdown makes the Fed slightly more likely to pause interest-rate hikes in November, but unless the shutdown goes on for longer than expected,\u00a0 it will have a small impact compared to incoming economic data, like the next inflation and jobs reports.\u00a0<\/span><\/p>\n

But that economic data could be delayed. If the Department of Labor and Department of Commerce aren\u2019t funded, their monthly reports on jobs and inflation could be delayed. That may mean the Fed has less data than they\u2019d like in November when they decide on a possible interest-rate hike.\u00a0<\/span><\/p>\n

Impact on housing market: Mortgage rates may come down temporarily, delay in FHA\/VA loans, demand likely to dip in D.C.<\/h3>\n

Mortgage rates could come down slightly\u00a0<\/em><\/p>\n