We don’t really know if the recent government shutdown will destroy the economic momentum we’ve gained, but we do know the furlough of some 800,000 government employees will undoubtedly slow things down. Another thing we know is that the longer this thing goes on, the worse the effects will be. Some employees of the Pentagon were recalled for work beginning on Monday, and the House passed a bill to approve back pay for furloughed employees. That’s good news for those employees, but what about the millions of Americans who need and/or depend on their services. What about the work that’s not getting done while they are at home?
Imagine being a homebuyer in the middle of a real estate deal and the federal government shuts down. You need your tax transcripts to get your mortgage loan approved and the only department that has the keys to what you need is on furlough.
The approval of most mortgage loans, at least 99% of mortgage loans, require tax transcripts. Homebuyers and Real Estate Agents who are in this predicament will surely see a stall in their real estate transaction. In some cases, deals could potentially fall apart because of the inability for homebuyers to get what they need from the government. Plus, these delays could cause some pre-approvals to expire and force homebuyers to purchase at a higher interest rate if interest rates continue to rise. Because interest rates are a major factor in how much house a homebuyer can buy, sellers and real estate agents are affected as well.
Even if you are a homebuyer who was lucky enough to have gotten your transcripts and your pre-approval to buy a home, you could still have some issues if you applied for a mortgage loan from the Federal Housing Administration. FHA mortgage loans aren’t federally funded, but they are guaranteed by the federal government. Some lenders may not be willing to lend without a guarantee already in place. If you happen to be in this situation, go with a larger institution that is in a better position to fund the loan even in the absence of a guarantee. Otherwise, you’ll risk having your loan on hold and your real estate deal falling apart.
In Atlanta, there is already a shortage of real estate on the market relative to the number of Atlanta homebuyers who are looking to buy a home right now. Many of the houses on the Atlanta real estate market are foreclosures and HUD homes, and the Department of Housing and Urban development is working on a skeleton crew during the furlough with 337 out of 8,709 employees on the job. There’s a possibility, but seemingly a slim chance for new HUD homes to come on the market for a while. If this will be the case, Atlanta homebuyers will see even slimmer pickings for housing in the current Atlanta real estate market.
The American people as a whole immediately felt the effects of the shutdown. The gravity of the effects, however, will be determined by the length of the furloughs. The longer the furlough, the dimmer the bright spot of the housing market recovery. We’re all here in the same boat, waiting to see what happens.
In what ways have you felt the effects of the recent government shutdown?