In the wake of the news of the Government Shutdown, consumer fear awakens.
After all, the one and only factor that separates reality from speculation is PERCEPTION!
Over 90% of residential housing depends on the Government for underwriting, insurance, and funding. Questions have arisen as to what would happen if the IRS shutdown and became unable to verify borrowers’ incomes. Freddie Mac issued the following clarification, “You do not need to obtain employment/ income verification prior to closing escrow if a government office providing the verification is not able to do so as a result of the temporary shutdown, nor would it be required on the same loan after the shutdown ends”.
Most economists expect that the effects of the shutdown will be minimal, given that it is short-lived. The most significant impact is consumer perception! This is mainly because most of the negative effects take place during the same time in which positive effects are expected, thus balancing itself out within the same quarter of growth. Over a year, the total would be equal to 0.3% GDP, which is nominal.
To date, consumer markets have not over reacted and overall the economy, year-to-date, has shown growth and a high demand for both residential and commercial real estate.
Historically, following a government shutdown, the feds boost consumption and federal workers’ payroll is restored. We anticipate VA and FHA loans to continue originating, but may have some delays in respects to the underwriting and funding times.