So, the week is ending, and it doesn’t seem that the government is any closer to resolving the issues affecting the shutdown. There are more than 800,000 federal workers out of work. Such a sad state of affairs.
Let’s see how the shutdown has already impacted the housing market and what the projections are for a continued shutdown.
According to Freddie Mac, 30-year fixed-rate mortgage rates have dropped to an average 4.22% this week from the 4.32% average of last week. These numbers are reflective of the average for the nation. Frank Nothaft, vice president and chief economist for Freddie Mac said:
“With the onset of the federal government shutdown and declining consumer confidence, fixed mortgage rates fell for the third consecutive week.”
In terms of home loan processing, lenders and buyers have run into a snag. The IRS is closed, so no forms are being processed. Many lenders require tax return transcripts from their mortgage applicants. One can imagine the kind of impact this might have on buyers who are trying to acquire loans. As a result of this issue, some lenders are changing their policies to allow for this type of verification to occur after closing. Even Fannie Mae and Freddie Mac have made some changes to certain requirements which will allow people to close on time.
Looking at the impact of the shutdown on our economy as a whole, according to a recent survey by Bloomberg, a partial shutdown of the government for one week could end up in a 0.1% reduction in economic growth. According to IHC Inc., a week-long shut down could amount to a loss of output of $300 million a day.
If it lasts longer however, Stephen Stanley, chief economist at Pierpont Securities LLC in CT said:
“The impact on the broader economy does start to kick in as the shutdown extends beyond a week, two weeks. If it’s a couple of days or even a week it’s something that we’ll have forgotten about a month or two from now.”
And according to Guy Lebas, chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia:
“Beyond a week, the costs from a shutdown to the $15.7 trillion economy would speed up amid declining confidence and spending among consumers and businesses.”
And finally, according to Yelena Shulyatyeva, a U.S. economist at BNP Paribas in NY:
“If the shutdown stretches on to a week or more, consumer confidence, equity markets and the increased likelihood of default could knock as much as 0.2 percentage points or more off the annualized pace of quarter four GDP.”
It’s hard to imagine that the shutdown will actually continue for another week or more, but then again, I said the same thing this past Monday night about an initial shutdown beginning Oct. 1. Let’s hope things change soon.
Have a restful weekend.
(Information for today’s blog comes from RealtorMag (NAR) and Bloomberg.)