The partial shutdown of the federal government is entering its 21st day, and reports of its myriad ripple effects continue to surface. The latest bit of insight from the real estate industry is a Jan. 7 survey by the National Association of Realtors, which polled 2,211 members to understand if and how the shutdown was affecting their transactions. Of the responses collected, 75 percent said the shutdown had not yet impacted their business. However, 22 percent reported there had been a noticeable effect on either current clients or transactions in the pipeline.
Digging deeper, Realtors responding to the online survey mostly said that any shutdown-related impact they had seen on closings or contracts came down to buyer anxiety. Twenty-five percent of respondents who reported some interruption explained that the buyer in the transaction simply “decided not to buy” due to “general economic uncertainty.” The next most common reasons given for a shutdown-related closing delay were problems with a USDA loan (17 percent), problems with IRS income verification (13 percent) or issues tied to FHA loans (9 percent). Another 9 percent of responses cited a direct impact because their buyer was a furloughed federal employee. Some transactions were also impacted because buyers using federal housing loan programs offered through the USDA, FHA or VA lost their pending bids.
“The housing industry was already facing market challenges before any government closure. The shutdown has made matters worse,” NAR chief economist Lawrence Yun said in a statement. “The shutdown is causing tangible harm to potential buyers, the real estate market and economic growth.”
The shutdown has also put financial markets on edge, as the release of key data reports on housing are delayed due to the lapse in funding, the Wall Street Journal reported. The Commerce Department has already missed the planned release of new-home sales, which was due in late December. Other reports on the federal budget deficit, international trade and economic growth are also delayed until funding is approved.
In other national real estate news:
- Detailed minutes of the Federal Reserve’s last meeting were released Jan. 9, providing greater clarity on the agency’s interest rate strategy going forward. During the last meeting of the Federal Open Market Committee Dec. 18-19, the Fed raised its key interest rate for the fourth time in a year, but signaled it would reconsider plans for a similar pace of rate hikes in 2019. With the release of minutes from the meeting, analysts received further confirmation that Fed officials had grown more cautious in the wake of recent market turbulence. As a result, the body of evidence suggests interest rates on mortgages and other consumer loans may not rise as fast or as high in 2019 as was previously anticipated. Fed officials still believe that the overall health of the U.S. economy is strong despite recent domestic and international signs of slowing growth.
- Mortgage applications rose over the previous week in the first home lending activity report of the year from the Mortgage Bankers Association. For the week that ended Jan. 4, mortgage application volume rose 23.5 percent above the previous week on a seasonally adjusted basis. Much of the activity came from refinance applications, although requests for purchase loans also rose. The MBA attributed this to the year-end drop in mortgage rates, likely precipitated by weaker expectations of interest rate growth in 2019. On the same day as the MBA report’s release, Freddie Mac’s Primary Mortgage Market Survey found average home loan rates were at nine-month lows as of Jan. 10.
- A landmark in the New York City skyline, the Chrysler Building, is up for sale, but expectations for the current owner’s profit are weak. The last time the building’s ownership changed hands was in 2008, when the Abu Dhabi Investment Council paid $800 million for a 90 percent ownership stake. New York developer Tishman Speyer holds the other 10 percent. CBRE was picked to broker the planned sale. While the listing price was not immediately disclosed to the public, commercial real estate analysts are skeptical that the historic skyscraper, completed in 1930, will sell for more than its majority owners paid for it 11 years ago. The building’s occupancy rate is below average for a Midtown Manhattan property, perhaps because tenants today are attracted to newer towers with updated amenities.