The government shutdown has caused uncertainty in the market nationwide
The National Association of Realtors did a survey of over 2,000 realtors and 25% said their transaction fell through due to this uncertainty. Nearly 90% of all mortgages are government backed and 75% of those were able to close their transactions with few or no delays.
Closings have only been affected if there was a delay in retrieving a payoff on an IRS debt or HUD lien. The title company in that case would not be able to issue clear title. If a lender needs to verify the income and employment of a federal worker on furlough, there may be delays if their employer is unable to be contacted.
Conventional, FHA and VA loans are not heavily impacted and are able to close without major delays. FHA staffing is limited so FHA loans for single family homes will be processed, albeit slower than usual, around 45 days.
The only majorly impacted government backed mortgage is the USDA loan which affects mainly those in rural areas. No new loans will be processed through the USDA while the government is shut down, affecting development and availability of rural housing. Depending on how long the shutdown extends will dictate how long the delays will be for the USDA to process final approvals once the government opens again.
For the most part, the flood certification process will not be impacted. However, if a situation requires additional research, such as mapping issues, it will be impacted.
Loans requiring social security number verification will not close without a completed validation. Right now the social security administration will not process any SSA89 forms.
NAR expects home sales to flatten, sales to increase 1% to about 5.4 million and the median home price to rise 3.1% to around $266,800 in 2019, and $274,000 in 2020. Inventory continues to be a concern. All indications are that we have a housing shortage. Chief Economic Lawrence Yun stated that if you look at population growth and job growth, it is clear that we are not producing enough houses.
Tucson Real Estate Market Impact
For buyers missing paychecks due to the shutdown, they will need to have two months reserves which is comprised of the estimated monthly mortgage payment and monthly HOA fees in the bank. This can be investment or retirement accounts – stocks, CDs, etc. on top of the required down payment and closing costs related to the transaction.
Should the shutdown extend past January, the self-employed borrower needing to file their 2018 tax returns to qualify will be impacted. Self-employed borrowers are required to have filed two years of tax returns for a lender to calculate their qualifying income by averaging the most recent two years of tax returns and making sure there is not a significant decline in income. If a self-employed borrower needs for 2018 to count as the second year of filed returns, they will need to wait until the government opens to file their 2018 tax returns.
The ramifications of the government shutdown will be brought to the attention of the lenders by the different agencies Fannie, Freddie, HUD, FHA, VA and USDA. These notices are distributed to all lenders so if you are thinking of obtaining a mortgage during this time, be sure to find a lender that you feel confident will keep you updated of any changes during your home search.