Congress has until the end of the week to fund the government and avoid a federal shutdown, which experts warn could damage the already struggling housing market.
Why It Matters
Republicans have a razor-thin majority in Congress and need near-unanimous backing to pass a short-term funding bill, which Democrats strongly oppose.
They have until the end of the day on Friday, March 14, to pass the continuing resolution and extend government funding for federal agencies and programs through September. If they fail, agencies across the government may be forced to shut down some of their projects and activities.
Last weekend, President Donald Trump admitted that a government shutdown “could happen,” though he expressed confidence in House Republicans passing the stopgap measure. A government shutdown could negatively impact the U.S. housing market, adding new challenges to struggling homebuyers.
What To Know
While the severity of a government shutdown’s impact on the U.S. housing market would depend on its duration, the real estate sector would not emerge unscathed.
“There is no upside from a government shutdown for the housing market, but the downside is limited until the shutdown were to drag on for more than a few weeks and further disrupt an already increasingly fragile economy,” Mark Zandi, chief economist at Moody’s Analytics, told Newsweek.
“The most direct link between a shutdown and housing is through the National Flood Insurance Program, which would not be able to issue new policies that are important for closing home sales in certain communities,” he added. “But this won’t be a serious problem unless the shutdown continued for a while.”
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NFIP provides affordable flood insurance to property owners in almost 23,000 at-risk communities nationwide. According to the latest data from the Congressional Research Center, the program has more than 4.7 million flood insurance policies, providing more than $1.3 trillion in coverage.
Homes in high-risk flood areas of the U.S. with mortgages from government-backed lenders are legally required to have flood insurance. Should NFIP be unable to offer new policies because of a government shutdown, interested buyers in these areas might have to drop out of pending sales, affecting properties for which they can no longer obtain coverage.
According to Lawrence Yun, chief economist at the National Association of Realtors, based on recent government shutdowns, the impact on the housing market would be minimal.
“Most people assume that any missed paychecks are temporary, and they will be made whole once the shutdown ends,” he told Newsweek.
On the other hand, a longer government shutdown would have the potential to create a downturn in the U.S. economy, eroding buyers’ purchasing power and hurting house demand. Uncertainty in the markets could also drive mortgage rates to spike or drop.
“The uncertainty is one more element that could lead to volatility in the mortgage and other financial markets,” Realtor.com Chief Economist Danielle Hale said in 2023, when the country was facing the possibility of a government shutdown.
In case of a government shutdown, home sales would also likely slow down due to the Internal Revenue Service’s inability to provide income verifications, which has happened in previous shutdowns, Realtor.com reported.
“Mortgage rates may temporarily decline as a safe asset investment,” Yun said. “No one believes that the U.S. federal government would not honor its interest payment obligations once the shutdown ends. Also, in the past some mortgage approvals were delayed if certain government-backed loans were delayed or income could not be verified by the IRS.”
Most experts expect mortgage rates to linger between 6 percent and 7 percent in 2025 and 2026.
The biggest impact on a local level, however, would be in the area where federal workers are concentrated, including Washington, D.C. Federal workers could struggle to honor their mortgages and rents during the shutdown, when they would not get paid, while those in the process of buying a property may not be able to complete their purchases.
What People Are Saying
President Donald Trump told reporters on March 11 regarding the possibility of a government shutdown: “It could happen. It shouldn’t have happened, and it probably won’t. I think the [continuing resolution] is going to get passed. We’ll see.”
Trump, on Truth Social: “Great things are coming for America, and I am asking you all to give us a few months to get us through to September so we can continue to put the Country’s ‘financial house’ in order.”
What Happens Next
A vote on a six-month funding bill pushed forward by House Republicans will be held on March 11, but there is uncertainty over whether it will pass. Several Republican hard-liners have already said they disagree with some of the bill’s suggestions and will likely hold out on it.
Democrats, concerned over the spending reductions in the six-month continuing resolution, have expressed support for an alternative shorter-term funding measure that would give lawmakers more time to consider new spending bills.