A partial government shutdown is currently in effect in the United States, where Congress is struggling to get funding for the government approved. The fund is effective until mid-February. The only way the shutdown ends is if the Senate votes to an agreement, Inman reported.
It is interesting to note that the government is currently in a divide. Republicans and Democrats hold key positions and each party has the power to approve or reject policies through non-action. It is not clear whether the Democrats, who hold power this time around, will vote to end the stalemate. Real estate buyers and investors might be trying their best to keep things afloat, but the problems may not be too drastic after all.
During this shutdown, the Internal Revenue Service (IRS), Social Security Administration, and the Department of Housing and Urban Development (HUD) prefer to keep their staff in 'furlough.' This results in a large number of mortgage approvals to go on furlough also. That effect trickles down to government-owned agencies, but such government-backed institutions like Freddie Mac aren't affected.
There are, however, a few things that need to be cleared. Townhall debunked a few misconceptions. Americans will still receive socially-mandated benefits like social security, Medicare, and other similar benefits. This has been the way it's been in the past. Similarly, federal agencies will also keep functioning, largely because most of them have budgets already approved. Only a few agencies, if any, will be affected by the ongoing shutdown.
US federal employees would also receive funding similarly because of the funding most agencies already received. This news should ease the mind of about 1.2 million employees working for the government, with only 350,000 out of the remaining 800,000 employees considered as non-essential. Even then, these furloughed employees have still received payment even when on leave.
The shutdown will definitely have an effect on all other transactions, however, particularly those in the real estate sector. The National Association of Realtors has even called on Congress to create a quick resolution to the stall. This is to keep the government open and to avoid any other negative effects on employees who will be hugely affected by it.
That being said, the housing sector should come out relatively unscathed. Mortgage approval would likely resume once funding for the connected agencies has been approved. That, however, remains to be seen in the meantime.
