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back January 07th 2019 back

Planning to buy a home soon? Here’s how the government shutdown could affect you

f you’re on the verge of closing on a new home or condo — or just starting the often arduous journey of becoming a first-time home owner — don’t let the government shutdown get you down.

Real estate industry experts say that the U.S. federal government shutdown, which began Dec. 22, has not yet had any impact on the buying and selling of homes in South Florida.

“People are surprisingly less concerned with the government shutdown than you might expect, because everyone knows the government has to fix it,” said Nancy K. Corey, regional vice president of Coldwell Banker Residential Real Estate. “The only thing that gets impacted when this happens is consumer confidence. But the housing market is driven primarily by needs and wants, and those always override other things that might make you hesitate.”

According to the most recent monthly report by the Miami Association of Realtors, sales of single-family homes in the $250,000-$600,000 price range surged 12.9 percent in November 2018 over the same period last year. Sales of existing condos in the $150,000-$300,000 range also grew 19.5 percent year over year.

Cash transactions comprised 37 percent of all closed sales in November — nearly double the national figure of 21 percent.

December figures are not yet available. But the forecast remains sunny, because the shutdown has impacted only the administrative side of the real estate industry thus far.

The majority of qualified buyers relying on Federal Housing Administration (FHA) or Veteran Affairs (VA) assistance — which guarantees loans for people who cannot afford a 20 percent down payment or have low credit scores — will be able to proceed with their home purchases, although the closings could take a little longer.

Freddie Mac and Fannie Mae operations also remain unaffected by the shutdown, because neither is funded by the government.

Wesley Ulloa, a broker with the Coral Gables-based Luxe Properties, said her brokerage firm hasn’t yet seen any impact. But that’s because most of its pending sales were already in the closing process when the shutdown took place.

“We’ve actually seen an increase in the number of contracts being signed,” she said. “But there could be problems down the road.”

For example, Ulloa said that if a lender needs to get a Form 4506 from the Internal Revenue Service — a transcript often required by banks that verifies the borrower’s tax returns and annual income — the process could be delayed, since the IRS is only operating with 12.5 percent of its total workforce, or about 10,000 employees.

Ulloa said her firm is already incorporating a longer grace period in contracts, giving buyers more than the traditional 30 days to obtain financing approval, in anticipation of a prolonged shutdown.

But Craig Garcia, president of Capital Partners Mortgage, the mortgage affiliate for The Keyes Company, said lenders can find ways around traditional paperwork during the shutdown

“It’s not totally necessary to have [a form 4506], to prove income,” he said. “You can use canceled checks or bank statements to show what you paid to the IRS or what kind of tax return you received. I spoke with a colleague at one of the big banks who told me they haven’t even issued an internal memo saying that anything is going to change.”

Crisis averted

One potentially catastrophic consequence of the shutdown has already been averted. On Dec. 28, the Federal Emergency Management Agency (FEMA) reversed its decision to halt the issuing and renewal of federal flood insurance plans, which could have disrupted up to 40,000 new home sales each month, according to the National Assocation of Realtors (NAR).

The Department of Homeland Security, one of the government entities affected by the shutdown, oversees FEMA. The National Flood Insurance Program is now renewed through May 31, 2019.

“We thank the Administration and Congress for stepping up so quickly to ensure the smooth continuation of flood insurance at a time when market disruption would be extremely hard-felt,” said Shannon McGahn, NAR senior vice president of government affairs, in a statement.

The shutdown could still have a negative effect on government-subsidized real estate programs, such as Rural Development loans by the U.S. Department of Agriculture, which offer zero-down payment mortgages to improve the economy and quality of life of rural areas.

Noah Breakstone, managing partner at the Fort Lauderdale-based real estate investment and development firm BTI Partners, also worries that a prolonged shutdown could have a severe impact on affordable and Section 8 housing overseen by the Department of Housing and Urban Development (HUD).

“The sector that could be affected the most by the shutdown are the people who don’t have the tolerance or financial means to weather it,” he said.

For now, though, the industry remains sanguine. Ron Shuffield, president and CEO of EWM Realty International, said that his firm had a “busy” December in sales and that their titles operations division reports no problems with any of their pending sales.

But Shuffield said that could all change if the shutdown stretches into February.

“If the government is still shut down by then, we’re going to be dealing with a lot of questions we’ve never had to deal with before.”