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Government shutdown puts squeeze on home sales

Monday, October 07, 2013

More fallout from the government shutdown: Home sales are cooling off, stalled by slower loan processing. And it could get much worse. The government shutdown is creating trouble in the recovering housing market. It's slowing home sales, and in some cases making potential buyers think twice.

Real estate agent Candy Peak says that due to the government shutdown, those in the housing market may have a harder time buying homes.

"The first thing that hit the market was the rising interest rates, but now with the uncertainty of the government shutdown, that's putting a second layer of insecurity, and people are holding back now," said Peak.

There are several factors involved.

One is that many Federal Housing Administration (FHA) loans, which are ensured by the government, are or will be stalled if the government remains shut down.

Mortgage broker Sanjesh Sharma says though it might not be affecting a lot of people yet, it will get much worse if federal employees continue to be furloughed.

"We've lowered the amount of employees from 8,709 employees down to 337 employees, so obviously when you have such a reduction in employees, you're going to have some delays," said Sharma.

Another issue: Lenders depend on the IRS to verify information like Social Security numbers and tax returns before a deal can go through. These days, realtors and lenders say it's hard to get a response.

"When it comes to closing the loan in 25 or 30 days, and we still have a government shutdown, believe me, we're going to have some difficulties," said Sharma.

Peak says all of this makes potential buyers think twice.

"Money is an idea backed by confidence, and if people don't have confidence in a system or a government, you're going to see people pull back and wait," said Peak.

But the real estate experts say that a dip in consumer confidence can also mean advantages in the real estate market, like lower rates and great deals for cash buyers.

"Cash is king, as they say," said Peak. "You can go in and just circumvent the whole loan process, and there's certainly many people doing that, so at least we are closing transactions more easily with cash buyers."

Federal employees already suffering the federal budget impasse can't even get employment verification.

(Copyright ©2014 KABC-TV/DT. All Rights Reserved.)

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budget, real estate, save money / consumer news, rudabeh shahbazi
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