What's Happening?
The ongoing federal government shutdown is testing the resilience of California's housing market. Despite the shutdown, the IRS's Income Verification Express Service (IVES) continues to operate, allowing
lenders to verify borrowers' tax information and maintain mortgage approvals. High-income, cash, and jumbo buyers in California's expensive metros remain active, as they are less affected by furloughs. New listings have increased compared to last year, and the time on the market remains stable. However, the shutdown is causing early signs of strain among government-backed loans, such as FHA and USDA financing, which rely on federal staffing and approvals. Builders are also experiencing delays in permit processing, which could impact multiunit residential developments.
Why It's Important?
The stability of California's housing market is crucial, as real estate contributes significantly to the state's economy, accounting for 17.6% of its GDP. The market's resilience is vital for maintaining economic growth and supporting jobs in construction, real estate, and home services. However, the prolonged shutdown poses risks, particularly for government-backed loans and builders facing permit delays. If the shutdown continues, it could lead to increased uncertainty, delayed closings, and higher costs for homebuyers. The situation highlights the interconnectedness of federal operations and the housing market, with potential ripple effects on consumer sentiment and economic activity.
What's Next?
If the shutdown persists, the impacts on California's housing market could become more pronounced. Builders may face further delays in permit processing, affecting project timelines and costs. Homebuyers relying on government-backed loans may encounter increased challenges, potentially leading to a slowdown in sales. The market's resilience will be tested as the shutdown continues, with potential consequences for consumer confidence and economic stability. Stakeholders, including real estate professionals and policymakers, will need to monitor the situation closely and consider measures to mitigate the impacts on the housing market.