The Obama administration's threats of a government shutdown if lawmakers can’t soon agree on a budget could hamper the housing market during its peak home buying season.
A government shutdown would limit government-guaranteed mortgages with the Federal Housing Administration halting its guarantees on loans. The FHA accounts for 30 percent of the mortgage market.
The Obama administration warned that the impact of a shutdown to the real estate market would be more severe than the 1995 government shutdown, which lasted 21 days. The FHA accounts for nearly three times the mortgage market than it did back then.
To avoid a shutdown, the administration has given Congressional negotiators until Friday to agree on a budget that would set spending limits through September.
Besides the impact to housing, a government shutdown would affect a number of government programs and services. For example, the processing of tax returns would stop and the government would have to cut staff across the executive branch, possibly 800,000 workers.
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