WASHINGTON – Nov. 1, 2013 – Though Congress has momentarily turned away from the political sniping that characterized this month’s government shutdown, economists and industry experts are watching Washington closely. They say the impact of the government shutdown, as well as coming changes to the industry from regulators, could have a sustained impact on the fragile housing recovery.
Economic indicators to be released this month will more accurately show the impact of October’s government shutdown. But NAR chief economist Lawrence Yun says concerns over the government shutdown have already played a role in the pending home sales index posting at its lowest level since December 2012.
“Government and contract workers were on the sidelines with growing insecurity over lawmakers’ inability to agree on a budget. A broader hit on consumer confidence from general uncertainty also curbs major expenditures such as home purchases,” Yun says.
Fannie Mae’s study of consumer sentiment in September revealed similar findings. Earlier this month, the mortgage giant reported that “Americans’ awareness of policy uncertainty leading up to the Oct. 1 shutdown, and the pending debt-ceiling debate” are leading to a “cautionary holding pattern in overall consumer housing.”
Other looming regulatory changes could mean uncertainty will stretch into the new year. Auction.com Executive Vice President Rick Sharga told Inman News that the changes coming to the mortgage market out of the Consumer Financial Protection Bureau might tighten credit standards further.
“Credit’s probably going to get tighter before it gets looser. So, once the new rules from the CFPB are implemented in January, I think it’s going to be a little bit harder for people to get loans, until the industry figures out how to comply with those things in a manner that’s safe for lenders,” he says.
Sharga adds that the housing recovery in general is fragile and still subject to outside forces:
“I think we’re still one economic downturn away from the housing market going south. So it’s a stable recovery, but it’s not strong enough to withstand a big economic downturn.”
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