When you hear the words government shutdown, you might picture closed national parks and furloughed workers. But for homebuyers and sellers, the effects reach much further. From FHA loans to flood insurance, a shutdown can ripple through nearly every corner of the real estate world.
For homebuyers in the Tri-Valley, understanding how this impacts the housing market can help you make confident decisions; even during uncertain times.
Why Do Government Shutdowns Happen?
A government shutdown occurs when Congress fails to pass the 12 annual spending bills that fund federal agencies. Without that funding, many departments are legally required to stop operations.
As Shannon McGahn, Executive Vice President of the National Association of REALTORS® (NAR), explained in a recent Advocacy Scoop podcast episode, shutdowns have become a modern reality in Washington.
“It’s something that’s used for negotiations, leverage, or funding other programs,” she said. “And unfortunately, that means they’re here to stay.”
How a Shutdown Affects Real Estate Transactions
Real estate is one of the most heavily regulated and federally linked sectors of the economy. Everything from loan approvals to insurance programs can depend on government employees and systems.
When a shutdown occurs, those programs may slow down, or pause entirely. That can delay transactions, closings, and homebuyer confidence.
- FHA Loans
The Federal Housing Administration (FHA) insures roughly 15% of all U.S. mortgages, many of which help first-time buyers enter the market.
During a shutdown, limited staffing can delay loan endorsements and approvals. For the Tri-Valley’s first-time buyers, especially those looking at condos or smaller starter homes, that can mean longer wait times or even postponed closings.
- VA and USDA Loans
VA loans are considered “essential” and typically continue, but support services like eligibility checks and customer service may slow.
The USDA’s rural housing loans, however, stop completely during a shutdown. While that primarily impacts rural communities, the ripple effect can still influence broader market activity, including lender capacity.
- IRS Verifications
Many lenders require IRS transcripts to verify borrower income. If IRS employees are furloughed, those verifications can be delayed leading to stalled mortgage approvals.
That’s particularly challenging in a fast-moving market like Pleasanton, where timing is everything.
- Flood Insurance and the NFIP
For homes in designated flood zones, an active National Flood Insurance Program (NFIP) policy is required before closing. Unfortunately, NFIP authorization often lapses during a shutdown unless Congress passes a special extension.
Without that, tens of thousands of home closings nationwide could be delayed, including those in parts of the East Bay that border creeks or flood-prone areas.
“When NFIP lapses, there are no new policies or renewals, and that can stall roughly 1,400 property transactions per day.”, McGahn shared.
The Impact on Builders and Developers
Shutdowns don’t just affect buyers. They also slow down construction and housing supply. Builders may face delays in obtaining federal permits or environmental reviews, and developers relying on HUD programs or rental assistance contracts may see payments paused.
In an area like Pleasanton, where housing inventory is already tight, any additional slowdowns in new construction can put even more pressure on home prices.
Consumer Confidence Matters
Real estate thrives on confidence. When uncertainty grows (like during a government shutdown) some buyers and sellers choose to wait things out. Even short shutdowns can create bottlenecks in paperwork, while prolonged ones can have deeper market impacts.
However, as McGahn noted:
“We take this very seriously at NAR. We’re constantly communicating with policymakers to make sure they understand that these shutdowns have real consequences for everyday Americans trying to buy or sell a home.”
What Buyers and Sellers Can Do
- Work with a Realtor who understands federal lending programs. They can help navigate loan delays or connect you with lenders that have contingency plans.
- Plan for possible timing delays. If you’re buying with an FHA or VA loan, build extra time into your closing schedule.
- Stay informed. Market conditions can shift quickly, so it’s smart to stay in touch with your agent and lender during a shutdown period.
The Bottom Line
A government shutdown doesn’t mean the housing market stops, but it does introduce extra challenges. Loan approvals, flood insurance policies, and federal verifications may move more slowly, especially for first-time buyers and those using government-backed loans.
For Tri-Valley homebuyers and sellers, the best strategy is to stay proactive, informed, and connected with experienced real estate professionals who can help keep your transaction on track… no matter what’s happening in Washington.
About the Author
Viviana Cherman is a trusted Pleasanton, CA Realtor® known for her expertise in market trends, negotiation, and personalized client service. With deep knowledge of the Tri-Valley area, including Pleasanton, Livermore, and Danville, Viviana helps clients navigate complex markets with confidence and clarity.
Whether you’re a first-time homebuyer, upgrading to your forever home, or preparing to sell, Viviana combines industry insight with local expertise to help you make smart real estate decisions.
📞 Ready to make your next move?
Contact Viviana Cherman, Realtor® with Elation Real Estate, for up-to-date market guidance and personalized buying or selling strategies.
👉 www.vivianacherman.com