A potential federal government shutdown, while likely to have a small impact on the overall economy and the U.S. housing market, could bring down mortgage rates temporarily, boosting homebuying demand nationwide.
The Washington, D.C., area, where many federal employees reside, is likely to experience more pronounced effects due to delayed paychecks, but according to Redfin, it's unlikely the shutdown will last long enough to prevent furloughed workers from making rent or mortgage payments, as they typically receive backpay, and lenders may offer forbearance options.
A government shutdown could bring mortgage rates down a bit if longterm Treasury yields fall with slightly greater recession worry–but rates would probably go back up once the shutdown ended. That could provide a small boost to homebuying demand around the country. On the flip side, shutdowns typically bring down consumer sentiment, which could counteract that boost. Both of these effects would likely reverse once the shutdown ends, unless the government stayed closed for a very long time.
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