Speculation surrounding the government shutdown resonated on a national level, as everyone was left to wonder what impact it may have on America’s economic status. However, the recent impasse is now over, as the two parties have reached what appears to be a temporary solution.
On Thursday morning, President Barack Obama signed a bipartisan measure that will bring an end to the 16-day partial government shutdown and avert a U.S. default on its debts. The move comes just hours after the measure was approved by the House and Senate Wednesday night.
Of particular concern, however, is the damage already incurred by the housing sector. The government shutdown has already had a detrimental effect on the housing industry. Perhaps even more concerning, however, is the timing in which this incident took place. As the industry was poised to make a comeback, government intervention, or lack there of, damaged the fragile state of the housing sector. While the recovery is projected to continue, it may do so at a slower pace.
Analysts attribute the recent jump in mortgage rates to the government shutdown, suggesting that rates would have continued to rise if the shutdown persisted.
Gary Thomas, president of the National Association of Realtors (NAR), testified last week before the Senate Banking Committee that a debt ceiling breach could lead to a one-percentage point increase in mortgage rates and potentially could drop homes sales by 450,000 units.
“This is a bump in rates immediately because of the crisis, so it’s going to have a detrimental effect on the housing industry, which obviously has a detrimental effect on the overall economy,” Thomas had testified.
The government shutdown also prevented countless mortgage applications to successfully pass through the system, as background checks were unavailable. Lenders could not provide assistance to prospective buyers without taking the appropriate precautions. Those intent on participating in the hosing market were relegated to the side, effectively harming the industry on a national level.
The wake of the government shutdown has allegedly resulted in the loss of $24 billion from the U.S. economy, according to Standard & Poor’s estimates. Shortly after government employees returned to work on Thursday morning, officials at the NAR warned of “residual delays in programs as workers address issues caused by the 16 day lapse.”
The new legislation, approved by the House and Senate, will fund the government through Jan. 15. However, “the bill’s passage was only a temporary truce that sets up another collision between Obama and Republicans over spending and borrowing early next year,” the Associated Press reports. “It’s the second time this year that Congress has passed legislation to increase the government’s borrowing cap.”