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July 26, 2014

Gov't Reopens, Averts Housing Impact

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Gov't Reopens, Averts Housing Impact

President Barack Obama signed a bipartisan measure early Thursday to end a 16-day partial government shutdown and avert a U.S. default on its debts. The measure had been passed by the House and Senate late Wednesday. 

The White House directed all government agencies to reopen immediately. 

The government showdown over fiscal policy disputes and the looming default deadline had prompted concern over the impasse’s effects on the housing recovery. Some real estate industry and mortgage experts had predicted that if the government defaulted on its debts, it could send mortgage rates skyrocketing quickly—by one to two full percentage points. 

Gary Thomas, president of the National Association of REALTORS®, 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 16-day government shutdown has taken an estimated $24 billion out of the U.S. economy, according to Standard & Poor’s estimates. After the bill was signed reopening the government, NAR released a statement warning of "residual delays in programs as workers address issues caused by the 16 day lapse," and pledged to maintain their web page that made shutdown information available for members over the next several days as government operations return to full capacity.

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.”

Source: “Gov't Reopens After Congress Ends 16-Day Shutdown,” The Associated Press (Oct. 17, 2013)

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