Tuesday, October 14, 2025 / by Mariah Smith
Government Shutdown and YOU
What the Government Shutdown Means for Your Move!
At Royale Real Estate, we know that news about the federal government shutdown—the first one in six years—can create layers of confusion and uncertainty when you are planning a major life event like buying or selling a home. We are here to break down exactly what this means for your real estate plans and to help you navigate these choppy waters together!
Here is your straightforward guide to the shutdown’s impact:
1. Good News for Buyers: Rates Might Actually Go Down!
It might seem backward, but the uncertainty caused by the shutdown could actually lead to favorable interest rates for you.
- Flight to Safety: When economic times feel uncertain, institutional investors tend to pull money out of the stock market and look for assets considered safer, like bonds and mortgage-backed securities (MBS).
- Yields Drop: This increased demand for bonds causes bond yields to fall. Since yields on 10-year Treasurys serve as a major indicator for mortgage rates, a drop signals potential declines in borrowing costs. On the very first day of the shutdown in 2025, 10-year Treasury yields fell 4 basis points (one hundredth of a percentage point)
- The Fed's Role: Economists at Pantheon Macroeconomics have even suggested that the Federal Reserve might consider a 1/4 percentage point easing (rate cut) as a measure of "prudent risk-management" if the shutdown continues.
While mortgage rates held steady even as Treasury yields fell on day one of the shutdown, this volatility could present a great opportunity for you to lock in a more favorable rate soon!
2. Navigating Government-Backed Loans (FHA, VA, USDA)
These programs account for about one in four mortgage applications. If you rely on one of these loans, be prepared for possible slowdowns:
Pro Tip: Even conventional loans can be affected. Prepare for potential administrative bottlenecks that could slow down closings, such as delays in processing tax transcripts, employment verifications, and identity checks by government services.
3. Flood Insurance Headaches and Closing Delays
If your property is in a flood zone, we need to be extra cautious right now.
- New NFIP Policies are Halted: The National Flood Insurance Program (NFIP) does not issue new policies during a federal shutdown. This lack of new policies could delay or cancel an estimated 1,360 to 1,400 home sale closings per day. Buyers in flood-prone areas, like Florida, are feeling the largest impact.
- Great Workarounds Exist: Don’t worry! We have options. Sellers can assign their existing NFIP policies to the new homebuyer. Additionally, homebuyers can utilize private flood insurance options. Lenders also have the discretion to approve mortgages in special flood hazard areas because the requirement for flood insurance on government-backed mortgages is actually suspended during a shutdown.
4. Uncertainty is Impacting Confidence
The lack of political stability and economic data is making the general public pause.
- Missing Market Insight: Key government agencies like the Bureau of Labor Statistics (BLS), the Bureau of Economic Analysis (BEA), and the Census Bureau have halted data collection and reporting. We are missing vital insight, including the jobs report, which provides clarity on the economy's health. If the shutdown continues, we will miss the new residential construction report. Without this data, the Federal Reserve will be "flying blind" ahead of its critical Oct. 29 meeting, complicating future interest rate decisions.
- Consumer Jitters: Most Americans say the shutdown isn't stopping them from making a large purchase like a home. However, about 17 percent of Americans are postponing their plans, and 7 percent are canceling them entirely. Most people postponing or canceling purchases are not government employees; they are reacting to the overall economic instability caused by a cascade of recent events (like inflation, volatile stock market, tariffs, etc.).
- Note on Demand: Last week, demand for mortgages was already down 13 percent compared to the week prior, with requests to refinance down 21 percent and purchase loan requests down by a seasonally adjusted 1 percent.
Your Royale Real Estate Action Plan
We are committed to keeping your transaction on track. Here’s what we recommend:
1. If you need a USDA Loan: We need to talk immediately to discuss alternatives, as processing is currently on hold.
2. If you are closing in a flood zone: Let’s confirm your flood insurance strategy (private policy or assignment of the seller’s existing NFIP policy) right away to prevent closing delays.
3. Be Prepared for Delays: While FHA and VA loans are still moving, expect administrative slowdowns. The National Association of Realtors is concerned that if the shutdown continues past 30 days, we could see closings that are unable to happen.
4. Stay Flexible on Rates: We are monitoring the market closely to potentially capitalize on lower mortgage rates if the bond market reacts strongly to the uncertainty.
If you have any specific concerns about your purchase or sale, please reach out to your Royale Real Estate agent today—we are here to help!
