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Government Shutdown Impacts Housing Market

Overview: Reduced expectations for global economic growth were good for mortgage rates over the past week. There was little significant economic data or news during the holiday period, and mortgage rates ended the week lower.


The government shutdown affects mortgage markets in several ways. The process of obtaining a mortgage may be impeded if information from closed government agencies is delayed. For mortgage rates, the primary impact concerns the release of economic reports produced by government agencies. So far, only the report on new home sales originally scheduled for December 27 has been postponed, but a continued shutdown likely would cause additional data to be delayed. It is generally not known when the affected data ultimately will be ready to be released.

The monthly Pending Home Sales (PHS) Index did come out on schedule, but the results were not particularly encouraging. In November, pending home sales unexpectedly declined a bit from October and were 8% lower than a year ago. This was the weakest reading in four years. The PHS Index measures signed contracts for the purchase of previously owned homes (roughly 90% of the market) and is viewed as a leading indicator of existing home sales, which are based on actual closings.

Week Ahead

Looking ahead, the important monthly Employment Report is scheduled to be released on Friday. As usual, these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, the Institute for Supply Management (ISM) Manufacturing Index will be released on Thursday, followed by the ISM Services Index on January 7. The minutes from the December 19 Federal Reserve meeting will come out on January 9. These detailed minutes provide additional insight into the debate between Fed officials about future monetary policy and have the potential to move markets. A prolonged government shutdown could affect some of these release dates.

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