A prolonged government shutdown could deliver a substantial blow to an already softening housing recovery.
If the political standoff lasts for weeks, it could stall sales because lenders can't useÂ IRSÂ documents to confirm borrower qualifications. The impasse could also threaten loans backed by agencies such as theÂ Federal Housing Administration.
"With each passing day, the anxiety in the marketplace is building," said Stuart Gabriel, director of UCLA's Ziman Center for Real Estate.
The FHA's staff has been greatly reduced, which may cause delays in "processing or closing of FHA-insured loans," according to theÂ U.S. Department of Housing and Urban Development, which oversees the agency.Â For now, the FHA â€” traditionally an insurer of loans to first-time and low-income buyers â€” will continue to endorse new single-family loans. The agency currently insures about 26% of all single-family home purchases.
"The longer the shutdown lasts, the more serious the impact will be," a HUD contingency plan said.
Some are already feeling the pain.
Ron Tanzman, an agent in Calabasas, said two of his buyers planned to use FHA-backed loans, but the deals are now on hold.
"You can't close any FHA deals right now," he said. "We just got notice from the lender that we are in a stalemate."
The federal government partially shut down Tuesday afterCongressÂ â€” amid a fight over Obamacare â€” failed to pass a budget, forcing the furlough of roughly 800,000 workers and the first federal shutdown in 17 years.