The U.S. government shutdown is not only affecting federal workers in Washington, D.C.; the disruptive effects can be felt in the real estate sector here in Collier County. 

With real estate, a carefully regulated industry with numerous steps in each transaction, the U.S. government shutdown will lead to delays and road blocks for paperwork processing. While Fannie Mae and Freddie Mac do not rely on appropriated funds and have continued operations during previous shutdowns, other requirements for processing real estate transactions will face an uphill battle. 

Employment verification and tax paperwork necessary for loan processing will also face obstacles. Verification of Social Security information and new small business loans provided by the Small Business Association will not be processed, which might hinder cash flow for buyers who own their own businesses.  

Other programs unique to Florida such as the National Flood Insurance program will also face logjams. With employees unable to process paperwork, the expediency of approvals will be delayed.  

The National Association of Realtors is the regulating body for the real estate industry nationwide. On a recent episode of its podcast “The Advocacy Scoop,” the NAR warns listeners to expect bottlenecks and delays in some transactions which incorporate federal partnerships. 

Debbie Psihountas reflected on the economic and business effects of the shutdown here in Naples. Psihountas holds a doctorate in finance, in addition to real estate licenses in both Florida and Ohio. She is the former dean of the School of Business and Technology at Florida SouthWestern State College and knows the Naples area well. 

“There are several areas in which the current shutdown can impact markets,” she said. “First, as anyone who has tried to obtain a mortgage in the last 15 years knows, the lending standards of underwriters are extremely stringent. The rules are endless, and with technology updates, it is very easy for lenders to track new expenditures and other factors that impact credit-worthiness.” 

Federal programs which assist in mortgage processing, such as HUD and the VA, will face postponements. Though some programs are classified as “essential,” the time to process paperwork may be extended. 

“For the numerous transactions already in-process in Collier and surrounding counties, the impact of the shutdown could be important, “Psihountas said. “Let’s say your spouse is employed by the TSA, and that he or she works at RSW. At this point, your spouse is working without pay. For an underwriter, your ability to pay your mortgage is now different than it was a week ago, prior to the shutdown. This could cost you your mortgage.” 

The end result might see more pending transactions turn into “back on market” transactions as a result of this shutdown.  

While anyone working for the government now faces an unknown future, even those not employed in that sector will see processing and approvals waylaid. With economic uncertainty, Psihountas said, all workers in general are nervous.  

The shutdown, coinciding with economic impact of tariffs on lumber and building supplies, puts the real estate industry and even the building/construction sphere in a precarious position, according to the National Association of Home Builders.  

Certain life decisions will now need to take this economic climate into consideration. Psihountas said, “Let’s say I may have been considering moving to a home in Port Royal from my current home in Grey Oaks a few months ago; now, I am having second thoughts about taking on a bigger mortgage. I am taking a ‘wait and see’ approach to any new financial obligations.” 

Risk-averse underwriters will be on hyper alert not to overstep during this uncertain time. Curtailing major purchases that impact credit scores is advised when you are in the process of buying a new home, especially during economic uncertainty.  

“Until we are in a situation where individuals feel like prices are stable and normalized, chances are, making a move to a better Collier neighborhood is likely not top-of-mind,” Psihountas said. 

The shutdown is, obviously, affecting more than just real estate, and more than just Naples and Collier County, but these are a few of the reasons you may be seeing a slowdown in the local real estate market.