How the Government Shutdown Is Impacting Real Estate

How the Government Shutdown Is Impacting Real Estate

The federal government shutdown that began October 1, 2025, is casting a shadow over parts of the housing market—even here in California. For the residential real estate world (buyers, sellers, and brokers alike), here’s what’s happening:

1. Processing Delays for Loans & Closings

Many mortgage transactions depend on federal agencies: FHA, VA, and USDA loan programs are all impacted. During a shutdown, those agencies furlough staff or limit operations. Other agencies that feed into mortgage approvals—like the IRS (for tax transcripts)—also slow down. The result: loan processing delays, postponed closings, and headaches for buyers using government-backed loans.

2. Programs That Support Home Purchases Are Interrupted

The National Flood Insurance Program (NFIP) often pauses issuing new or renewal policies during a government shutdown. That matters in flood zones or areas where insurance is required to close escrow. Without a valid flood insurance policy, many sales simply can’t close until the government reopens.

3. Confidence and Timing Are Getting Hit

Even if rates are favorable, shutdown uncertainty impacts consumer confidence. Buyers hold off, sellers wait, and overall activity slows. This adds a “wait-and-see” attitude that can stall what would otherwise be active markets—especially in high-demand areas like Sonoma County.

How the Shutdown Is Impacting Mortgage Rates Now

Mortgage rates are heavily influenced by the bond market and investor sentiment—both of which react to government activity. Here’s how that plays out:

Why rates could go down

When uncertainty hits, investors seek safety. They move money into Treasury bonds, which pushes bond yields lower—and mortgage rates often follow. In the early days of this shutdown, we’ve seen slight downward pressure on rates because of that “flight to safety.”

Why rates might not drop much—and could even rise

If the shutdown drags on, it can signal fiscal instability, delay critical economic data, and increase longer-term risk—which could push yields (and rates) higher. In other words, the short-term dip could reverse if investors lose confidence in Washington’s ability to manage the budget.

Where things stand today

Rates have stayed relatively flat—a typical 30-year fixed mortgage is hovering around the mid-6% range. Buyers hoping for a major drop may be disappointed, but steady rates at least provide some predictability in an otherwise uncertain market.

What Could Happen After the Shutdown Ends

When the shutdown ends, several dynamics will kick in—some good, some not so much.

Positive outcomes: smoother closings & renewed confidence

Once agencies reopen, backlogged FHA/VA/USDA loans can move forward again. This may release pent-up demand, helping transactions that were frozen to finally close. The boost in consumer confidence could also lead to more market activity—especially if the economy shows signs of slowing, prompting the Fed to consider future rate cuts.

Possible headwinds: short-term rate bump

When the shutdown ends, investors often shift back out of bonds and into riskier assets like stocks. That can push Treasury yields up—and with them, mortgage rates. So while the housing market might get moving again, the cost of borrowing could inch higher.

What This Means for Buyers and Sellers in Sonoma County

For buyers: If you’re well-qualified, now might actually be a window of opportunity. Rates are steady, competition is lighter, and once the government reopens, you may face more buyers entering the market again.

For sellers: Use this time strategically. Fewer buyers mean less noise—but motivated, pre-approved buyers are still active. Make sure your home stands out with professional photos, good pricing, and a strong agent strategy (that’s where I come in).

The Bottom Line

The current government shutdown isn’t collapsing mortgage rates, but it is causing some temporary friction in the housing market. Once Washington gets back to work, we could see a short-term jump in activity—and possibly a mild rise in rates. Either way, being prepared is key.

If you’re thinking about buying or selling in Sonoma County, let’s talk about how this situation affects your timing and strategy.

Written by:
Nima Kazeroonian | Broker Associate | Coldwell Banker Realty
CA DRE #01491305
📞 707-486-9055
🌐 www.nima.homes