From the Washington Post:
Beginning next week, thousands of home buyers will be unable to get
approvals for their mortgages because of the government shutdown,
potentially undercutting the nation’s resurgent housing market.
Without paperwork from the Internal Revenue Service, the Social
Security Administration and in many cases the Federal Housing
Administration, banks and other mortgage lenders will be less willing to
make loans, if they can make them at all. For instance, lenders rely on
the IRS to confirm borrowers’ income and on Social Security to confirm
their identity.
Every day that government offices remain shuttered will delay an
ever-larger fraction of mortgage closings, industry leaders say,
jeopardizing mortgage and interest-rate approvals and spooking sellers.
About 15,000 new home mortgages and 18,000 refinancings on average are
completed across the country each day.
And the reason? When the economy is weak, fiscal multipliers are higher:
This paper investigates the relation between growth forecast errors and planned fiscal consolidation during the crisis. We find that, in advanced economies, stronger planned fiscal consolidation has been associated with lower growth than expected, with the relation being particularly strong, both statistically and economically, early in the crisis. A natural interpretation is that fiscal multipliers were substantially higher than implicitly assumed by forecasters. The weaker relation in more recent years may reflect in part learning by forecasters and in part smaller multipliers than in the early years of the crisis.
