In short term, N.H. housing market may take minimal hit from government shutdown
New Hampshire’s housing market has surged this year: Sales are up, prices are rising, foreclosures are down and the state government is collecting more and more revenue from its tax on real estate transactions.
But the partial shutdown of the federal government, now in its 10th day, could create a drag on the market by slowing the mortgage approval process – though observers say the effects should be limited unless the shutdown lasts for many weeks.
“It’s a little bit more of a headache than it is a chronic flu,” said Bill Weidacher, a Bedford Realtor and president of the New Hampshire Association of Realtors.
But, Weidacher added, “It really comes down to how long this is going to last.”
After the U.S. housing bubble popped in 2006 and 2007, New Hampshire’s market for single-family homes endured years of lukewarm sales and falling or stagnant prices. But sales picked up in 2012, increasing 20.1 percent from a year earlier, and prices began to rise, too.
In the first eight months of 2013, home sales were up 12.4 percent compared with the same period of 2012, and the median sale price was $210,000, up 9.7 percent from a year earlier, according to the New Hampshire Association of Realtors.
In August alone, 1,685 homes were sold in the state, the most in any single month since August 2005, the group said. And New Hampshire recorded 1,905 foreclosures in the first eight months of the year, down 26.2 percent from the same period in 2012, according to the New Hampshire Housing Finance Authority.
“It hasn’t fully recovered, but it is certainly well on that path and will probably remain so as long as interest rates don’t go crazy,” said Russ Thibeault, an economist and president of Applied Economic Research in Laconia.
The housing market’s recovery has benefited the state government’s balance sheet, too. New Hampshire’s real estate transfer tax brought in $93.4 million in fiscal 2013, 13.9 percent more than in fiscal 2012. It generated $31.2 million in the first three months of fiscal 2014, 21.9 percent more than in the same period a year earlier.
But with the federal government shutdown that began Oct. 1, the Internal Revenue Service can’t issue tax documents often needed for loan applications. The website that allows lenders to verify Social Security numbers is down. Fewer employees are at work at the Federal Housing Administration, which insures some mortgages.
The FHA and Department of Veterans Affairs are still processing loan applications. Fannie Mae and Freddie Mac, the government-sponsored mortgage giants, are operating as well.
But the Department of Agriculture has stopped approving applications through its Rural Development loan program, which accounts for about 20 percent of the mortgages passing through programs run by the New Hampshire Housing Finance Authority, said Ignatius MacLellan, the authority’s managing director of homeownership.
“The impact of Rural Development being shut down is significant for New Hampshire,” MacLellan said. “There are folks who have signed purchase-and-sale agreements . . . and now their loans are unable to be processed by Rural Development, and we know that is creating an impact on buyers and sellers alike.”
The Mortgage Bankers Association, a national group, last week warned the disruptions will grow more serious the longer the government remains shut down and agencies operate with limited staff, if at all.
“Different loan programs have different requirements, and these disruptions impact lenders in different ways, leading to confusion and fear among borrowers about whether they will be able to close on a home purchase or refinance,” said David Stevens, the association’s president and chief executive officer, in a statement.
But MacLellan said those effects aren’t being felt in New Hampshire yet.
“New Hampshire Housing and the lenders that we work with are open for business, in terms of loans with FHA, VA and Fannie Mae. . . . So far, we haven’t seen that as a glitch that’s really impacted people, to be honest,” he said.
MacLellan said there is a worry mortgage interest rates could begin to rise if the market becomes nervous about a lack of data – the shutdown has prevented many federal agencies from releasing economic indicators – but it’s impossible to know when that might happen.
“When it does happen,” he said, “it could happen quickly.”
Thibeault said, if the shutdown lasts a month or two, “the negative effects will multiply.” But for now, he said, it’s had a “nominal” effect on residential real estate in New Hampshire.
“It certainly does nothing good for the housing market,” Thibeault said, “but thus far it hasn’t been a major detriment.”
(Ben Leubsdorf can be reached at 369-3307 or firstname.lastname@example.org or on Twitter @BenLeubsdorf.)