Home buyers are being left in limbo as the shutdown brings these parts of the housing market to a halt

By Aarthi Swaminathan

The federal government shutdown is leading to "stalled deals, delayed closings and sidelined buyers," the National Association of Realtors says.

"Each day the shutdown continues, more of these transactions hang in limbo, with buyers losing financing, sellers walking away and confidence across the housing market eroding," said Shannon McGahn, chief advocacy officer at the National Association of Realtors.

Maresa and Loren Sanderson have spent the past two months trying to close on their first home while living in a hotel.

The couple had initially made an offer on a townhouse near Fredericksburg, Va., in September. They opted to finance the house with a mortgage backed by the U.S. Agriculture Department, which allowed them to use a $0 down payment.

But with the federal government in the midst of a shutdown, USDA has stopped issuing mortgages - and the Sandersons have now been waiting six weeks for their mortgage to go through.

After their offer on the townhouse was accepted, the couple, their kids and their dog moved out of their rental and into a hotel in mid-September, anticipating that they would close on the new house in a few days. "It's been brutal. It's been so draining," said Loren Sanderson.

"Between paying for the hotel, food and storage, I'm basically using all of my savings, all of my money, on top of the money I paid for the earnest money deposit and the appraisal on the home," Sanderson told MarketWatch.

Switching to a different type of mortgage would be difficult, because it would probably mean he would have to put more money down or would end up with a higher mortgage rate. Still, he said he was exploring other options now that his family is stuck.

"We're just stuck in limbo and waiting for the government to reopen," Sanderson said. The seller has already delayed their closing date twice.

Shutdown-related delays come at an uneasy time for the housing market. Buyers have been spooked by economic uncertainty and signs of weakness in the job market. Now, some of the buyers still in the market are seeing transactions come to a halt because of the shutdown.

Those forces are making an already slow residential real-estate market even more lethargic. Home buyers in rural communities, as well as those in areas where homes need flood insurance, are particularly affected by the shutdown, because their mortgages and insurance policies cannot be finalized while the government is closed.

Even as mortgage rates dipped recently to the lowest level in a year, causing an uptick in mortgage applications, that demand may not add enough momentum to offset delays caused by the shutdown.

Transactions involving USDA mortgages and the National Flood Insurance Program are seeing the biggest impacts from the government shutdown. The USDA stopped issuing new mortgages as of Oct. 1, and the NFIP stopped issuing new policies or renewals on that day.

That freeze has left many buyers in the lurch and stuck without financing or the flood insurance that's required for their mortgage. These buyers either have to either wait it out or seek private, and likely pricier, insurance options elsewhere.

Mortgages backed by the Federal Housing Administration and Department of Veterans Affairs are also impacted by the shutdown, according to the National Association of Realtors, for reasons such as not being able to obtain income verifications from the shuttered Internal Revenue Service for their mortgage to close.

Though it's still unclear exactly how many home-sale transactions nationally have been derailed by the shutdown, many real-estate agents say they're seeing the impacts, a spokesperson for NAR said.

"We've received more than 600 responses from Realtors across the country describing stalled deals, delayed closings and sidelined buyers as a direct result of the prolonged shutdown," Shannon McGahn, chief advocacy officer at NAR, told MarketWatch.

"Each day the shutdown continues, more of these transactions hang in limbo, with buyers losing financing, sellers walking away and confidence across the housing market eroding," she added.

In just one week ending on Oct. 24, the number of USDA mortgage applications fell 26%, according to data from the Mortgage Bankers Association, while other loan types saw an increase in applications.

To be sure, USDA loans form a small part of the overall mortgage market: Roughly 1.6% of mortgage originations in the U.S. to date this year have been USDA loans, according to Hannah Jones, a senior economic research analyst at Realtor.com. (Realtor.com is operated by News Corp subsidiary Move Inc.; MarketWatch publisher Dow Jones is also a subsidiary of News Corp.)

Even so, "the pause is significant for the subset of buyers who rely on this program, as it could delay purchase timelines or temporarily sideline qualified rural buyers until the program resumes," Jones told MarketWatch.

USDA loans were created to promote homeownership in rural areas among low- and moderate-income households. The states where USDA loans have been the most popular in 2025 include Louisiana, where 10% of mortgages were USDA-backed, followed by Mississippi and West Virginia, per Realtor.com.

Soliman Martinez, a division manager with mortgage lender Click n' Close, said most of the loans his division originates are USDA-backed mortgages. "We're feeling the pain," he told MarketWatch.

Technically, buyers can still apply for a USDA-backed mortgage - there's just no one there to receive the files, Martinez said.

The last time the government shut down for an extended period of time in 2019, the same freeze on USDA loans played out. But once the USDA eventually came back online, loans started moving into closing. "So we're queuing up our borrowers" and getting them ready to go once the shutdown ends, Michael Chiodo, a sales manager at Click n' Close, noted.

Spencer S., is also trying to buy a house with a USDA mortgage. He's been waiting for four weeks - and counting.

The 24-year-old data analyst told MarketWatch that his family of three has been living with his in-laws while they wait for their mortgage to close to purchase a three-bedroom home in Winder, Ga. In selecting his mortgage, he had shopped around and shaved 0.25% off of his initial mortgage-rate offer to get approved for a 30-year mortgage at 6%.

He put in an offer in late September for the house, which was accepted. The seller has been very patient, he said, delaying their closing date twice so far. He's hoping to close on the house by Nov. 20, but is also mentally prepared to let the house go if the shutdown persists.

"I'm not really concerned about another buyer coming in, but I think the right thing to do would be to ... not make [the seller] wait any longer than we have to," he said.

Up in Virginia, Maresa Sanderson was growing increasingly impatient about the situation. "The government doesn't know the impact that they're having on people waiting for USDA loans," she said.

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-Aarthi Swaminathan

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11-03-25 1240ET