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Shutdown could impact recovering housing market

Shutdown could impact recovering housing market
A sold sign outside a home for sale is seen in Arlington, Virginia on July 23, 2009. (UPI Photo/Alexis C. Glenn) | License Photo

WASHINGTON, Oct. 4 (UPI) -- The partial federal government shutdown has potential to undermine about a quarter of the U.S. home sales or more, available data indicates.

The U.S. Department of Housing and Urban Development said that the shutdown could create delays in "processing or closing ... Federal Housing Administration-insured loans," the Los Angeles Times reported Friday.

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The FHA insures 26 percent of all mortgage loans for first-time home buyers, which market analysts say are a critical part of the housing market recovery, which has been relying on large numbers of investment buyers.

"The longer the shutdown lasts, the more serious the impact will be," HUD said.

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Echoing that sentiment, "with each passing day, the anxiety in the marketplace is building," said Stuart Gabriel, director of the Ziman Center for Real Estate at the University of California at Los Angeles.

"You can't close any FHA deals right now. We just got notice from the lender that we are in a stalemate," said Calabasas, Calif., real estate agent Ron Tanzman,.

Tanzman said he had two deals that cannot move forward because of the government shutdown.

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In addition, the Times said, while the shutdown continues, buyers will not be able to use the IRS to verify qualifications for a loan.

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"A few days' delay in getting documentation shouldn't derail too many deals," said Keith Gumbinger, vice president of HSH.com, which monitors mortgage rates.

Market exports also fear the repercussions of the government going into default on some of its bills which, the Treasury Department has warned, is what would happen if the debt ceiling is not raised by mid-October.

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Republican leaders on Capital Hill have said recently that they would not let the government go into default. The Treasury, however, has warned that even coming close to a default would impact markets by making investors nervous.

"We are playing with something big and bad and nasty," Stuart Gabrial said, commenting on a possible government default.

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