September Market Pulse Q&A: Experts on Housing Affordability and Economic Shifts

Highlights: 

• A potential government shutdown carries economic consequences, potentially reducing GDP growth by 0.2% for each week it lasts.

• Housing affordability remains a significant challenge, with customers concerned about the current market and the need for either home prices or interest rates to decrease to stimulate market activity.

Both before and during each Market Pulse webinar, our audience submits their burning questions to our expert panelists, some of which we run out of time to cover in the live webinar and which we then answer in this blog. 

For our September Market Pulse webinar, our panel included Dr. Robert Wescott, President of Wescott Strategic Advisors, Dave Sojka and Jesse Hardin, Senior Advisors at Equifax, along with Joel Rickman, General Manager and SVP, U.S. Mortgage and Verification Services, Greg Holmes, Chief Revenue Officer at Xactus, and Brock Tate, First Vice President and Mortgage Retail Production Manager at Trustmark Bank. Below are their answers on questions around government budget and housing affordability.

Q: There's talk about a looming federal government shutdown. Can you give us your thoughts on why this might happen and when? What might be the economic effects, and how long might this last? (Note: This question was answered September 18.) 

Dr. Robert Wescott, Wescott Strategic Advisors: September is the last month of the federal fiscal year and of course, at the time of our discussion, we don’t have a budget yet for the new fiscal year, meaning that we could have a shutdown. I would guess that it’s around a 50-50 chance that we will have a shutdown. It does have economic consequences. 

A government shutdown likely takes something like .2% off GDP growth for every week that it runs. For example, if Q3 GDP growth was going to be 3%, it may be 2.8% growth after a one week government shutdown. After a two-week shutdown, it might be 2.6. So, it will take something off GDP growth. 

This is happening because the two parties don’t necessarily agree on budgets and thus, they are debating. Even if the House of Representatives passes a continuing resolution [which prevents a shutdown by providing short-term funding until an official budget is passed], the Senate would have to vote for it.

There’s talk about trying to extend a continuing resolution to November 21. But, how long would a shutdown last? Typically, these things go a week or two, though sometimes they’ve gone for a month.

Personally, I think there’s a pretty good chance that we may have a shutdown and it may last two to four weeks.

Q: What is a good response to customers when they ask about the affordability of housing over the next 6 to 12 months?

Brock Tate, Trustmark: It's a challenge. Obviously, some interest rate help would go a long way. Hopefully, we'll continue to see that move in our direction. But there is still the overall cost of living and based on what we hear, there is concern amongst our borrowers about the current market. Is now a good time to buy? Should I wait? 

We have got to find a way for either home prices to come down or for interest rates to come down to where housing is more affordable again. When talking with customers, I would hone in on those few points. But, until there’s more optimism in the market, I’m just not certain that the consumer feels a huge push at this point to be extremely active in the marketplace.