As the government shutdown continues to drag on, how is commercial and residential real estate being impacted? What does Vail resorts, the largest owner of ski resorts in the country, have to do with the government shutdown.  How are existing property owners impacted?  How are government workers impacted?  How are purchases and refinancing impacted from the shutdown?  I’ve created a guide with details on 5 impacts of the federal shutdown on real estate.

As we all know, the federal government is a behemoth so the impacts from a prolonged shutdown will be felt far and wide.  I’m going to focus on 5 areas: Government Financing, Conventional mortgages, flood insurance, commercial mortgages, and property owners.  It is also important to discuss the impact of the shutdown on government employees and what this means for the economy.  Finally, I will discuss how Vail resorts plays into the shutdown discussion.

  1. Government financing: The federal government is the largest mortgage lender in the United states including FHA, HUD, VA, USDA, etc… During the shutdown, the loans are now continuing although questions are not being answered with reduced staff and loans are being delayed on average of 3-4 weeks by some estimates.   Ironically there are no official estimates due to the government shutdown.
  2. Conventional Financing: Over 70% of all mortgages are backed by the federal government via Fannie Mae, Freddie Mac, and Ginnie May.  Lenders originate loans and then sell the loans to one of the government sponsored entities that then bundles the mortgages and resells the various “strips” in the secondary markets.  Each of the three government sponsored entities is a “quasi” private enterprise with an explicit backing by the US treasury.  Although during the shutdown, it appears that the GSEs are continuing as normal with minimal impact on their funding, borrowers on the other hand could have issues as lenders verify information from the IRS.  The IRS is running on a skeleton staff during the shutdown so as lenders request verification of taxes, w2s, 1099s, etc there will be substantial delays.  This will lead to substantial delays in conventional funding.
  3. Flood Insurance: In order to get a conventional loan on any property in a flood zone, the mortgage company requires flood insurance.  The US government is the primary issuer of flood insurance.  Without flood insurance properties can’t be bought or sold.  Initially the national flood insurance program refused to issue policies since they didn’t have funding for staffing the program.  A special bill was passed that provided funding for Fema and January 1st Fema began issuing policies at a delayed rate (3-4 weeks out) due to the backlog.
  4. Commercial Mortgages: The SBA is shutdown except for workers focusing on disaster services. The SBA lends 25.4 billion annually to small businesses annually. The SBA programs has come to a halt during the shutdown with no new loans being funded for small businesses. Furthermore, the SBA is the guarantor on countless loans that banks originate.  The shutdown eliminates the review of any SBA guarantees as well.  Small businesses throughout the country will be hurt by the lack of funding for their loans to expand, buy equipment, invest in infrastructure, etc…
  5. Property Owners: With thousands of government workers no longer receiving paychecks, rent payments will be missed soon from government workers.  Furthermore Section 8 payments (low income housing assistance) from HUD will also not be sent putting many low income properties under financial duress.  Government workers could soon face eviction if the government is not reopened soon.  Furthermore, many property owners with tenants that rely on governmental assistance will also be forced to make decisions in regards to tenants in order to “keep the lights on”.

Secondary Impacts to property owners: Along with direct impacts to property owners, there are countless secondary impacts.  For example, let’s say you owned a property outside of Rocky Mountain National Park that you rent nightly.  With the park now closed you likely are not able to rent the property.  On the flip side, let’s say you owned an eatery close to a federal office (like the IRS or park service) with employees furloughed they aren’t patronizing the eatery.  Even as the government reopens this is lost revenue that isn’t coming back.

Not only will the shutdown impact purchases, refinances, and owners of properties, but also the government workers that aren’t getting paid.  According to a marketwatch article , government workers owe 400 million in mortgage and rent payments a month.  Many of these payments will be missed to mortgage companies and landlords as the shutdown drags on.  This could have long lasting impacts on government workers even after the shutdown is lifted.  For example, let’s say a government worker misses a mortgage payment due to not getting paid during the shutdown.  The lender would likely work with the borrower to an extent to help them out for a month or so.  Unfortunately, this would still show as a late on their credit and drop their score dramatically which would raise costs for the government workers going forward.  This same scenario will play out with various bills from utilities to credit cards to car insurance, et… As a result rates on credit cards, insurance, car payments, etc.. will all increase for at least the next 18-24 months due to the various late payments.  Not only will the rates increase, but this could prevent many government workers from being able to purchase or refinance a home in the future.

What does Vail Resorts have to do with the shutdown?

Don’t worry, I’m not crazy!  One of the byproducts of the shutdown is a hit to consumer and business confidence.  As the shutdown drags on and workers and businesses are not being paid or are unable to borrower money this wears on everyone’s future perception of the economy.  Consumer and business confidence take a hit and both groups pull back from spending which further dampens the economic outlook.  This is where Vail resorts comes into play.

Vail resorts does not have any direct impact regarding the shutdown, but they are a good proxy of consumer confidence.  Vail resorts caters to a higher demographic with ample disposable income.  60% of skiers/boarders earn greater than 100k a year.  This is a valuable group that has ample money to spend and are an important group to watch for cracks in consumer confidence.

Vail resorts has fallen 39% percent from its peak and recently fell 13% in one day. The CEO of Vail resorts, Rob Katz, said “despite the good conditions, our destination guest visitation was much lower than anticipated in the pre-holiday period.”  By Vail resorts reporting lower income and emphasizing less destination skiers are visiting is an important indicator that a very valuable group of consumers with disposable income is starting to get “worried” about the future and are pulling back on disposable expenditures like skiing.  The government shutdown will only perpetuate these fears.

A short term shutdown typically has minimal impacts on the economy.  Our current shutdown that is now 30 days old will have substantial impacts on real estate from purchases to refinances and existing property owners as paychecks continue to be missed.  The longer the shutdown drags on, the greater the risk to the economy. Vail Resorts recent earnings announcement is a warning that consumers are getting nervous.  The shutdown will no doubt perpetuate these fears and business and consumers will pull back from disposable purchases.  How much consumers and businesses pull back is the question of the hour.  Unfortunately, we will not know the answer for a while as staff that handles governmental reporting of the economy is on furlough.


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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.


Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide.  To get started on a loan all they need is their simple one page application (no upfront fees or other games).