Federal government shutdown affecting Sacramento region’s housing market

SACRAMENTO, Calif. — The federal government shutdown is impacting the Sacramento region’s housing market, from federal workers unable to get approved for a home loan to federal flood insurance policies being unavailable at this time.

FEMA’s National Flood Insurance Program is unavailable. Insurance expert Karl Susman says new policies and policy renewals are on pause during the shutdown.

ABC10 spoke with Susman and housing analyst Ryan Lundquist about what the shutdown means for the local real estate market.

“Flood insurance is not available right now through FEMA, and so that can certainly impede lending in various pockets of Sacramento where they are designated as flood zones” Lundquist said.

He is an appraiser and housing analyst, who runs the Sacramento Appraisal Blog.

Typically, he said, mortgage lenders require homeowners to get flood insurance if they live in a flood zone, and one popular method is FEMA’s National Flood Insurance Program.

“Over 5 million properties are covered under this program,” Susman said.

Susman is founder of the non-profit Insurance Consumer Guidance Society, “dedicated to providing the residents of California with clear, unbiased educational resources about insurance,” according to its website.

People in need of new or renewed flood insurance during the federal government shutdown can check the private market, he said.

“There are private insurance companies that write flood insurance. It’s not just you can only get it through the feds, and it’s not necessarily more expensive. Sometimes, it can be a fraction of the cost,” Susman said.

People with an existing FEMA flood insurance policy who file a claim during the shutdown should still be able to get that processed, Susman said.

ABC10 reached out to FEMA for this story but did not hear back.

While flood insurance is a concern, there are other housing market issues caused by the shutdown that don’t have a clear immediate solution.

“The big issue is there are some federal employees who are struggling to close on loans, whether that’s a refinance or purchase, because they can’t show proof of continued income, and so – unfortunately – those people are sort of on pause until the federal shutdown gets resolved,” Lundquist said.

The shutdown is the latest factor fueling economic uncertainty, he said. During the hot housing market of 2021, nearly 57% of homes in the region sold above the original list price. Now, that number is just 25%, with 63% selling below list price.

Active listings are spending an average of about 80 days on the market.

“I think this year in the housing market is– we’ve seen more uncertainty about the economy, and so, the current shutdown doesn’t help the situation,” Lundquist said. “I don’t know that we can say that it’s exacerbating it, but it really doesn’t help… the psyche of buyers and sellers.”

He points out mildly positive data, with 235 more homes sold in the region last month compared to September 2024. He attributes that to slightly lower mortgage rates over the past few months.

“I think we can at least identify that– hey, when mortgage rates do go down, it does make a little bit of a difference for buyers,” he said.

ABC10 asked if the Fed lowering interest rates will impact the housing market.

“When the Fed cuts rates, that’s really the short-term rates, so for like credit cards, and, you know, auto loans, and so there’s relief for consumers in that regard, but it doesn’t necessarily mean that mortgage rates would definitively go down,” Lundquist said. “In fact, today, mortgage rates actually went up a little bit.”

You can learn more about the state of the Sacramento region’s housing market at Lundquist’s blog HERE.

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