Many Americans have recently been engaged in an ongoing struggle to purchase homes, largely made difficult because of well-documented affordability complications.
“In 2025, households and housing markets face an ever-more challenging environment,” according to a Joint Center for Housing Studies of Harvard University report. “High home prices
and elevated interest rates reduced homebuying to its lowest level since the mid-1990s.”
Rising insurance costs and escalating property taxes are placing increasing financial pressure on both homeowners and rental property owners, the study found.
The Harvard report explained that, in the for-sale market, home prices grew over the previous year across most of the country:
- As of
early 2025, prices are up 60 percent nationwide since
2019 and still rising at a rate of 3.9 percent year over
year, according to the S&P CoreLogic Case-Shiller US National Home Price Index. - Prices increased
in all four regions and in 88 of the top 100 largest metro
areas. - The U.S. median existing single-family home price hit $427,800 in August 2025, up 1.9% from last year, according to the National Association of Realtors
(NAR). - This is five times the median household income and significantly above the price-to-income ratio of 3 that has traditionally been considered affordable.
Against this backdrop, technology real estate company Zillow explained how another unfortunate wildcard in the housing market could make the difficult affordability environment even more challenging.
Zillow warns on government shutdown impact on housing market
The U.S. government shutdown began on Oct. 1 after Congress failed to pass competing funding resolutions — neither the Republican nor Democratic stopgap bills met the Senate’s 60-vote threshold.
“The most visible housing-market impact from the current government shutdown is on the millions of civilian federal employees who could be furloughed or laid off and miss paychecks, in turn leaving them potentially struggling to make their mortgage and rent payments,” wrote Orphe Divounguy for Zillow Research.
More on homebuying:
- Berkshire Hathaway HomeServices explains housing market changes
- Fannie Mae forecasts mortgage rate shakeup
- Dave Ramsey shares key insight on mortgage rates
In addition, there are other less obvious effects of the government shutdown to consider.
“Behind the scenes, the mortgage and housing system could also feel the strain if the shutdown drags on,” Divounguy wrote for Zillow (Z) . “When agencies halt or scale back operations, processing of federally insured or guaranteed loans slows — and in some cases grinds to a temporary halt.”
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Zillow: Impact on mortgages that are tied to federal agencies
- Each weekday, more than 2,500 mortgage applications connected to federal programs could face disruption due to the shutdown.
- Homebuyers depending on these government-backed financing options may see their transactions paused or even derailed.
- Lenders handling federally insured loans have been cautioned by the Mortgage Bankers Association to brace for major processing setbacks.
- These delays disproportionately impact individuals who already struggle the most to access affordable housing.
How government shutdown can add to rent, mortgage, housing market stress
A government shutdown threatens to stall thousands of new Housing Choice Vouchers monthly, even as existing payments continue. Mortgage processes tied to federal agencies — such as underwriting, appraisals, and FHA oversight — face mounting delays with each passing day.
“The housing market is already operating at the edge of affordability,” Zillow’s Divounguy wrote. “Many households are exposed — and a federal shutdown would exacerbate that vulnerability; marginal households could become cost-burdened overnight.”
Closings may be deferred, putting financially vulnerable buyers at risk of losing escrow, missing rate locks, or forfeiting homes entirely, Zillow explained. The U.S. Department of Housing and Urban Development’s critical services, including rental aid, homelessness grants, and fair housing enforcement, slow dramatically as staff are furloughed.
Related: Fannie Mae predicts major mortgage rate change coming soon
These disruptions hit hardest among low- and moderate-income households, many of whom already struggle with high rent burdens and limited access to stable housing.
The longer the shutdown lasts, the deeper the impact on those least equipped to absorb the consequences.
“The best outcome is function: continuous government funding so critical systems — including housing, lending, and aid — can operate predictably,” Divounguy wrote.
“Anything less invites real pain for households, especially those least able to absorb it.”
Related: Warren Buffett’s Berkshire Hathaway reveals housing market changes, trends
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