Real estate braces for impact of government shutdown

We’re closing in on a week since the federal government shutdown, and with Congress failing to reach a deal on Friday, the stalemate is poised to stretch on until the coming days, at least.

At first, the housing market appeared insulated. But the longer this drags on, the more pressure points emerge — from financing and insurance to renter subsidies and mortgage markets.

The most immediate impact is on federally backed lending. FHA and VA loans may face delays, especially when income verification from the IRS is required. Some buyers could see closings pushed back. If the shutdown lingers, subsidy programs that fund rental assistance may also run short, raising concerns for both landlords and tenants. In the 2019 shutdown, more than 1,000 Section 8 contracts expired during the 35-day standoff.

Financial markets are already showing signs of strain. Shutdowns often send investors flocking to Treasurys, pushing down yields and, in turn, easing mortgage rates. That pattern is playing out now as the 10-year Treasury yield hit a two-week low on Thursday. But this shutdown arrives at a pivotal moment. The Federal Reserve is weighing its next rate move, and with a blackout on government economic reports, policymakers are effectively flying blind. Without jobs and inflation data, markets could misjudge conditions, setting up sharper corrections once reporting resumes.

Florida, meanwhile, faces the most immediate squeeze. Nearly 1.8 million homeowners there depend on the National Flood Insurance Program, which can’t issue new policies while the government is closed. That risks derailing thousands of sales in flood-prone areas at the height of hurricane season. The National Association of Realtors estimates 1,300 to 1,400 closings could be disrupted nationwide each day. In Florida, where private flood coverage is costly and Citizens Insurance already requires it, the squeeze could be especially painful.

Federal workers on furlough or without pay may soon face trouble covering rent or mortgage payments, particularly in metros like Washington, D.C., Virginia Beach, Baltimore and San Antonio, according to a recent Realtor.com analysis. Meanwhile, in New York, the shutdown has also stalled federal reviews of infrastructure funding, including the Gateway tunnel and the Second Avenue subway’s next phase.

Like in previous years, a government shutdown brings with it uncertainty and volatility, and each day this shutdown continues, the ripples spread further.

There was plenty of other real estate news this week. Recession red flags are clouding South Florida’s market outlook, Meyer Chetrit was accused of harassing tenants and New York City office is making a comeback.

Meyer Chetrit indicted on felony tenant harassment charges

Manhattan developer Meyer Chetrit has been indicted on felony charges of tenant harassment tied to his Chelsea property at 117-119 West 26th Street. Prosecutors allege Chetrit and a co-defendant subjected two rent-regulated tenants in their 70s to unlivable conditions in a bid to push them out.

Tracking recession red flags in Miami

South Florida’s real estate market, long a magnet for wealthy buyers and investors, is facing new headwinds as recession indicators cloud the outlook. Rising inflation, a widening wealth gap and weak job numbers are fueling concerns, with JPMorgan pegging the odds of a recession at 40 percent by year’s end.

Tales from New York’s cautious office comeback

Earlier this year, New York City recorded the lowest office vacancy rate of any major city. Foot traffic has exceeded pre-pandemic numbers. And new leasing in Midtown rose to 5.3 million square feet in the second quarter, its highest mark since 2019. News from the leasing market has spurred big-ticket deals, but the scope of the office comeback is unclear.

Bally’s casino gets CAC approval, Thor’s Coney Island bid voted down

New York’s downstate casino race narrowed this week, with two more proposals gaining community advisory committee approval. Bally’s Bronx plan and Steve Cohen’s $8 billion “Metropolitan Park” casino both cleared key hurdles, while Thor Equities’ Coney Island bid was voted down.

Ikea buys Soho building from Jeff Sutton for $213M

Ikea is planting its blue-and-yellow flag in Soho, buying 529 Broadway from Jeff Sutton’s Wharton Properties and partners for $213 million. Ingka Group, which owns most Ikea stores worldwide, confirmed it will open a new location in the building, with the furniture giant taking over the first two floors for 25,000 square feet of retail.

Mayor advances $1.8B to speed up housing projects

With just three months left in his tenure, Mayor Eric Adams is squeezing as much housing as possible into his remaining time. A day after ending his re-election bid, the mayor announced he is shifting $1.8 billion from future capital budgets to this fiscal year for affordable housing projects.

Flatiron Building developers unveil pricing for 18 units of the conversion 

Owning a piece of one of New York City’s most iconic landmarks finally has a price tag. The team behind the hotly anticipated conversion of the Flatiron Building released the first glimpse of pricing at the building. Asking prices for 18 of the hotly anticipated conversion’s 38 planned residences start at just below $11 million. The units, disclosed in an offering plan filed this week, are eyeing a sellout of $375 million.

Billionaire spends $8.3M to buy neighbor’s lakefront Glencoe home

Billionaire Groupon co-founder Eric Lefkofsky spent nearly $8.3 million buying the house next to his record-setting estate in Glencoe in late August. The entrepreneur’s $19.5 million purchase of his current estate in 2014 was the most expensive home purchase in Chicagoland’s history at the time.

Union Investment sells Uptown tower in biggest trade this year

Uptown is home to another grand-slam office trade. Union Investment’s sale of 2000 McKinney topped Cousins Properties’ $218 million purchase of The Link at Uptown over the summer, making it the most expensive office trade of the year.