The federal shutdown is rattling housing markets in states like Florida, but California’s has barely flinched.
“Overall, the California housing market hasn’t shown signs of any major shifts since the government shutdown kicked off,” says Realtor.com® senior economic research analyst Hannah Jones. “New listing activity is up year over year, time on market is stable, and inventory growth is decelerating, holding with recent trends.”
It’s a striking finding given how exposed California could be. The state ranks sixth nationwide for both FHA and VA loan volume, ninth for total USDA housing investments, and sixth for the number of active National Flood Insurance Program (NFIP) policies—all federal programs now halted or critically delayed as the shutdown enters its third week.
It’s also significant because of California’s sheer scale: Real estate makes up 17.6% of California’s economy, contributing roughly $680 billion to the state’s GDP and supporting hundreds of thousands of jobs across construction, real estate, and home services, according to the National Association of Realtors®.
But resilience has its limits, and the longer the shutdown lingers, the more pressure builds.
“Each day the shutdown continues compounds these challenges,” writes NAR Executive Vice President and Chief Advocacy Officer Shannon McGhan.
“For millions of Americans, it means uncertainty about closing dates, delayed access to affordable housing, and higher costs as markets react to instability,” she adds. “For the broader economy, it risks slowing growth in one of the country’s most important sectors.”
California’s calm
So far, the data signals stability for the Golden State.
New listings are up compared with a year ago, time on market is largely unchanged, and inventory growth continues to slow in line with national trends. That steadiness reflects who’s driving California’s market—and how they buy.
Most borrowers in the state rely on conforming loans, which haven’t been disrupted by the federal shutdown, while cash and jumbo buyers remain active in expensive metros like Los Angeles, San Francisco, and San Jose.
“Buyer demand remains intact in California, as high-income, cash and jumbo buyers, who tend to be common in high-priced California metros, aren’t directly affected by furloughs,” explains Jones.
That activity highlights a key portion of the federal government that still is working, despite the shutdown: the IRS’ Income Verification Express Service (IVES), which allows lenders to verify borrowers’ tax information and keep mortgage approvals moving.
Curtis Knuth, CEO of credit reporting and verification firm Service 1st, says that his company has seen no disruption in delivery of the thousands of tax transcripts it requests from the IRS each week as part of the mortgage vetting process.
“For the divisions that we work with, there’s no impact,” he tells Realtor.com. “Normal turn times are standing.”
Knuth explains that the IVES is self-funded by user fees, and thus does not require a new spending bill from Congress to continue normal operations.
Lisa Binkley, the COO of Service 1st, says that about 97% of tax transcript requests through IVES are currently getting processed within three days, on par with turnaround times before the shutdown.
For homebuyers, it’s a spot of bright news as the government shutdown drags on with no end in sight.
Early signs of strain among government-backed loans
But beneath that surface of calm, early fractures are forming.
“I’ve seen a small cooling over the past couple of weeks in buyer enthusiasm, particularly for first-time buyers using FHA or USDA financing,” says Bastien Wissmann, a New Properties & Investment Specialist.
While these sales make up a small portion of California’s real estate, the scale or importance of these programs shouldn’t be underestimated. In June 2025 alone, California buyers took out $1.9 billion in FHA loans—the third-highest volume in the nation, according to HUD’s Single-Family Portfolio Snapshot.
While fewer than 1% of California homebuyers rely on USDA loans, those who do often have few alternatives. And since 2024, the state has received nearly $20 billion in USDA funding for single- and multifamily housing, ranking ninth nationally for total investment.
Unlike conforming loans, these programs rely on federal staffing and approvals, both of which are now frozen. “The lack of clarity about government operations breeds caution, even among qualified buyers who would otherwise be eager to move ahead,” Wissmann says.
Sellers, meanwhile, are adjusting rather than retreating. “Most are willing to extend the closing process a little longer or notch prices down slightly to keep deals chugging along, an acknowledgment of caution and optimism,” Wissmann adds.
Shutdown delays hit builders first
But while the shutdown’s effects have been mostly muted for the market at large, builders are starting to feel the drag.
“Builders and developers are beginning to complain about the slower processing of permits and inspections,” says Wissmann. “These small delays can cause ripples throughout projects, especially for multiunit residential developments.”
While many permits are issued from local authorities, sometimes those authorities need federal coordination to move the process forward.
“Right now, the impact has been minimal, but the longer the shutdown goes, the more those reviews and permitting procedures are going to start clogging up,” Russel Riggs, senior regulatory representative for NAR, told Realtor.com last week. “After four weeks, you’ll really start seeing the impacts very clearly.”
As we near the four-week mark in the shutdown, Gary Mkrtichyan, a developer and general contractor with Opus Builders in Los Angeles, says he’s run into significant delays since the start of October.
He’s currently overseeing several new-home projects in Hollywood that require city-managed infrastructure, everything from sewer connections to fire hydrant relocations. But recently, even routine requests have gone unanswered.
“I’ve never seen this type of slow movement,” he says.
For developers, those delays can come with costly consequences.
“I’ve paid close to $20,000 that went to waste because they can’t move efficiently and give us what we need to get our projects going,” Mkrtichyan says.
A hidden flood risk
It’s been widely reported that the lapse of the National Flood Insurance Program has put 4.7 million policies at risk at the height of hurricane season. But in California, there’s an added danger.
In wildfire-scarred regions, burned hillsides become more vulnerable to floods—without vegetation, the ground can’t absorb rainfall, heightening the risk of flooding even for properties that are outside of designated Special Flood Hazard Areas.
FEMA estimates that flood risk remains significantly higher for at least five years after a major wildfire. Yet only about 4% of homes in wildfire-affected states carry federal flood insurance, leaving most owners—and many new buyers—exposed as federal coverage stalls.
Less than a year after the devastating Palisades and Eaton fires, that’s an especially serious problem for Californians still rebuilding. With the NFIP stalled amid the federal shutdown, no new or renewed policies can be issued.
For buyers in high-risk areas, that bureaucratic pause can bring home closings to a sudden halt.
“If the shutdown lingers, home sales could see delays related to insurance. For homes needing a new/renewed flood insurance policy, the suspension of the NFIP puts closings at risk and slows down transaction activity,” explains Jones.
The lag effect: When stability turns
For now, California’s housing data looks calm, but in a market this interconnected, the effects of a freeze as extended or expansive as this one are unlikely to stay invisible for long. The real risks come later, as the slowdown ripples through listings, loans, and sentiment.
“If homes sit for longer due to issues with mortgage loan approval or insurance challenges, delistings or price reductions may increase,” says Jones. “This is especially relevant if consumer sentiment shifts or anxiety over the shutdown increases, which could convince some buyers to hold off.”
The real estate industry makes up roughly 18% of California’s $4.1 trillion economy—nearly one-sixth of the entire U.S. GDP. Each median-priced home sale generates about $230,000 in local economic activity and supports three jobs, from contractors and appraisers to movers and furniture retailers, according to research from NAR.
California’s stability may be masking a lag effect—a market that looks steady on the surface but could start showing cracks in the coming weeks. If that happens, the state’s housing slowdown won’t stay local for long.
