KJZZ

The budget impasse in Washington is starting to impact the housing recovery.

ASU real estate expert Michael Orr says it’s shutting down mortgage lending, because lenders are unable to get income documentation from the IRS.

“Some of the lenders are saying okay, well just sign the form asking for the transcript, and we’ll continue assuming that the transcript will turn up at some time,” Orr said. “Other people are just saying, well we can’t process this yet.”

Orr says a federal default would represent an even bigger nightmare, opening a trap door beneath the fragile housing market, and leaving home prices nowhere to go, but down.  He says the shutdown is reducing the speed and will probably reduce the volume of transactions during the fourth quarter of the year.