Government Shutdown Threatens D.C. Housing Market Already Rattled by DOGE Cuts

The weakened Washington, D.C., housing market is bracing for a "direct impact" from the federal government shutdown, coming just months after the Department of Government Efficiency (DOGE) sweeping job cuts.

The shutdown went into effect early Wednesday morning, after Republicans and Democrats in Congress failed to reach an agreement to continue funding government services.

The federal government employs roughly 3 million people—750,000 of whom have now been furloughed.

Typically, once the shutdown ends, those workers would resume their jobs and receive back pay, but the Trump Administration reportedly plans to use the impasse to further cull the federal workforce.

Speaking to reporters Wednesday, White House press secretary Karoline Leavitt warned that layoffs would be "imminent."

That spells bad news for the D.C. metro area, which has the nation's highest share of federal workers, at roughly 11%.

A different kind of shutdown

"The Washington, D.C. housing market is more exposed to the government shutdown than anywhere else in the country, given the region’s deep ties to federal employment and contracting," confirms Bright MLS chief economist Lisa Sturtevant.

On a practical, short-term level, Sturtevant says the shutdown could delay home sales due to slowdowns in FHA and VA loan processing. Additionally, it will shut buyers out of the market looking to purchase properties in flood zones, because the National Flood Insurance Program (NFIP) has lapsed.

Beyond that, the Bright MLS economist predicts that the political crisis now unfolding in the capital's halls of power will negatively impact housing supply and buyer demand going forward.

"Even the uncertainty created by this shutdown will cause prospective homebuyers to hold back and could cause more existing homeowners to leave the region," says Sturtevant.

A government shutdown is nothing new in the D.C. metro. Over the past decade alone, the federal government suspended operations four times, most notably in 2018-2019, when furloughed workers went unpaid for a record 35 days.

Sturtevant says that while impacts from previous shutdowns on the local housing market have generally been "modest and temporary," she insists this time is "different"—and the real estate sector will feel it.

Market weakened by DOGE purge

"The region has been caught up in a series of other federal initiatives, including DOGE layoffs and budget cuts, return-to-the-office mandates and the deployment of the National Guard in the District of Columbia," says Sturtevant, recapping some of the turbulent events that have occured in the capital since President Donald Trump's return to the White House in January.

In the first months of Trump's second administration, DOGE, then headed by Tesla billionaire Elon Musk, carried out a large-scale campaign to drastically downsize the federal workforce, resulting in tens of thousands of job losses. Some unofficial estimates place the total number of positions cut in the hundreds of thousands.

Kevin Hughes, a D.C.-area real estate agent with The Group at Compass, agrees that this latest shutdown is not like the others.

"The government and politics has always reverberated through the D.C. house market, but we have never seen the volatility and lack of understanding of what is coming next," Hughes tells Realtor.com. "In my years as a realtor, until Trump's DOGE firings and now this shutdown, I have never seen the job stability of government employees impact so strongly the overall sediment and enthusiasm of the market."

In the aftermath of the purge, the D.C. metro's housing market has been left in a weaker state compared to other Mid-Atlantic markets, with more listings, slower home price appreciation and longer time on market.

During the week ending on Sept. 28 predating the start of the shutdown, new pending contracts in D.C. were down 4.1% year over year and there were 3.8% fewer showings compared to the same period in 2024, according to data from Bright MLS.

At the same time, the median listing price within the city plunged nearly 15% on an annual basis, to $624,950.

According to the September 2025 monthly housing market trends report from Realtor.com, active inventory in D.C. surged 48.7% compared to a year ago, with more than 18% of sellers offering price cuts. 

Shattered confidence

Sturtevant says another aspect of this latest shutdown that sets it apart from its predecessors is the Trump Administration's apparent pursuit of permanent job cuts, specifically in agencies and offices that are not aligned with the president's policies.

"In prior shutdowns, non-essential federal workers were sent home but returned after the shutdown ended and received back pay," says the economist.

Hughes says if the administration follows through with mass firings, he expects consumer confidence to plunge further in the local housing market.

"These firings don't just mean changes for federal employees, but also anyone who has a job that relies on the federal government, i.e. government contractors, consultants, lawyers, lobbyists, etc," notes the agent.

Which communities will be affected the most?

Sturtevant says impacts from the shutdown will likely vary across different parts of the region, depending on the share of federal workers living there.

Communities with especially high concentrations of federal employees, such as D.C. proper, Arlington, VA, and Alexandria, VA, stand to feel the most pain.

On the other hand, Loudoun County, VA, which has only 8% of government workers, should be relatively safe.

"Although it is difficult to predict the extent of the impact, a prolonged government shutdown, or a shutdown that results in permanent workforce cuts, would lead to a slowdown in housing market activity and likely to year-over-year declines in home prices," says the economist.

In some good news, existing homeowners who do not have to move, or who have a significant amount of equity in their homes, will not necessarily be adversely impacted.

Also, both Sturtevant and Hughes agree that prospective buyers with jobs not tied to the federal government will find opportunities to get into the market with more options and lower prices.

"Longer-term, the Washington D.C. area will always be the seat of the federal government and will also be a major metropolitan area economy, attracting new jobs and residents and the housing market will rebound," says Sturtevant.  

Hughes says he hopes the local market regains its usual stability, but he harbours doubts.

"Unfortunately, because Trump's policies are so erratic, the standard buyer and seller has a hard time feeling confident making a large investment without the confidence not only of their own jobs, but the jobs of others in the area," he says.