The housing market is facing a new threat: a looming government shutdown.

If Congress doesn’t reach an agreement by Saturday, the many federal government services could grind to a halt. That could bring new challenges to Americans, the economy—and a housing market hobbled by high home prices, mortgage rates topping 7%, and a critical shortage of homes for sale.

“The housing market is in a very fragile state right now,” says Jim Tobin, president and CEO of the National Association of Home Builders. “What we don’t need is a government shutdown that further damages the housing market.”

The biggest impact on residential real estate could be mortgage rates, which are primed to go even higher. Homebuyers could run into delays closing sales and have trouble securing popular loans. Government employees and contractors might have trouble making their mortgage and rent payments.

The length of a shutdown will determine the amount of damage done to real estate.

Four shutdowns have occurred over the past decade. The last one was in late 2018 and stretched into early 2019. It lasted 34 days as President Donald Trump had wanted funding to build a border wall, which Democrats had opposed.

“If the government shutdown lasts two to three weeks, it’s not great, but it isn’t a big deal for the economy or housing market,” says Mark Zandi, chief economist at Moody’s Analytics. But “a longer government shutdown could cause the economy to flatline, costing jobs and thus, hurting housing demand. Home sales may also be affected directly by the shutdown if homebuyers and builders aren’t able to get permits and insurance they may need.”

Mortgage rates could rise

A government shutdown could also lead to higher mortgage rates, says Bill McBride, author of the Calculated Risk economics blog. He correctly predicted the last housing bust in the 2000s.

Shutting down the government would inject a certain amount of uncertainty into the economy. Inflation, unemployment, and other data that the U.S. Federal Reserve considers when deciding whether to hike its rates could be affected.

Investors purchasing mortgage bonds (which are mortgages that are bundled together and sold so lenders can free up funding to make new loans) are likely to want higher mortgage rates to compensate them for the unpredictability in the market.

“The uncertainty is one more element that could lead to volatility in the mortgage and other financial markets,” says Realtor.com® Chief Economist Danielle Hale.

However, rates, which were above 7.5% on Wednesday, are likely to come down once the government reopens.

“As soon as it gets resolved, mortgage rates will return to whatever they would have been without the shutdown,” predicts McBride.

A long enough shutdown could also lead to lower mortgage rates. If a shutdown lasted long enough to hurt the economy significantly, the Fed could cut its rates. That could result in mortgage rates going down.

Home sales could be delayed

A shutdown would likely slow down the trickle of home sales, frustrating buyers and sellers eager to close.

The problem is lenders need to verify buyers’ income before approving loans. That could become trickier if the Internal Revenue Service doesn’t provide income verifications, which is what happened in previous shutdowns.

Buyers purchasing properties in flood zones could also be affected. Lenders providing mortgages often require insurance coverage to protect their investments in flood-prone areas.

But during a shutdown, buyers would not be able to secure and homeowners would not be able to renew National Flood Insurance Program policies.

There are workarounds.

Sellers could have their policies assigned to buyers and buyers can still find policies on the open market, according to the National Association of Realtors®. But transferring policies isn’t ideal and private flood insurance might be pricier than what’s offered in the national program.

Claims after a disaster are expected to continue to be paid until the money in the program is used up.

Homebuyers in rural areas may have trouble with USDA loans

Buyers might have trouble securing USDA home loans in more rural parts of the country. USDA loans are popular because buyers might not have to put any money down if they are approved.

“It’s not just about farm loans. It’s about newlyweds who have decided to purchase their first home in a rural small town. Perhaps they’re getting a loan guarantee from a bank that is guaranteed by USDA or perhaps they’re getting a direct loan from USDA to be able to purchase that home,” Secretary of Agriculture Tom Vilsack said at a press briefing on Monday.

“With a shutdown, those loans don’t take place. And it’s conceivable in those circumstances … that they may lose the deal,” he said.

Renters and homeowners could struggle to make housing payments

Many federal workers, contractors, and those whose employment relies on federal funding will not get paid during a shutdown. Some will be furloughed, others will be required to work without a paycheck. Typically, government workers get back wages, but most other workers do not.

If the shutdown stretches out, that could make it difficult for some homeowners to make mortgage payments and renters to pay their landlords as many live paycheck to paycheck. Buyers might not be able to go through with a home purchase.

“Workers [may] face a cash crunch that could make buying a home unfeasible,” says Hale.

However, foreclosures and evictions aren’t expected unless the shutdown drags on.

In the unlikely situation that the shutdown stretches into 2024, housing assistance provided to renters could be affected. Repairs in government-subsidized buildings could be put off.

In addition, a shutdown could also affect developers and builders who receive government funding for their projects, slowing down new construction, says Tobin. Most of these projects are larger, multifamily developments, such as apartment buildings and complexes.

“Bottom line is there is nothing good that comes out of a shutdown for the economy and housing market,” says Zandi.

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