The Department of Government Efficiency's (DOGE) proposed budget cuts could reshape housing markets across the U.S.
Why it matters: These cuts could shake up inventory and prices in cities with lots of federal workers — creating both challenges and opportunities for buyers and sellers.
Where the risks are highest:
Federal layoffs are looming, with cities reliant on government jobs bracing for impact. Top of the list: the Washington D.C. metro area, where about 375,000 federal jobs could be at risk.
"There is no historic precedence, outside of base realignment actions, for large-scale layoffs of federal workers, and none that I can think of that involve large reductions in force (RIFs) of civilian workers," says Terry L. Clower, Ph.D., professor at George Mason University's Schar School of Policy and Government.
Big picture:
Concentrated job losses can cause serious, lasting damage to housing markets. Clower points to the Rust Belt of the 1970s as an example of what happens when communities can't recover quickly.
"For some markets, economic recovery does not happen quickly enough and a path dependency of dropping values takes hold,” he said. “Eventually, you can find a need to raze abandoned homes to help shore up the values for homeowners who stay."
It’s not just government workers: Restaurants, contractors, and service businesses tied to federal paychecks could take a hit too — creating a domino effect across communities.
"If the combination of federal job losses and the loss of jobs related to federal contractors is as large as promised by the administration and DOGE, it will have a negative impact on the DC regional housing market," Clower said. "Though it will likely be some months before we see significant effects."
What's next:
As workers tighten their belts — or move away — more homes could hit the market, just as fewer buyers are shopping. That usually leads to price drops in the hardest-hit neighborhoods.
Timing the effects: Housing markets won't shift overnight, but signs could pop up soon.
"Much depends on the speed of federal actions, but we will see some signs in the next month or two that will accelerate in the fall as workers who chose to take buy out offers begin to lose income," Clower said.
Even before layoffs, market psychology can change behavior.
"It is possible that we will see preemptive actions by some households, especially those where there is a federal worker eligible, or near eligible, for retirement," he noted.
Less hiring = softer demand: If fewer people move to these cities for work, overall housing demand could weaken — pushing some homeowners, especially those near retirement, to list their homes now.
What it means for buyers and sellers:
Buyers: Patience might pay off. More homes = better negotiating power. But: Markets could stabilize quicker than expected, limiting price drops.
Sellers: If you're thinking about selling soon, acting quickly could put you ahead of any downturn.
Navigating uncertainty:
Every household faces different choices when job markets shift.
"Every household will be facing their own unique circumstances that will impact their employment or career choices," Clower said. "Do they retire? Do they move to someplace with a growing economy and/or lower cost of living? Do they have social or economic connections to the community that causes them to ride out the coming economic storm?"
The next few months will show how people respond — and how that reshapes local markets.
Some areas may weather it better: Not every city will be hit the same way.
"How bad it gets will depend on the region's ability to absorb displaced workers and find alternative industries to offer alternative job opportunities," Clower said.
Cities with a diverse economy might see only temporary dips, while others more dependent on federal jobs could face longer recoveries.
The Bottom Line:
Government cuts are likely to cool housing markets in federal hubs — but don’t expect a crash. Expect a gradual easing instead.
Your Next Move:
If you're buying or selling, keep an eye on local job trends, not just national headlines.
Housing markets rise and fall — but the best decisions start with your own situation.
