Potential debt default could make housing market more volatile

The housing market faces unprecedented challenges, and the country's looming debt default could make it even worse.
Published: May. 18, 2023 at 1:11 PM EDT
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HUNTINGTON, W.Va. (WSAZ) - The deadline is quickly approaching to make a decision about the fate of the nation’s debt ceiling. This impacts many parts of the economy, and the real estate industry is a big one.

”It’s a challenging market, and if the debt ceiling does not raise it will most likely become even more challenging for buyers,” said realtor Todd Nelson with Old Colony Realtors.

The housing market faces unprecedented challenges, and the looming default could make it even worse. Nelson has been selling homes for decades and compares the market to what it was during the recession of 2008.

“The biggest difference between 2008 and now, is in 2008 we had a lot more houses to choose from,” Nelson said. “We don’t have the inventory levels we had in 2008.”

Little inventory and the potential skyrocketing of mortgage rates if the nation defaults on its debts, could create a nightmare for home buyers.

“If the mortgage rates raise, there are situations may not be able to afford as much home as they once did as those rates raise,” Nelson said.

He said despite it all, buying a home still has its perks, like having a fixed rate mortgage that stays the same when rent prices are everchanging.

“In real estate you have the ebbs and flows, it goes up, it goes down,” Nelson said. “I think our area hasn’t seen the increase in the last few years at one time as it has.”

In a seller’s market, Nelson said the best thing you can do is act quickly, which an experienced realtor can help you do.

According to Zillow, if the nation defaults on its debts, home sales would collapse up to 23% with rates for 30-year fixed rate mortgages going up more than 8% by this fall.