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The Debt Ceiling Crisis & How It Will Effect the Real Estate Market & Mortgage Industry

Posted by Matthew Boreen
Matthew Boreen
Founder of RealEstateSwap.com. I kiteboard, snowboard, work with robots, study AI, and play jazz clarinet.
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on Friday, 29 July 2011 in Real Estate One Stop Shop Blog

debt_ceiling_united_statesOver the past 6 months there has been an issue luring over the United States. An issue that if not resolved by congress, will create U.S. financial hardship. August 2nd is the day that the United States will be out of money to pay its debt and officially default.

- So what does this mean for the middle class?
- Is this a big deal or just a concern for the wealthy?
- How will this effect your life financially?


These are just a few questions that come to mind as TV and news outlets run story after story.  They frequently talk about how the President and politicians, both democrats and republicans, will not agree on a compromise. As the August 2nd deadline approaches, you have to wonder what the consequences are and how it may effect the United States?

 

After August 2nd, the United States will be short of paying their debts by $135 billion. So what are these debts that are not going to be paid? Some of these companies that the US owes money to are military suppliers, government workers, Medicare, Medicaid, and Social Security. This may be one outcome of the debt ceiling not being raised, but the biggest problem is after the U.S. defaults, it will lose the AAA credit rating the country has had for so long. Once the country’s credit rating is downgraded, the effect will be spread across the entire U.S. population and beyond.

Here are a few examples of what is suspected to happen to the real estate market if our U.S. credit rating is downgraded.

  • The United States Treasury will be forced to pay even higher interest rates on their debt. This will force interest rates on mortgages and banking to rise.
  • The higher interest rates required for home loans will only make it harder for buyers to afford houses.
  • The slowdown in an already weakened economy will continue to drop housing prices, create more foreclosures, and force real estate professionals to lose their jobs.

In conclusion, many areas of the economy will be effected from the potential downgrade of the United State’s credit rating and looming debt ceiling crisis. This issue may be political hype that everyone is talking about, but if not handled correctly it will cause a significant strain on the U.S. economy. Resolving this crisis will take effort from every political party with a plan in mind to not only save the country’s credit, but also significantly reduce the amount of money our country spends.
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Tags: AAA credit rating, august 2nd deadline, debt ceiling, debt ceiling crisis, downgraded credit, mortgage industry, united states credit rating, united states economy, us credit rating, us economy
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