As politicians continue to battle over the national debt ceiling in the nation’s capitol , real estate analysts fear that the wrong deal could send the sluggishly recovering housing market into a tailspin. Director of the Corky McMillan Center for Real Estate Michael Lea believes that a short-term debt deal could mean that interest rates rise and, more problematically, consumer confidence could plummet. “If you’re not confident about where the economy is going…you’re not going to be confident about buying a house,” he said, while other analysts speculated that personal finances would take a major hit if a long-term deal is not struck. Furthermore, given that many credit agencies have already either downgraded the United States’ credit rating or announced that they are likely to do so regardless of the terms of a deal in Washington, interest rates are likely to rise no matter what – and inflation could enter the picture as well. “The closer we get to downgrade and default, the less confidence in the immediate to long-term the rest of the world is going to have in the U.S.,” said Lea, adding that if the deal is not “right” then the U.S is risking its “economic prominence.”
If the deal that politicians struck over the weekend goes through, then $2.4 trillion in cuts will be made to budget deficits over the next decade . And it’s not looking good for consumer confidence either, with “further spending cuts and higher taxes” interfering with economic growth, according to Capital Economics senior economist Paul Dales. However, other analysts argue that the sooner the government gets out of the business of artificially stimulating the economy, the better it will be. Do you think that this debt deal will help or hurt the housing market? Do you feel like the government has any choice but to make these cuts in spending?
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