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[1]. “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 [2]. 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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[1] http://www.10news.com/news/28723227/detail.html
[2]http://www.bloomberg.com/news/2011-08-02/debt-agreement-puts-u-s-on-path-to-end-stimulus-just-as-economy-falters.html
As real estate agents, we have multiple opportunities to speak to the common household, and in my conversations, a majority of my clients are weary of the debate and uncertainty. Business have sat on loads of cash waiting for a signal that stabilization will occur and because the constant debate of increased taxes and cuts as a form of retaliation, businesses see no immediate benefit investing in their business by hiring or improving operations. Businesses feel more comfortable stock-piling cash reserves which is slowing our return to a stable market. This extends to our housing market, where the only sales are the amazing deals, and not normal sales. How much lower will they go overrides fair market value which increases days on market and decreases local market value.
Anyone that thinks we do not already have inflation has not been paying attention to what it cost to purchase food or fuel, and not just gasoline, but heating oil, etc…
The only businesses being smart are those able to sit on cash, how else are they going to survive the upcoming crisis of higher taxes and increased government spending?
As a country, the concept of default being tossed about is just a lie! Moreover, looking at adding another 2+ trillion dollars to the debt by 2013 is idiotic, to say the least.
Obama’s policies of cutting the debt will have nearly doubled it in 4 years! Somehow, I do not understand the math in spending like mad and telling me things are getting better, neither do the rating agencies. They have made no bones about the fact we are close to being downgraded a little bit, and the latest numbers on the economy show just one of the reasons we are going to be downgraded.
Too much spending, too little brains in D.C. to rein it in. The downgrade is coming; higher interest rates are on the horizon, maybe not this month, but sooner than later. Large companies are laying off large numbers of people again, we have almost have a new debt ceiling deal that is poison to our country, show me a bright spot that is real and not some idiot talking point!
Therefore, in summation, the debt deal is going to hurt the country, hurt housing and yes, the government needs to get out of the housing market! The government regulations and unrealistic policies have been the main drivers in getting the housing market into such turmoil in the first place.