Homebuyers will suffer if President Biden and the GOP leadership cannot reach an agreement on the debt ceiling, according to a data analysis from Zillow Group (NASDAQ: Z, ZG).
While acknowledging that a debt default was “very unlikely” Zillow predicted mortgage rates could reach 8.4%, which would skyrocket mortgage payments on a typical home 22% higher by September.
Zillow also forecasted that home values after a debt default would begin to fall in August, albeit by a mere 1% from current levels through February 2024.
“Home buyers and sellers finally have been adjusting to mortgage rates over 6% this spring, but a debt default could potentially raise borrowing costs even higher and send the market into a deep freeze,” said Zillow Senior Economist Jeff Tucker. “Home values might not see a notable drop, but higher mortgage rates would severely impair affordability, for first-time buyers especially. It is critically important to find a solution and not put more strain on Americans who are striving to achieve their homeownership dreams.”
