Debt Deal Reached, Disaster Avoided?

President Barack Obama and congressional leaders late Sunday announced they had reached a compromise in the debt ceiling crisis, just in time to meet an Aug. 2 deadline. However, the deal still awaits full congressional approval, which is expected later today.

The compromise reached Sunday night among Republicans and Democrats would raise the government’s debt ceiling and trim $2.4 trillion in long-term spending. The deal, if approved, would avoid a first-ever government default.

Many real estate professionals have been eyeing the news closely as lawmakers have frantically tried to reach a solution to the debt ceiling crisis over the past few weeks. Real estate pros say that their indecision had already been impacting their business.

Some real estate professionals had reported they were seeing a decrease in buyers in the last few weeks as more homebuyers were opting to wait on the sidelines for the debt crisis fallout and see what happened with mortgage rates. Other real estate pros actually reported a spike as some buyers were rushing to beat the clock and lock-in mortgage rates before they rose.

The federal government needed to raise the $14.3 trillion debt ceiling by an Aug. 2 deadline or risk defaulting on its debts, which would send interest rates soaring — and continuing to soar since a higher debt ceiling could devalue the U.S. dollar, analysts have said.

“Most people don’t realize that [interest rates are] the big money saver, not the $10,000 you weigh holding out for on the home,” Stewart Karstens with Windermere told KING 5 News in Seattle. “It’s the 30 years at saving $120 a month, is the biggie.”

On Friday, the National Association of REALTORS® urged lawmakers to resolve the debt crisis before the Aug. 2 deadline because the uncertainty was hurting home sales.

By REALTOR® Magazine Online