NAR: Without Debt Limit Raise, Disaster May Strike

Posted by Patrick Barnard on October 11, 2013 No Comments
Categories : Residential Mortgage

14461_lightening_strike NAR: Without Debt Limit Raise, Disaster May Strike Defaulting on the nation's federal debt could be disastrous for the U.S. economy and catastrophic for the housing recovery, according to the National Association of Realtors (NAR).

In testimony to the Senate Committee on Banking, Housing and Urban Affairs, Gary Thomas, president of NAR, said Congress must raise the debt limit in a timely manner to avoid the consequences of a severe and drawn-out recession that would rapidly erase recent gains in the still-young housing recovery.

‘A default would be devastating for homeowners whose largest asset would lose value and equity, for home buyers who would see dramatic increases in interest rates and tighter credit standards, and for entire communities that are still grappling from the impact of the financial meltdown,’ said Thomas, who is a broker-owner of Evergreen Realty in Villa Park, Calif.

Thomas said even a 1% increase in mortgage rates could lead to 450,000 fewer home sales and could price many middle-class Americans out of the housing market. For a borrower earning $60,000 and taking out a $200,000 mortgage, a one percentage point increase in interest rates would raise the borrower's monthly mortgage payment by 10% – a difference that could be costly to buyers and potentially disqualify them from many lending programs, according to Thomas.

During his testimony, Thomas pointed to the significant financial market disruptions resulting from the debt ceiling impasse in 2011, which reduced consumer and business confidence and led to slower job growth. He urged Congress to raise the debt limit to help sustain the housing market rebound, which he said will keep the economy on its healthy path to recovery.

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