Modelling A.I. in Economics

The Debt Ceiling: A Threat to the Housing Market?

The debt ceiling drama last week raised concerns about a possible government default, which would have sent shockwaves through the financial markets. The uncertainty led investors to sell stocks and buy bonds, which drove up bond yields and mortgage rates.

The yield on the 10-year Treasury note, which is a benchmark for mortgage rates, rose to 3.06% on Thursday, its highest level since December 2018. The average rate on a 30-year fixed-rate mortgage rose to 5.81%, according to Freddie Mac.

The debt ceiling is the limit on how much money the federal government can borrow. The United States reached its debt ceiling on October 1, 2022, and has been operating under a series of temporary extensions ever since.

The rise in mortgage rates is likely to dampen demand for home buying, which is already facing headwinds from rising inflation and rising home prices. The National Association of Realtors reported last week that sales of existing homes fell 2.7% in April from a year ago.

The Federal Reserve is expected to raise interest rates several times this year in an effort to combat inflation. The higher interest rates will likely put further upward pressure on mortgage rates, making it more expensive to buy a home.

The debt-ceiling drama and the rise in mortgage rates are likely to make it a challenging year for the housing market. Home buyers are facing a number of headwinds, including rising prices, rising interest rates, and limited inventory. It remains to be seen how the market will weather these challenges.

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