Posted by: RAPV | August 8, 2011

NAR Chief Economist Comments on U.S. Credit Downgrade

U.S. Credit Downgrade Talking Points from NAR Chief Economist Lawrence Yun 

  • What are your general comments about the U.S. credit downgrade?
    It depends on how the global bond investors react to the news, and it is likely that they will continue to buy U.S. treasury even at low rates.
    Still, a downgrade on anything nearly always means higher borrowing costs so any federal government-related interest rates will likely rise.
  • How will this affect borrowing costs for homes?
    Mortgage rates will move in tandem with U.S. Government borrowing costs since most mortgages today have government backing.   Non-government backed loans may not move that much, unless the general economic weakness forces it.
  • Will the downgrade further weaken the housing market?
    Not really.  Even if mortgage rates were to rise, the current lending situation is less about interest rates and more about underwriting standards.  What’s really preventing many qualified buyers from becoming home owners is today’s tight credit restrictions.  Realtors® believe in a responsible, sustainable model for home ownership, and current credit policy restrictions are not conducive to that model.
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Responses

  1. How does the downgrade impact the market?

    • It remains to be seen. We’ll see how it plays out. Most likely if we asked a variety of nation economists we would get a variety of interpretations. Lawrence Yun, NAR Economist doesn’t see a big impact.


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