A default on the nation’s debt likely would boost mortgage rates by at least two percentage points and cause a slump in home sales, a Zillow economist said.
“Our view is that the Zillow report may be a best-case scenario as our concern is that credit markets will freeze up if there is a default,” Seiberg said.
With a razor-thin Republican majority in the House of Representatives, even a few hold-outs inspired by Trump’s remarks could doom a chance to come to an agreement about raising the debt cap, Seiberg said. Negotiations over the debt ceiling aren’t about how much to spend – they’re about paying bills already incurred.
While economists agree that a failure of the U.S. government to pay its bills would be a recession-inducing catastrophe, they don’t agree on the “X date,” meaning the day a default would begin. Treasury Secretary Janet Yellen puts the month as June, and the earliest potential day as June 1. The U.S.it would use “extraordinary measures” to move money around to delay a default as long as possible.
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