--- title: A U.S. Debt Default Could Send the Housing Market Into a 'Deep Freeze' description: If the U.S. defaults on its debt, mortgage rates will rise, home values will fall, and the housing market will slump, Zillow forecasts. authors: - name: Adam Hardy role: Lead Data Reporter url: https://money.com/author/adam-hardy/ bio: Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. Adam’s work has also appeared in Business Insider, Forbes, Nasdaq, The Penny Hoarder, Yahoo! Finance and more than a dozen local and regional newspapers. education: University of South Florida, BA, Magazine Journalism at_money_since: 2021 articles: 498 covers: - Mortgages - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - The Penny Hoarder - Forbes Advisor - Creative Loafing - The New York Times - The Washington Post - Bloomberg - Harvard Law School - The Federal Register - National Consumer Law Center - CBS News - Becker's Hospital Review - Business Insider - Mother Jones - The Week - Fortune - The Philadelphia Inquirer - National Association of Student Financial Aid Administrators (NAFSAA) - Education Advisory Board (EAB) - The Institute for College Access & Success (TICAS) - This Morning with Gordon Deal - Empower - Reddit social: - https://www.x.com/hardyjournalism - https://www.linkedin.com/in/hardyjournalism/ editors: - name: Brad Tuttle role: Senior Editor url: https://money.com/author/brad-tuttle/ bio: Brad Tuttle is a former senior editor at Money with over 10 years’ experience covering a vast number of personal finance topics, including careers, cars, travel, budgeting, investing, insurance, credit cards, consumer psychology, real estate, banking, and shopping and deals. education: Columbia University School of Journalism, MS at_money_since: 2014 articles: 366 covers: - Mortgages - Banking - Business - Career Advice - Credit - Credit Cards - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology social: - https://twitter.com/bradrtuttle - https://linkedin.com/in/brad-tuttle-834b225 former_staff: true published: '2023-05-12T18:01:06.000Z' modified: '2023-12-19T04:17:54.000Z' section: Mortgages tags: - News word_count: 436 canonical: https://money.com/how-debt-default-affects-housing-market/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We may earn a fee if you click on the links below. Compensation does not determine ranking. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Photograph of a house for sale](https://img.money.com/2023/05/News-How-debt-default-affect-mortgage-rates-housing-market.jpg?crop=0px%2C301px%2C2880px%2C1620px&quality=85) If the U.S. defaults on its debt, the economic effects could be catastrophic, potentially causing the already [struggling housing market](https://money.com/buyers-sellers-housing-market-pessimism/) to slump further. An analysis released Thursday from the real-estate marketplace Zillow sheds light on just how damaging a [potential debt default](https://money.com/debt-ceiling-questions-answers/) could be on the housing market. The picture is bleak. Jeff Tucker, a senior economist at Zillow, projected that home sales would plummet, [mortgage rates](https://money.com/current-mortgage-rates/) would climb even higher, and buyer [housing payments would soar](https://money.com/typical-mortgage-payment-record-high/) by over 20%. "Home buyers and sellers finally have been adjusting to mortgage rates over 6% this spring, but a debt default could potentially raise borrowing costs even higher and send the market into a deep freeze," Tucker said in a [statement](https://zillow.mediaroom.com/2023-05-11-Home-buying-costs-could-soar-22-if-US-defaults-on-its-debt) Thursday. In his report, Tucker stressed that the U.S. has never before defaulted on its debt, and that he believes one is not likely to happen. Still, the U.S. could run out of cash to pay its bills by as early as June, according to recent estimates. ## Need to lock in a Mortgage Rate before they increase again? ### Mortgage Rates may go up soon, but you don’t have to wait. Click on your state to talk to a Rocket Mortgage (NMLS #3030) Mortgage Expert today. [View Rates](https://money.com/pr/g840443cff52?ap_referrer=%2Fhow-debt-default-affects-housing-market%2F) ## What the research says - A debt default, while unlikely, could trigger 30-year mortgage rates — which are [currently hovering above 6%](https://money.com/current-mortgage-rates/) — to jump to as high as 8.4% in September before falling below 7% toward the start of 2024, according to Zillow. - Average mortgage rates have not topped 8% in more than two decades, data from the [St. Louis Federal Reserve](https://fred.stlouisfed.org/series/MORTGAGE30US) shows. - As a result of higher rates, the mortgage payment on a typical home could skyrocket upwards of 22% by September. - Zillow estimated housing market activity would also fall sharply, with existing home sales plummeting 23% at its worst. Between July 2023 and December 2024, the cumulative decline in home sales would be over 700,000, Tucker said. - [Home values](https://money.com/what-lower-home-values-mean-for-homeowners/), which Zillow currently predicts to rise 6.5% by the end of 2024, would end up being 5% lower if a default were to happen. To avoid a debt default, lawmakers — who are currently gridlocked — must decide the path forward: raising the debt ceiling, hiking taxes, slashing government spending or a combination. Other more fringe alternatives include minting a [$1 trillion coin](https://money.com/debt-ceiling-trillion-dollar-coin/) or abolishing the debt ceiling altogether. “Any major disruption to the economy and debt markets will have major repercussions for the housing market, chilling sales and raising borrowing costs,” Tucker [wrote](https://www.zillow.com/research/debt-ceiling-32626/) in his report, “just when the market was beginning to stabilize and recover from the major cooldown of late 2022.” ## Buy your new home with more convenience and less hassle ### A Mortgage Expert at Rocket Mortgage (NMLS #3030) can lend you a hand for a smoother process. Your dream home is possible. Click below to make it happen. [View Rates](https://money.com/pr/u918d32af718?ap_referrer=%2Fhow-debt-default-affects-housing-market%2F) ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/how-debt-default-affects-housing-market/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Mortgages", "item": "https://money.com/mortgages/" }, { "@type": "ListItem", "position": 3, "name": "Mortgage Rates", "item": "https://money.com/mortgage-rates/" }, { "@type": "ListItem", "position": 4, "name": "A U.S. Debt Default Could Send the Housing Market Into a 'Deep Freeze'" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/how-debt-default-affects-housing-market/#webpage", "url": "https://money.com/how-debt-default-affects-housing-market/", "name": "A U.S. Debt Default Could Send the Housing Market Into a 'Deep Freeze'", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2023-05-12T18:01:06.000Z", "mainEntity": { "@id": "https://money.com/how-debt-default-affects-housing-market/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/how-debt-default-affects-housing-market/#breadcrumb" }, "dateModified": "2023-12-19T04:17:54.000Z" }, { "@type": "NewsArticle", "headline": "A U.S. Debt Default Could Send the Housing Market Into a 'Deep Freeze'", "articleSection": "Mortgages", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2023/05/News-How-debt-default-affect-mortgage-rates-housing-market.jpg?crop=0px%2C301px%2C2880px%2C1620px&quality=85", "width": 1012, "height": 569, "caption": "News-How-debt-default-affect-mortgage-rates-housing-market" } ], "author": [ { "@type": "Person", "name": "Adam Hardy", "url": "https://money.com/author/adam-hardy/", "@id": "https://money.com/author/adam-hardy/#author", "description": "Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. 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