Aug
09

U.S. Downgrade: How Will It Impact Housing Fundamentals?

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Congress’ last-minute accord to raise the nation’s debt ceiling and avert a default wasn’t enough to save the United States’ AAA rating from Standard & Poor’s. The market’s reaction to the news could have an impact on Treasury yields and with these yields closely tied to mortgage rates, on homebuyers’ borrowing costs.

The international ratings agency downgraded the long-term sovereign credit rating of the United States to AA+ late Friday night. That’s a grade level just below the AAA rating the U.S. had held for 70 years, going back to 1941 when S&P began assigning ratings to countries.

S&P said the fiscal plan that Congress and the administration agreed to last week “falls short” of what its analysts believe is “necessary to stabilize the general government debt burden by the middle of the decade.”

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