The reality of this headline is severe and unfortunately most will read it, shrug their shoulders, and move onto the next piece of doom and gloom media hype.
Those of us in the real estate industry have already had to make major cutbacks, tighten our belts and reinvent our industry and personal business models. Why is it that Congress, with one fourth of our national GDP going to government programs, spending, entitlements etc, has not decided that it is time to seriously eliminate spending waste and elimination projects that are not critical? Don't cut jobs, but remove programs and spending that will not adversely affect a majority of Americans.
We must self impose minor austerity measures now or else the rioting and frustration over the forced cutbacks down the road will be horrendous. Just look at the union fight in Wisconsin. That was a few unions in one state. Imagine if (I say if as if I don't know the word when) we realize we are no longer able to print money to solve our debt problems and we tell baby boomers that their long promised Social Security checks are going to be cut or eliminated all together. This isn't the generation that you want to tick off.
OK enough ranting. The real concern from a real estate standpoint is that our mortgage bonds, while not tied to treasury securities, typically follow their yield curve. If the US public debt is less secure, then we will have to offer higher yields in order to attract investors. Public debt will always be more secure than private debt, even when the private debt is secured by real property as with a mortgage. The reason for this is that the government can use monetary policy to the extent that it is not inflationary to our currency (don't repeat that too loudly, some of us have loans to lock while rates are still good) and even then, they can come to the realization that taxes must be raised in order to cover the public payments.
So if you read this much of this blog post, consider writing your congressional representatives and senators and let them know that, no one is kidding anymore. They MUST get together and balance the budget. This is such a simple step to take when compared to the looming total outstanding debt our nation faces, and the consequences could create a long term burden that will severely affect our housing industry which is the backbone of the American Dream.
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