Based on new research by Zillow, the U.S. government defaulting on its debt, which could become a reality as soon as June 1, 2023 without intervention, could send the typical cost of a mortgage soaring by 22%. Mortgage rates rising above 8% would likely overwhelm a small price dip to make affording a home an even steeper hill to climb and send home sales tumbling.

To be sure, the U.S. has never before defaulted on its debt, and it is very unlikely that the U.S. will fail to pay its debts now. This analysis projects what might happen in the unlikely worst-case scenario of a prolonged default, and it is not a prediction that a default will occur.

“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,” said Zillow senior economist Jeff Tucker. “Home values might not see a notable drop, but higher mortgage rates would severely impair affordability, for first-time buyers especially. It is critically important to find a solution and not put more strain on Americans who are striving to achieve their homeownership dreams.”

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