Armageddon averted for battered housing market?
Maybe, if Congress can get its act together and pass a compromise bill today to keep Uncle Sam from becoming the biggest deadbeat in history.
If the federal government were to start default on its debts, it could have catastrophic consequences for the economy and, by extension, the housing market.
A still stubbornly high unemployment remains one of the biggest obstacles to a housing recovery, argues Greg McBride, senior financial analyst at Bankrate.com.
A prolonged debt default could very well trigger another severe downturn, throwing another 2 million people out of work while sending interest rates soaring.
That's obviously just what the housing market needs right now as it flounders amid another round of falling prices and sales.
"The downside of a default is massive," McBride said. "It is the reason we teach our kids to look both ways before they cross the street."
So is there a silver lining here?
Well, assuming Congress doesn't mess this up at the last minute, we are back worrying about a weak recovery and a housing market that is stuck in the mud.
"The agreement, assuming it passes, averts a worst case scenario," McBride contends. "We can get back to worrying about a weak economy."
And until the economy starts spinning off more jobs, the housing market is likely to continue to stumble along.
"People are not going to take the plunge into home ownership if they are worried about their job security," he notes.
