BiggerPockets Daily America's Credit Rating Downgraded—And Why It's Another Headwind For Housing
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May 19, 2025 Moody's downgrade of the U.S. credit rating is a major topic, highlighting its impact on global confidence and borrowing costs. The discussion reveals how this downgrade could lead to higher mortgage rates, affecting housing affordability and the real estate market. Factors like rising national debt and governance challenges are explored, shedding light on America's financial future. Strategies for navigating these shifts, including tax benefits from real estate transactions, also make an appearance, offering insights into investment opportunities during economic turbulence.
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US Credit Rating Downgraded
- The US credit rating downgrade to AA1 by Moody's signals growing economic risk despite still being very good.
- This rating reflects increased risk perceptions affecting global confidence and borrowing costs.
Credit Risk Raises Mortgage Rates
- Treasury yields rise when credit risk increases, leading investors to demand higher interest for lending.
- Mortgage rates directly correlate with Treasury yields, driving housing costs up.
Reasons Behind Moody's Downgrade
- Moody's cited ballooning debt, weak governance, and rising interest payments for the downgrade.
- Federal debt is projected to surpass post-WWII levels, alarming Wall Street and raising borrowing costs.