Falling Home Prices
A rising national debt can lead to higher market interest rates, including for home mortgages. Since the cost of a home mortgage is an extremely important variable in the affordability of a home, higher mortgage rates typically slow the growth of new home purchases, as homes begin to seem too expensive.
At some point, higher mortgage rates also make renting seem like a more attractive option. In addition, higher market rates and a rising national debt are often accompanied by a slowing economy and rising unemployment — a combination that makes it less likely that consumers will be out buying new homes. All of these factors contribute to reduced demand for new homes, which ultimately drives housing prices lower.
