The real estate industry can breathe a sigh of relief knowing that lawmakers have made a significant step toward addressing the nation’s debt ceiling and avoiding a calamitous federal default.
Democrats and Republicans reached a consensus on Dec. 9 to approve new legislation that stands up a temporary process to allow the former to increase the debt limit without GOP backing. The Senate approved the bill by a 64-36 vote, sending it to President Joe Biden’s desk for the final sign-off.
While it doesn’t raise the debt limit itself, the measure creates a one-time pathway for Democrats to increase the government’s debt limit by a dollar amount with a majority vote in the Senate—51 votes—instead of 60 votes required with most legislation. The bill would bypass the pushback from Republicans, who have tried to block raising the debt limit through standard procedures.
The decision comes days before the government was expected to exhaust its ability to meet its financial obligations. With the fast-track process in place, Congress will have to take up additional legislation to raise the debt limit ahead of the deadline.
Treasury Secretary Janet Yellen has warned that the U.S. could have hit its debt limit, the amount of debt the U.S. federal government can have outstanding, on Dec. 15. Hitting the deadline would lead the nation to its first-ever default—a disastrous consequence for the nation’s recovering economy.
Without raising the debt ceiling, a default period could have dealt a catastrophic blow to real estate, leading to furloughed federal employees or even requests that staff keep working unpaid, with a large IOU looming over their heads.
With more than $8 trillion in mortgage debt backed by the federal government, the real estate industry is highly susceptible to market instability, according to an October statement from the National Association of REALTORS® (NAR) regarding debt ceiling negotiations.
At the time, NAR President Charlie Oppler headed to the White House with other business leaders to meet with President Biden on the matter. Oppler encouraged Congress to continue working on a long-term debt ceiling in a post-meeting statement.
“A debt default would unleash unnecessary and unknown harm on the economy and our 1.5 million members, most of whom are small business owners,” he said.
In previous interviews, Matthew Gardner, chief economist at Seattle-based Windermere Real Estate, has noted that the default could deal a massive blow to the faith in the U.S. government, and could lead to many offloading their holdings in treasury bills—an outcome that could cause mortgage rates to surge.
“Bottom line is if there is no trust in the government to get paid on your holdings of their debt, then you’re going to dump it, and there will be no buyers out there for it—at least not at the interest rate that would be normalized,” Gardner told RISMedia.
This is a developing story.
Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to email@example.com.