WASHINGTON (May 7, 2023) – The REALTORS® Legislative Meetings kicked off Sunday morning with a lively discussion on the debt limit, an issue currently enveloping Washington that could have a significant impact on the economy and real estate sector.

During the "Federal Legislative and Political Forum: How Banking and Institutional Investors are Influencing the American Dream of Homeownership", two of the nation's top economists, Doug Holtz-Eakin, former director of the Congressional Budget Office, and Dana Peterson, chief economist of The Conference Board, shared their views on the debt, current economy, and the complex role of banking and institutional investors in the housing market, including the impacts on housing affordability and generational wealth-building.

The pair started the session by addressing the debt limit. Peterson said that the national debt is unsustainable and projected to rise to more than the size of the economy. She said she's fearful we will go over the brink, warning that "everything" shuts down if there is a debt limit breach. "That (shutdown) cuts 6 percentage points from GDP, ensuring an immediate recession," Peterson said. "The cost of borrowing would go up for all your customers."

"My concern is also about consumer confidence. When consumers don't feel good about what's going on in government, they're not likely to spend. We at the Conference Board are forecasting a mild but short recession."

"There is no right way to raise the debt limit – we have to do it, but getting it done is just a matter of politics," Holtz-Eakin said. "They're going to run up to June 1, and we're going to see financial markets react. They won't know what deal they want, so they will punt and do a short-term extension until September 30 – so we'll get two rounds of this."

"The budget process, it's broken," Holtz-Eakin continued. "We spent $5 trillion in stimulus because of the pandemic that bounced the debt up. It is something we need to come to terms with. I am concerned we don't have the politics to slow the (debt) number."

"The 2024 election will be a teachable moment," he continued. "Medicare is going to run out in 5 years, and social security in 10 years. It is essential to fix these large and important pieces of our social safety net."

Peterson agreed that social programs are a big problem. "There needs to be a national conversation about debt," Peterson said. "It needs to extend beyond just a decade. We can't solve it within a decade without draconian measures. We need to look at it as a 20- to 30-year initiative and ensure we are caring for our elders but at the same time making sure we are not spending on excesses."

The conversation turned to the threat posed by institutional investors in today's housing market. Buyers are seeing themselves thwarted by institutional and commercial investors, posing a significant threat to traditional homebuyers across the country. "I think it is a tremendous threat," Peterson said. "More than 70 million millennials turning 40 want to buy a home and can't."

"Investors are targeting communities of color and preventing the people within them from having a pathway to generational wealth," she said. "If we don't fix the affordable housing issue, it threatens people's ability to achieve the American Dream of homeownership."

"The Fed launched higher rates at a time when there is record low inventory – there isn't a level playing field in competing with these investors right now. We need to focus during the next decade on getting greater housing supply, period," Holtz-Eakin said to applause.

Holtz-Eakin acknowledged the issue is local and not prevalent everywhere.

When prompted, both Peterson and Holtz-Eakin lent the audience some advice on advocating for important housing policy issues. Peterson said, "Housing is roughly 5-6% of GDP, but then if you add all the things that people put into a house or around a house and the taxes they pay, all those things contribute to the economy and their communities. Those are the things you should focus on."

"For you to make good policy, you need good politics," said Holtz-Eakin. "It is in [policymakers'] political interest for [more people] to have better access to the American Dream."

The National Association of Realtors® is America's largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. The term Realtor® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of Realtors® and subscribes to its strict Code of Ethics.

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