The Realtors Legislative Meetings, the National Association of Realtors’ (NAR) mid-year conference, kicked off Sunday in Washington, D.C. with a discussion about the current national debt limit debate — a hot topic throughout the nation’s capital.
During the “Federal Legislative and Political Forum: How Banking and Institutional Investors are Influencing the American Dream of Homeownership,” Doug Holtz-Eakin, the former director of the Congressional Budget Office, and Dana Peterson, the chief economist of The Conference Board, shared their thoughts on the debt crisis, current economic conditions, and how banking and institutional investors are impacting housing affordability and generational wealth-building.
According to Peterson, the national debt is unsustainable, as it is projected to rise to more than the size of the U.S. economy.
“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.”
Despite Peterson’s concerns and the ongoing national debate, Holtz-Eakin said that there is no one 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. 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.”
Holtz-Eakin also highlighted some of the social programs, including Medicare and social security, which are set to expire in five and 10 years, respectively.
“It is essential to fix these large and important pieces of our social safety net,” he said.
Peterson agreed with Holtz-Eakin that a solution needs to be reached for the social programs. She feels that these conversations need to be part of a larger national conversation about debt.
“It needs to extend beyond just a decade. We can’t solve it within a decade without draconian measures,” Peterson said. “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 panelists also discussed the impact institutional investors are having on the housing market, with Peterson stating that she believes they pose a significant threat to traditional homebuyers.
“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. 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 added.
