Bipartisan agreement avoids potential catastrophe. President Biden and House Speaker McCarthy reached a tentative agreement on May 27 to suspend the debt limit until January 2025. This bill, known as the Fiscal Responsibility Act of 2023, was approved by the House of Representatives on May 31, and the Senate on June 1, before going to the president for his signature. Treasury Secretary Yellen provided an estimated date of June 5, at which point reserve funds would be exhausted and the government would need to cut costs elsewhere to maintain debt service payments. Every day closer to this key date without a formal resolution expanded the potential for negative consequences. If a deal had not been officially passed in time, veterans’ benefits, social welfare programs and government agencies could have been suspended or scaled back. If the impasse had lingered and the nation defaulted, it would have sent a shock through global markets, as U.S. debt is a benchmark for many financial instruments. The agreement should avert the worst-case outcomes.

Key Features Include:

  • Bipartisan agreement avoids potential catastrophe.
  • Debt ceiling deal reduces the most pronounced CRE risks.
  • Previous close-calls still had ramifications.
  • Expiration of student loan pause has real estate implications.
  • Environmental provisions could expedite energy projects.

Marcus & Millichap’s Full Report:
Debt Ceiling Agreement Avoids Default; Implications for CRE