“The Office of Speaker of the House of the United States House of Representatives is hereby declared vacant.” Those words were uttered for the first time this week. The removal of a Speaker of the House is certainly history, but more important to the real estate industry is what happens next. The Republicans in control of the House will need to appoint another speaker with enough time to negotiate another debt ceiling increase before January 2nd of next year.
If this doesn’t happen, there will be a drag on the economy. By some estimates, each week the government is shut down it could cost the economy $6 billion and decrease GDP growth by 0.1 percentage point. The problem could also be compounded by the rising interest payments on Treasury Notes. Other countries, particularly China, are already slowing down their T-Bill holdings, pushing the rate that the government has to pay higher. They might be watching for the Fitch rating agency’s prediction, which downgraded the U.S. default rating from AAA to AA+ last month because of “growing general government debt burden” and “erosion of governance.”
Everything that changes an economy changes the real estate that it sits on. Property values often drop even faster than economic indicators like GDP. Plus, there would be a risk of late payment for any property leased to a federal agency. Having no one at the helm of one of the most important governing bodies could also limit FEMA’s ability to respond to natural disasters and delay any stimulus that might be needed to prop up certain industries or financial institutions. Overall, a House divided and without a speaker will add a bit more risk to everyone’s projections.