This article originally appeared in The Miami Herald.
Higher mortgage rates, costlier loans for governments and general chaos could come to South Florida from Washington’s debt woes. But watch for Brazilian condo buyers, too.
By Douglas Hanks
Miami and Miami-Dade do not have AAA ratings on their debt, and so are not part of Moody’s first wave of rating reviews, Jacobson said. But if the U.S. loses its AAA ratings, all debt would eventually get a second look.
“Credits across the spectrum are going to be affected to some degree if the United States gets knocked off triple-A,’’ he said.
BOOST TO FOREIGN CURRENCIES: Miami usually enjoys a certain hedge against bad news in the U.S. economy, since it has so much exposure to foreign dollars. And should the United States find its debt knocked down to second-tier status, investors will stock up on strong foreign currencies, including the Brazilian real, said William Nobrega, managing partner of the Conrad Group in Miami. That will be prompted in part by a stock sell-off on Wall Street, he said.
The real is “perceived as a currency of safety,’’ said Nobrega, who advises investment funds, mainly in Asia. “You will definitely see it rise if we’re downgraded.”
That would give Brazilians more purchasing power, which would probably prompt more of them to invest in South Florida.
Ron Shuffield, head of the Esslinger-Wooten-Maxwell real estate brokerage in Miami, predicted chaos on Wall Street would send more foreign dollars into Miami real estate, similar to what happened after technology stocks crashed a decade ago.
“For foreign investors, they’re going to continue to see the U.S. as the most stable market in the world,” he said. “While it won’t be comforting to see that the government is defaulting, they would still see this as a far safer place to put their money than somewhere else.”
AN UNSETTLED ECONOMY: As the announced Aug. 2 deadline nears for implementing a debt deal, anxiety over the lack of one could take on its own momentum.
Edwin Rivera, co-founder of the digital branding firm Credelis, expected to see national brands sign-on this month for a new line of clothing that interacts with electronic advertising. But the deals were delayed in recent weeks, and Rivera suspects the debt impasse is at work.
“You’re seeing people getting very conservative, even brands that have a lot of money, brands that were solid,” he said.
At BrandsMart, sales are up this summer and CEO Michael Perlman said expansion plans are underway. He sees the housing market as a much bigger hurdle than the debt talks in Washington. But at ME Productions, an event planning firm in Pembroke Park, the sales team is bracing for a drop in corporate bookings should Congress and the White House not reach a deal soon.
“We haven’t felt it, but we will,” CEO Hal Etkin said. Corporate clients “do not like uncertainty.’’
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