How does cheap oil, weak stocks, and the U.S. dollar impact South Florida real estate
Oppenheim Law Legal Update as of 3/31/2019:
Who knew the Wall Street Journal subscribed to the South Florida Law Blog! We anticipate that investors with large deposits will need legal counsel to devise legal strategies regarding walking away from these deposits.
The following Periscope was streaming Live through Twitter @Oplaw and is approximately 14 minutes.
- Cheap oil will have a negative impact on oil based economies such as South Dakota but not here in South Florida.
- Cheap oil may encourage buyers to buy homes further from their jobs.
- Energy costs will be cheaper which may encourage buyers to purchases bigger homes.
- More money in people’s pockets means more money to spend on a mortgage payment.
- Oil producing countries like Brazil and Venezuela will see their economies suffer and will invest less money in South Florida Real Estate.
- Snow birds, particularly from Canada, will be less likely to come down to South Florida due to the strong dollar and their petrol based economy.
Weak Stock Market – Good and Bad
A weak stock market is a double-edged sword.
- On the one hand, people with money are more likely to invest in real estate market.
- Stocks may be seen as too risky for investors.
- On the other hand, buyers trying to take money out of the stock market may find they have less liquidity and, therefore, less cash available for a down payment.
- Their overall net worth will go down with the stock market, causing the negative wealth effect.
Strong U.S. Dollar—Bad
- Will have an effect on foreign investment in the high-end condo market, which is a crucial part of South Florida Real Estate. Or, is it that, “Another Condo Bust Looms in Miami?” as written in the WSJ?
- The strong dollar will limit the amount of investment from countries such as:
- Central and South America
- A strong dollar has a deep impact on conversion rates, diminishing value of foreign currency anywhere from 20%-50%.
- The conversion rates will affect the ability of foreign buyers to make a deposit or even close on a home or condo they have already made a deposit on, especially when the final payments may exceed 1 million dollars.
- This situation provides lenders with the opportunity to step in and make short-term “bridge loans” until the market gets back to customary valuation.
Please view the broadcasted discussion on Periscope @Oplaw. Subscribe to The South Florida Law Blog for the latest on foreclosure law and legal issues in South Florida Real Estate.