The unbelievable happened last Thursday.
In the Sunshine State — the home of the fastest-growing string of condominium buildings on the beach from South Beach to Palm Beach — the economy couldn’t be any worse…
Thursday, officials at a Florida-run investment fund stopped withdrawals at the fund, placing the payrolls of teachers and other government employees at risk. In a drastic measure, Florida’s Local Government Investment Fund halted withdrawals from its fund, as assets under management fell from $27.0 billion just a couple of months ago to a mere $15.0 billion Thursday.
What caused the run on the fund?
A downgrade of the fund to “below investment grade” from a credit reporting agency was responsible for fund investors getting nervous and withdrawing their money. We could see a lot more of this happening in previously hot real estate markets like Florida and California.
Joshua, president of a manufacturing facility in Miami and a confidant of PROFIT CONFIDENTIAL, told us, “Miami has been in a recession for the past four years. The real estate market was the only thing holding up the economy. Now that the property market bubble burst, we are in real trouble.”
What will happen next?
The Florida Local Government Investment Fund won’t be the last fund to halt withdrawals. As foreclosures accelerate and the market values of properties in previously “hot” vacation property markets fall, towns will be taking in even less in tax revenue, making it difficult to cover expenses that have increased to serve growing communities.
booms are always followed by busts. We are experiencing that repeat of history right now. The once fast- growing vacation property markets like Florida and California will be the hardest hit by the economic contraction we are now entering. Buyers looking to pick up a deal in those markets should wait longer, as the best buys are yet to come.