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S&P U.S. Credit Downgrade's Possible Affect On Real Estate

Standard & Poor’s (S&P) dropping of the U.S. long term credit rating one notch from “AAA” to “AA+” on August 5, 2011 was a historic and monumental wakeup call regarding out of control spending and political paralysis, and it serves as yet another blow to an already unstable financial scenario in the country. While the tangible effect across all segments of the economy remains to be seen, the ripple will most likely continue to shake the national real estate market, according to speculation in a August 6 column published on the Forbes blog by Chris Macke.

The ramifications on real estate might be a diminished demand, said Macke, and a continued reluctance in both company and consumer confidence to spend. “Companies and consumers are already hesitant to spend,” wrote Macke, “Downgraded U.S. debt will likely only increase that hesitancy… There could be a negative impact on consumer and business confidence and thus spending, which could translate into reduced economic activity and as a result reduced commercial real estate demand, at least in the interim.”

Macke highlighted that the U.S. long term credit rating wasn’t lowered by S&P because the country lacked the ability to pay its bills on time. Instead, its prime focus was on the partisan gridlock displayed by U.S. leaders in reaching an agreement on how to pay the government’s bills. “Think of the Republicans and Democrats as two partners in a real estate partnership or two members in an L.L.C.,” wrote Macke. “They had the means to borrow the money necessary to continue operations including servicing their debt; however, they very nearly weren’t able to agree to do what was necessary to pay the debt, i.e. raise the debt ceiling – that was the reason for the downgrade.”

The inability of politicians displayed in reaching a debt ceiling agreement mirrors the difficulties encountered in countless arduous corporate disputes. The Los Angeles business dispute attorney Art Matthews at Matthews Law Firm, Inc. can help you find resolution in the midst of a stalemate. Call 800-449-4850 for a complimentary consultation today.

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