Silver lining and good suggestions for developers

 

 

The following is part of a talk recently given at one of the Urban Land Insitute’s conferences by Pete Halter of Halter Companies. Its a good read:

Even though many Americans have lost faith in the United States’ financial system and the government’s ability to fix things (for the moment hopefully), I encourage all of you who have not been through this before to not forget we are blessed to be living in a country where creativity, ingenuity, and hard work have always led us out of our problems, including many of those noted herein.  It may take some time, but the current “time out”consumers are in will eventually end and a “new normal” will emerge.  Below are some silver linings that may be out there: 

1. All real estate is local!  There will be many second home developments and resorts that will do much better than others because of their brand, previous success, special characteristics, amenities, and locations. 

2. Some buyers still have money.  Nobody knows what impact Washington’s economic plan will have on the speed of the economic recovery or the “wealth effect” needed to reenergize the second home market.  This notwithstanding, there are many who will come through this with their jobs and retained wealth. Hopefully they are only momentarily holding back from the purchase of a second home.  My bet is this universe of potential buyers will return to the market sooner than one might think if properties are properly repositioned and their new offerings are compelling.  

 There are buyers out there. Many are still looking, perhaps not too many biting right now, but many realtors sense pent-up demand is being created.

Just what the market needed…

a pandemic flu threat…

Pamela Thompson, a long-time residence who is very involved in the local health industry, has been keeping up-to-date on what’s been happening locally. Seems there’s no swine flu in this region. She reports:

I have just spoken to Dr. Luis Suarez, infectious disease physician in Puerto Vallarta.

 

He reports that:

1. There are no confirmed cases in the state of Jalisco. 160 samples were taken and all were negative for Swine Flu.

2. There are no confirmed cases in the state of Nayarit.

3. Continue with precautionary measures including good hand washing, avoiding crowds, increase Vitamins B, K, A & D. Good ventilation in homes allowing the sun to enter.

4. Avoid hand-shaking, kissing.

5. He feels it is coming under good control in Mexico City.

Interesting times…

State of the market

As the high-season ends and we look back at what transpired from November until April, we’ve seen the market go from one of denial to acceptance. By January, real estate developers could no longer ignore the fact that our market is no different than any other market in Mexico or the USA for that matter. Global economic conditions have seen more than 40% of the world’s wealth simple disappear in a very short period of time. That has removed many people who were once considering a second home, or perhaps even a retirement home, from the market, or at least delayed it for a number of years. 

Second homes buyers have been hit the most, as this is seen more of a luxury, and luxury items can be the first to go when times get tight. But for the retiree, (if there’s still enough in his 401k to retire), purchasing a retirement home is a lifestyle decision. And for that Vallarta still has much to offer. If you want to retire, why not somewhere warm, a lower cost of living, exciting social scene, but still situated close to your community back in Canada or the United States where family is still located?

Perhaps more than ever, with diminished retirement funds, this will drive this sector of the real estate market.  But for most of the high season, realtors and developers reported more of a sense of “wait and see” from their prospects and clients. They wanted to first understand the severity of this recession, how badly it would effect them, and when we could expect to see a bottom and the beginning of a turnaround (however slow it may be). Its been this roller-coaster ride of the stock market that has made this all very difficult.  As well, they want to see how this will effect real estate prices in Vallarta. That is still hard to determine. Having personally weathered two of these downturns in the past (‘95 and ‘02), past experience has shown me that prices do not drop like they do traditionally in downturns as in the USA.

For the most part, properties here are paid for – few properties have mortgages on them. Many are retirement homes, which are now part of their new style of life – people live here most of the year. It seems the urgency to sell, or the need to sell, is less urgent here. Although realtors and developers have been showing properties to prospects, its been more “showing than selling”. But people are still interested, they just aren’t sure when to make the jump and buy. That’s building up a demand, which will most likely start appearing in the fall. Already there is talk of “light at the end of the tunnel”.  We all could use some more of that good news.

State of the Market…

As the high-season ends and we look back at what transpired from November until April, we’ve seen the market go from one of denial to acceptance. By January, real estate developers could no longer ignore the fact that our market is no different than any other market in Mexico or the USA for that matter. Global economic conditions have seen more than 40% of the world’s wealth simple disappear in a very short period of time. That has removed many people who were once considering a second home, or perhaps even a retirement home, from the market, or at least delayed it for a number of years. 

Second homes buyers have been hit the most, as this is seen more of a luxury, and luxury items can be the first to go when times get tight. But for the retiree, (if there’s still enough in his 401k to retire), purchasing a retirement home is a lifestyle decision. And for that Vallarta still has much to offer. If you want to retire, why not somewhere warm, a lower cost of living, exciting social scene, but still situated close to your community back in Canada or the United States where family is still located? Perhaps more than ever, with diminished retirement funds, this will drive this sector of the real estate market. 

But for most of the high season, realtors and developers reported more of a sense of “wait and see” from their prospects and clients. They wanted to first understand the severity of this recession, how badly it would effect them, and when we could expect to see a bottom and the beginning of a turnaround (however slow it may be). Its been this roller-coaster ride of the stock market that has made this all very difficult. 

As well, they want to see how this will effect real estate prices in Vallarta. That is still hard to determine. Having personally weathered two of these downturns in the past (‘95 and ‘02), past experience has shown me that prices do not drop like they do traditionally in downturns as in the USA. For the most part, properties here are paid for – few properties have mortgages on them. Many are retirement homes, which are now part of their new style of life – people live here most of the year. It seems the urgency to sell, or the need to sell, is less urgent here.

Although realtors and developers have been showing properties to prospects, its been more “showing than selling”. But people are still interested, they just aren’t sure when to make the jump and buy. That’s building up a demand, which will most likely start appearing in the fall. Already there is talk of “light at the end of the tunnel”.  We all could use some more of that good news.

Comparing Maui to Vallarta

The following advice was given about the Hawaiian market on the blog; Its pretty good advice for Vallarta’s market as well, just replace “Maui” with “Vallarta”…

 

2009 Predictions and advice

We will continue to see selling prices decline in certain types of condominiums.  There are bargains to be found in

• Oceanfront garden view units
• Properties where maintenance fees have gone up and occupancy has gone down
• Properties in which owners are being pressured to implement expensive renovations
• Anywhere that the 4 D’s are in play: death, divorce, disease and desperation.

Prices will hold in properties that are:

• Newer
• Renovated already
• On the ocean with great views
• In a unique location (think Napili Bay, Kapalua Bay, parts of Makena)

A word to Buyers

If you have ever been in the market for Maui property, now is one of the best times ever to be a buyer.  There are certainly bargains to be had at certain properties.  Your Realtor can root them out.

And even where prices are holding, now might be the time.  Otherwise in 5 years you will walk into my open house and say, “Lee, I remember back in ‘09 when I could have picked up this oceanfront 2 bedroom unit for under a million dollars.”

There’s that rearview mirror again.

A word to Sellers

People are still buying.  So if you are selling now you have to be smart about pricing. 

If you are in the first group of properties I described, the ones where buyers are likely to find bargains, be strategic.  Prices are declining, so pricing at the top or above what condos are selling for means you are going to continue the pride of condominium ownership on Maui.  And worse, if you need to sell you will be doing what we call chasing the market down.  You will be reducing the price over and over but you will always be just behind the price point at which your condo will sell.  Listen to your Realtor and get ahead of the curve.

If you are an owner in the second group of condos I described and you want to sell don’t get greedy or you too will continue to experience the pride of Maui condo ownership.  Sooner or later people will pay for quality, but in this market they are deathly afraid of overpaying.  Price your condo fairly, in line with the market and look for offers.  If you are not getting showings or offers in a few weeks, consider a price adjustment.

Obama and Mexico…

Huffington Post contributor and California-based political analyst William Bradley, recently had an interesting article posted. I’ve been adding articles regarding the drug problem in Mexico because it is so much in the media lately and can effect real estate values. Although my opinion is that this has had little to no effect on the people who own/live around Vallarta, perception is reality for those who have been considering owning a second home here and therefore it needs to/should be addressed. 

 

Visiting Mexico City, President Barack Obama cited JFK’s remark that “the bonds between our two countries cannot be broken.”

Another country, another crisis. President Barack Obama summited yesterday in Mexico City with President Felipe Calderon, pledging to help Mexico’s elected government beat back the challenge of powerful drug cartels that increasingly out-gun Mexican security forces. But Obama’s measures will only manage the incipient chaos, not end it.

Which has actually long been typical of America’s policies with regard to Mexico.

THE APRIL MARKET REPORT – Coldwell Banker Previews

Brock Squire has some interesting comments on safety and the economy in Mexico, in Coldwell Banker Preview’s April Newsletter:

Safety Concerns and Market Trends by Brock Squire

Over the past several months we have been repeatedly asked ‘Is it safe here’? Well, it depends on who you believe – and your sense of geography. If one was to listen to the certain segments of the sensationalist US media one would quickly come to the conclusion that the entire country of Mexico was in a state of civil war. That the drug lords were in shootouts with government troops on every street corner. The truth is that the Calderon government has drawn a line in the sand against the drug cartels that have operated with impunity for many years in Mexico. At the same time, the severe tightening of the US/Mexican boarder crossings has put the cartels between a rock and a hard place. The result is that now the cartels have a two sided battle to deal with – the Calderon government bent on eradicating their operations in Mexico – and – each other with rival cartel groups vying for the very limited cross-boarder smuggling opportunities.

Is Vallarta Safe? III

This will appear  in the next issue Vallarta Lifestyles Magazine:

 

Is Puerto Vallarta Safe?

by Cynthia Beare

Not a day has gone by in recent weeks and months for those of us living in Vallarta without coming across more disturbing news slamming the safety of visiting and/or living in Mexico, as well as a barrage of questions and concerns from friends and family living north of Mexico wanting to know how dangerous it truly is in Vallarta. Of course, these well-meaning people tend to gather their information from newspapers, television and online news sources, which often sensationalize the facts and images. Seeing graphic violence and not knowing the truth can be very unsettling, and any information taken out of context can easily blow things completely out of proportion. And so it has been with the issue of safety and security in our beloved Puerto Vallarta.

Vallarta Visitor Traffic

Although there seemed to be a lot of people in Vallarta during March, the numbers were down compared to last year. Total airport  terminal passengers decreased 20.4% compared to the previous year; international passenger traffic decreased 16.2%, and domestic passenger traffic decreased 23.1% compared to March 2008.

However, Easter break took place in March last year, (instead of April like this year), so that could explain the big drop in visitors by air. Reports from hotels and local businesses actually say there are more people but they have less money to spend. 

One thing for sure is that they are not buying much real estate, sales are still very slow, especially for developers. Its going to be an interesting summer…