Puerto Vallarta Mortgage Defaults

This was recently posted on Mish’s excellent blogsite. One in eight homeowners in the US are now behind on their payments or in foreclosure? 

The Mortgage Bankers Association noted that a record 12%, or 1 in 8 homeowners, in the US are now behind on their payments or in foreclosure. 10.6% of the mortgages in Florida are now somewhere in the process of actual foreclosure. (My seatmate here on the flight says the prices on the condos where he lives are now back to 1998 levels. It would be scary, he said, if you had to sell. There are new developments that only have 10% actual occupancy, as the bulk of the condos were bought for speculation. Now those 10% of buyers are having to shoulder all the fees for upkeep. Nobody will buy, because the upkeep costs can be more than the mortgage. It is a vicious cycle.)

Florida, Southern California, Phoenix and Las Vegas are in a lot worse shape than Puerto Vallarta. For the most part, people own their homes and condos here without holding any mortgages against them, they own them free and clear. There have been only a few foreclosures in the whole region. And there are few, if any projects that where 10% of the owners are stuck with paying 100% of the fees for upkeep. What a mess.

Tehnorati: vallarta real estate

American Writer’s Viewpoint on Vallarta

This was recently published online, and although I don’t agree with his conclusion, I do agree with the main point of his article. 

Mexico is grabbing more headlines than a pantiless starlet at a fashionable nightclub these days. Drugs, murders, guns and swine flu have been the stories coming out of Mexico in 2009. American media outlets can’t help but run it all. After all, their audience loves it. But what does it do to Mexico? 

He even manages to quote Vallarta Lifestyles:

To bolster their argument they plopped a very glossy magazine down in front of me called Vallarta Lifestyle. It resembles El Paso Media Group’s El Paso Magazine greatly. In fact, their mission seems to be the exact same – promotion of local activity, culture and people through positive portrayal of the city. The letter from the editor, Paco Ojeda, eerily breaks from that tradition when he explains: 

“Have you been watching CNN lately? So have we, and we’re not amused by the media’s portrayal of our country. So, despite our best effort to always accentuate the positive in our publications, we couldn’t help but throw in our own two cents by way of Cynthia Beare’s excellent article on page 142.” 

Ms. Beare’s article skewers the American media on their portrayal of a problem that she claims is a Mexico-U.S. border problem. She correctly asserts that the American media threw all of Mexico under the bus, which hurt tourism everywhere in the country. She attributed the media frenzy north of the border to an attempt to distract the American people from their economic crisis. 

His conclusion may be stretching it a little. Yes, times are bad, but they will get better! Its going to be a hard summer for many, but there’s a big investment in Vallarta by Americans in hotels, timeshare, condos and villas; they and their friends and family will be coming back in the fall. Life will get back to normal. Its just hard, and very unfortunate, how this all has played out.

The bottom line as related to me by the crowd that night was that Puerto Vallarta is on the brink. The careless reporting of isolated problems hundreds of miles away from Puerto Vallarta threaten to make it into the city it was wrongly labeled as. The mass hysteria was unwarranted before, but has had its effect on the future of Puerto Vallarta. 

They weren’t a sick, drug addicted slum in the past, but they may be in the future and it all can be tracked to a case of mistaken identity. 

Its worth reading the whole article, which you’ll find here.

Practicality over Design

I recently stayed at a hotel in Mexico City that claims to be a “design” hotel. And for the most part, it is. The manner in which they’ve designed the hotel is thinking out of the box and does not follow many of the rules that you would think a regular hotel would follow. I like the concept, what I don’t like is when design is done in order to be “cool” and what’s practical plays a secondary role.

For instance, the rooms have wooden floors. And in the bathroom the joints don’t even meet, which must make it very hard to clean and that a lot of dust and dirt is gathering up below the floorboards. While sitting on the toilet, to get to the toilet paper one needs to have studied yoga for years as it is directly behind you. There is no way to turn on the show head without getting hit with an initial blast of cold water. The show head is located in the center of the tub in a high ceiling. The toilet is in the way so you have to reach over the toilet to turn on the showerhead, getting wet while doing so. And the shower head is so far up that you can’t reach it to point it in a different direction. And then once you’re in the shower, the wonderful shampoo and body scrub are in neat little bottles but with text so small anyone over 50 can’t read them. Its all nicely done, its “cool”, just not practical. And I guess their target market is those “under” 50; that’s why I’m having such problems with their “design”.

There’s another design hotel that did the second floor of a mezzanine, overtop of the lobby, in glass. When you step out of the elevator, its a little bit of a shock, but its cool. However, when going down the stairs, you can’t see the steps! And when the floor gets wet (its open over a courtyard), it gets slippery and dirty very easily. Cool, but not very practical.

There were many aspects of real estate design that was going in this direction until this recent downturn. In order to stand out against other real estate products, they went for coolness, which too often meant design without the practical aspects. With less competition and with a desire to now keep prices down, I’m sure we are going to return to a more practical world. I personally look forward to that!

Vallarta Real Estate Guide Website Updates

A little commercial here…

We’ve been doing some updates to our website www.vallartarealestateguide.com over the past couple of weeks. A while back we installed Google Maps as another way to search for properties. It is now connected with the database for Multi-Dev Vallarta, the MLS for developments in and around Vallarta. If you go to the search page, and click on Google Search, you’ll see what we’ve done. If you want to watch a short video to see how it works and how to get the most of it, just scroll down this page a bit. 

You can click on a development name on the left side and you’ll be taken to the development’s location. On the pop-up info box you’ll get information and a photo. Click on the (+) and you get more information. Click on “Inventory”, and, if they are part of MLV and have entered their inventory, you’ll see what units they have for sale. Or just, click on any of the balloon markets on the page or scroll over them. Purple markets are for aerial images and red one’s are for developments.

They’ll be a few more improvements coming along in the next couple of weeks.

Coldwell Banker Punta Mita Previews Newsletter

 

Positive Economic Data Exposes Buying Opportunities Media Drives Swine Flu Pandemic by Brock Squire

As international stock markets recovered from their March lows, real estate buyers seemed to take heed and after months of very little sales activity, the buyers started to come out of their caves and started looking at properties. Depending on the market and location in the Banderas / Riviera region, buying opportunities have been variable. Depending on sellers’ circumstances there have been reports of what could only be termed phenomenal opportunities from a historical perspective. As these ‘lookers’ have been turning into ‘buyers’, we have continued to see a pick-up in seasonal activity. Often, in the more normal markets in the past years, buyers look in the ‘high’ season and buy in the ‘low’ season. I expect that what we are now seeing is quite a bit of that – further enhanced by the perception that the economy may be nearing its low point and poised for a bit of an upswing. After seeing more properties go under contract over the past 30 days than we have likely seen for the past 6 months we are hopeful that we are clearly in a recovery phase where we will still see a clearing out of distressed properties at relatively opportunistic prices which we fully expect to last through to the end of the year. 

At the same time, these difficult times are often when we see some of the more creative deals and opportunities that wouldn’t necessarily be needed in more buoyant economic climates. We are currently working on a limited offering of ownership interests via a legally constituted holding company allowing owners to enjoy full ownership rights to a branded flagship property in Punta Mita unlike any prior offering of its kind seen to date. This particular opportunity allows the owner a proportionate amount of co-ownership and use of a property that would be normally valued somewhere in the $4M ranges for less than $500K. This is not a standard ‘fractional’ offer but one that has been enhanced through innovation and opportunity. 

We are also seeing the beginnings of a couple of new and major master-planned community resorts which are bringing the green approach to what might be considered a more low-key family activity environment which we feel that our customer is now looking for – without the huge overhead commitments that often come with these master-planned communities.

I would be remiss if I did not address the Swine Flu Panic – I mean Pandemic – that has somehow encompassed our beautiful country. Actually, somehow probably isn’t the correct word, nor is encompass – but of course that entirely depends on where you get your information from on a 24 hour basis! The reality is that there have been no reported cases of swine flu within 1,100 miles of the Bay of Banderas/Puerto Vallarta area. The symptoms of the cases that have been reported are apparently quite mild and of those that have succumbed to the virus in Mexico CITY we do not know anything about their prior physical condition. Compared to the death rates of other flu virus strains, it boggles the mind to understand the media hype that has been given to this situation. The appalling result is difficult to predict in economic terms, however with hotel occupancy rates hovering around 10% recently, layoffs occurring daily in the hospitality industry and airlift being curtailed drastically, the result is certainly not going to be positive. While we see this as a temporary situation economically and a non-event medically, it will have some effect on our real estate markets. Some buyers might even call it the perfect storm! 

Positive Economic Data Exposes Buying Opportunities Media Drives Swine Flu Pandemic by Brock Squire – Coldwell Banker Preview

As international stock markets recovered from their March lows, real estate buyers seemed to take heed and after months of very little sales activity, the buyers started to come out of their caves and started looking at properties. Depending on the market and location in the Banderas / Riviera region, buying opportunities have been variable. Depending on sellers’ circumstances there have been reports of what could only be termed phenomenal opportunities from a historical perspective. As these ‘lookers’ have been turning into ‘buyers’, we have continued to see a pick-up in seasonal activity. Often, in the more normal markets in the past years, buyers look in the ‘high’ season and buy in the ‘low’ season. I expect that what we are now seeing is quite a bit of that – further enhanced by the perception that the economy may be nearing its low point and poised for a bit of an upswing. After seeing more properties go under contract over the past 30 days than we have likely seen for the past 6 months we are hopeful that we are clearly in a recovery phase where we will still see a clearing out of distressed properties at relatively opportunistic prices which we fully expect to last through to the end of the year. 

At the same time, these difficult times are often when we see some of the more creative deals and opportunities that wouldn’t necessarily be needed in more buoyant economic climates. We are currently working on a limited offering of ownership interests via a legally constituted holding company allowing owners to enjoy full ownership rights to a branded flagship property in Punta Mita unlike any prior offering of its kind seen to date. This particular opportunity allows the owner a proportionate amount of co-ownership and use of a property that would be normally valued somewhere in the $4M ranges for less than $500K. This is not a standard ‘fractional’ offer but one that has been enhanced through innovation and opportunity. 

We are also seeing the beginnings of a couple of new and major master-planned community resorts which are bringing the green approach to what might be considered a more low-key family activity environment which we feel that our customer is now looking for – without the huge overhead commitments that often come with these master-planned communities.

I would be remiss if I did not address the Swine Flu Panic – I mean Pandemic – that has somehow encompassed our beautiful country. Actually, somehow probably isn’t the correct word, nor is encompass – but of course that entirely depends on where you get your information from on a 24 hour basis! The reality is that there have been no reported cases of swine flu within 1,100 miles of the Bay of Banderas/Puerto Vallarta area. The symptoms of the cases that have been reported are apparently quite mild and of those that have succumbed to the virus in Mexico CITY we do not know anything about their prior physical condition. Compared to the death rates of other flu virus strains, it boggles the mind to understand the media hype that has been given to this situation. The appalling result is difficult to predict in economic terms, however with hotel occupancy rates hovering around 10% recently, layoffs occurring daily in the hospitality industry and airlift being curtailed drastically, the result is certainly not going to be positive. While we see this as a temporary situation economically and a non-event medically, it will have some effect on our real estate markets. Some buyers might even call it the perfect storm! 

Vallarta “Flu” Commercials

Its been great to watch the outpour of people coming forward with ideas to help get Puerto Vallarta back on its feet, letting people know that everything is just fine in PV and they should come on down. Here’s a couple of commercials that were made up that are hilarious. They are in Spanish, but even if you don’t speak the language, you’ll get their drift.

http://www.youtube.com/watch?v=-QynWfg-oeg

http://www.youtube.com/watch?v=ea–dkpHoWE

http://www.youtube.com/watch?v=71kSdUb7RfI

http://www.youtube.com/watch?v=8FehxflGjC4

Speaks Volumes

I was recently asked if I would give a presentation to the board of Front Porch, a California-based company that specializes in assisted living housing. They have a new condo project in Nuevo Vallarta called Luma, which is their first venture into Mexico and first “for profit” endeavor. At first the board was coming to Mexico, but then cancelled because of the swine flu breakout. So they asked if I would go to Burbank and make the presentation. My first question was; if even the board doesn’t want to come to Mexico, doesn’t that speak volumes about the state of the market? How can they expect buyers to buy if they as developers aren’t ready to even come to Mexico? 

But they had a good attitude about it. They were thinking long term, they realized that the flu was short term, and by the time I actually got up there to make the presentation the flu pandemic was basically a non-event. 

I went and visited the project in Nuevo Vallarta again, to see how they have been progressing. And I was impressed, they have done an excellent job. Its obvious that it is very well built, the floor plans are nice, as is the finishing. This really isn’t assisted living as I have thought of it. There is nothing that is noticeably different from any other development, until the representative who was touring us pointed them out. They have given a lot of thought on how to make living easier, and thinking ahead on how we age, what things may become more difficult. And its stuff that makes sense; little things like having a seat in the shower (something I think you can enjoy at any age!). There will be medical service on site; but its something you don’t think of until you need it. Its a good concept, something I think other developments will begin adopting into their programs in the future.

Age of Uncertainty

I picked this up in the New Yorker a couple of months ago, and felt that it says a lot about where we are right now.

Risk describes a situation where you have a sense of the range and likelihood of possible outcomes. Uncertainty describes a situation where it’s not even clear what might happen, let alone how likely the possible outcomes are. Uncertainty is always a part of business, but in a recession it dominates everything else: no one’s sure how long the downturn will last, how (shoppers) buyers will react, whether we’ll go back to the way things were before or see permanent changes in consumer behavior.

Before we can expect any significant change in our current market the level of uncertainty must diminish. Unfortunately we seem to be living more and more in a world of uncertainty. Perhaps just getting used to living with it will be enough to reduce uncertainty and get the market back on track. There are people who want to buy in Vallarta. Some are moving ahead, but a lot more are sitting on the sidelines, waiting to see where the economy is going, and of course, what’s up with the flu pandemic (which seems quite passé right now). Its amazing how many are not turned away by the turn of events, they do still want to have a second- or retirement- home here, they just need to be a little more comfortable where they stand financially and also have a better idea of where pricing is going here. Risk is one thing; people can alway factor it in somehow, but uncertainty, especially in recessionary times, is a whole other ball game.

Mexico’s reaction to the Flu Pandemic and the repercussions

Bruce Greenberg is a real estate appraiser who has been doing a lot of work in Mexico for many years. He is a regular participant as a speaker at any conference having to do with real estate in Mexico. He recently posted this on his website and on his newsletter.

I agree with what Bruce has to say. Mexico has been praised internationally for its pro-active approach to this potential serious pandemic. But is has cost the country dearly financially. Vallarta is empty. People are having their salaries cut back and many have been laid off. Hotels have closed towers or portions of the property. Many looked forwarded to the national market season in July and August, however, its just been announced that students will have to stay in school until July 15th because of the class time they missed because of the Flu. There goes 25% of the summer vacation time for Vallarta! Its going to be a long, long summer.

I hope people are taking note on how this country can handle a major health crisis, especially those that choose to spend time down here. 

The Mexican people should be commended and congratulated by the international community for placing the health and safety of its citizens and the world first, regardless of economic impact.  Through the leadership of its government and the strength of its community, Mexico successfully slowed the advancement of the A(H1N1) virus through a Federal public health declaration that required both private and governmental to close their doors to the public and limit physical interaction.  In effect, this action shut down the country and its economy for a six-day period.  This type of impact in the United States would be detrimental to the economy.

One Journalist’s View

This was recently forwarded to me, without a link to where it originated. But its written by Linda Ellerbee, a very distinguished American journalist. 

Sometimes I’ve been called a maverick because I don’t always agree with my colleagues, but then, only dead fish swim with the stream all the time. The stream here is Mexico . 
 
You would have to be living on another planet to avoid hearing how dangerous Mexico has become, and, yes, it’s true drug wars have escalated violence in Mexico , causing collateral damage, a phrase I hate. Collateral damage is a cheap way of saying that innocent people, some of them tourists, have been robbed, hurt or killed. 

But that’s not the whole story. Neither is this. This is my story. 

I’m a journalist who lives in New York City , but has spent considerable time in Mexico , specifically Puerto Vallarta , for the last four years. I’m in Vallarta now. And despite what I’m getting from the U.S. media, the 24-hour news networks in particular, I feel as safe here as I do at home in New York , possibly safer. I walk the streets of my Vallarta neighborhood alone day or night. And I don’t live in a gated community, or any other All-Gringo neighborhood. I live in Mexico . Among Mexicans. I go where I want (which does not happen to include bars where prostitution and drugs are the basic products), and take no more precautions than I would at home in New York; which is to say I don’t wave money around, I don’t act the Ugly American, I do keep my eyes open, I’m aware of my surroundings, and I try not to behave like a fool.