A reality check on Mexico…

An interesting post form the Jeff Musto Blog was passed along to me recently. Although I may not agree with everything, he does bring up some interesting points. I say “He” as I’m not sure who actually wrote it. Its shows up on Jeff’s blog, but then its also on Banderas News with Charles Simpson given credit, but then on Jeff’s blog at the end he has Adamarie King mentioned from “a” Conde Nast Magazine. But it still makes an interesting read!

Update: Was just contacted by Charles Simpson and he confirmed that he did indeed right this article. Sorry about the confusion Charles, it was a little confusing trying to figure out where Adamarie came into all this. JY

Real estate opportunities in Mexico! How to prosper & avoid the coming storm and prolonged economic stagnation in the USA.

First: A reality check on Mexico
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Mexico is in a unique position to reap many of the benefits of the decline of the US economy. In order to not violate NAFTA and other agreements the U.S.A. cannot use direct protectionism, so it is content to allow the media to play this protectionist role. The U.S. media – over the last year – has portrayed Mexico as being on the brink of economic collapse and civil war. The Mexican people are either beheaded, kidnapped, poor, corrupt, or narco-traffickers. The American news media was particularly aggressive in the weeks leading up to spring break. The main reason for this is money. During that two-week period, over 120,000 young American citizens poured into Mexico and left behind hundreds of millions of dollars.
Let’s look at the reality of the massive drug and corruption problem, kidnappings, murders and money. The U.S. Secretary of State Clinton was clear in her honest assessment of the problem. “Our insatiable demand for illegal drugs fuels the drug trade. Our inability to prevent the weapons from being illegally smuggled across the border to arm these criminals causes the deaths of police officers, soldiers and civilians,” Clinton said. The other large illegal business that is smuggled into the U.S.A. that no one likes to talk about is Human Traffic for prostitution. This “business” is globally now competing with drugs in terms of profits.

For the complete article, click here

LA Times article about Mexico

The following article was recently featured in the Times, and its a good read. Mexico has been hit extremely hard over the past year, and this article explains well what has happened and what the consequences have been. Read the whole article here:

Your neighbor needs your help. Do you have it within you to lend a hand? Will you book yourself a week on the beach in Cabo or Puerto Vallarta, or explore Mexico City or one of the colonial cities in the heart of Mexico? You know, for the common good. 

This has been a banner decade for empathy tourism — many Americans flocking to New York after 9/11 and to New Orleans after Hurricane Katrina did so with a sense of public service. Mexico now needs a similar surge.

Our neighbor to the south is having an annus horribilis, as a British monarch might say. These were never going to be good times down there, with Mexico’s economy so intertwined with ours, but growing concern about war-on-drugs violence, the decline in oil prices and the advent of swine flu has further dented “brand Mexico.” Adding insult to injury, Washington earlier barred Mexican trucks from coming into the United States, a flagrant violation of the North American Free Trade Agreement, and, as of last week, Americans crossing over to Mexico were required to have a passport to reenter the country, a change expected to deepen the slump in border towns frequented by Americans.

I found this quite interesting:

Mexico traditionally ranks somewhere between Jordan and Argentina on the foreign policy establishment’s list of priorities. 

So Mexico shares a 2,000 mile border, is its 3rd

This was especially telling: Mexico has come a long ways since the 1995 “Tequila Crisis”. Its a shame that this has where it currently stands.

Mexico, for its part, has enacted prudent fiscal policies, shored up its foreign reserves and remained a faithful adherent to the free-trade gospel, continuing to open its economy to foreign goods and investment. The nation has also become a great deal more democratic in the last decade. Still, despite doing all the “right” things according to the Washington consensus, Mexico’s economy (and currency) has been harder hit by the Wall Street-triggered crisis than the United States’. No one said life was fair. 

Comparing PV to Hawaii’s market

The following article appeared in Business Week, discussing the Trump Tower project in Hawaii.

Three years ago, real estate, tourism and Donald Trump were soaring to new heights in Hawaii.

Some 1,600 potential buyers from across the globe put down $20,000 deposits for an opportunity to reserve units in the celebrity tycoon’s first condominium-hotel in the islands. In eight euphoric hours, all 463 suites in Trump International Hotel & Tower Waikiki Beach Walk were sold for an average $1.5 million. Hundreds were placed on a waiting list.

Today, Hawaii’s real estate values are faltering and several other Trump-branded projects around the world are in trouble, but his Trump Waikiki tower appears to be withstanding the downward spiral.

The lowest-priced unit is a 355-square-foot, furnished studio on the 20th floor for $750,000, with a $542 monthly maintenance fee. The highest priced is a 1,660-square-foot, two-bedroom, 35th-floor unit with sweeping ocean views. It was listed for $4.5 million by Hawaiian Joy Realty LLC.

Get that? The lowest priced unit has only 355 square-feet and its $750,000 USD. For that price you can get a 3+ bedroom unit with 3,550 (or ten times the space) in Punta Mita. Not oceanfront, but oceanview. And for the most expensive? We’ve barely been able to break the $2 million-dollar market (and that was a year ago – not today) for an oceanfront unit at Hacienda de Mita, penthouse unit, more than twice the size. Is the Trump name worth that much or are these real-time prices in Hawaii?

Meanwhile, plans for similar Trump-branded condotels stretching from Mexico to Tampa, Fla., have been scrapped and are mired in legal battles. Buyers at the failed Trump Ocean Resort Baja sued Trump and Irongate in March for deposits totaling between $18 million and $20 million after they were told there was no money left to refund deposits. Trump, in turn, filed a $40 million lawsuit last month against Irongate, accusing the developer of failing to build the five-star resort.

Fortunately we weren’t so fortunate to have Mr. Trump in our marketplace!

In Waikiki, no buyers have dropped out — remarkable considering the severe shifts in the economy, real estate, tourism and lending. “There’s been no cancellations. The developer has no inventory,” Herkenrath said. “Every one of the suites is in firm-and-binding contracts.” A major disincentive of canceling is the 20 percent deposit that buyers risk forfeiting. At an average $1.5 million per unit, the average deposit was $300,000.

That sounds like a good enough reason for me to stick with the deal…

The 350-foot tower is located steps from the sand and Fort DeRussy Park in a revitalized area known as Waikiki Beach Walk. It features a library, wine cellar and a spa, along with 24-hour room, valet and concierge services. The fully furnished suites, which have views of the Pacific and the Honolulu skyline, feature everything from high-end appliances to Italian marble counters.

“Just steps away”? Isn’t that real estate talk for, it isn’t located on the beach? I checked out the website, this project isn’t on the beach. $4.5 million and you aren’t on the beach.

Kathleen Kagawa, who helped broker the sales of 25 units, said some of her clients have expressed concerns because of the economy, but the development remains attractive because, unlike most Waikiki properties near the beach, the purchase includes ownership of the land.

“So everyone’s pretty bullish and pleased,” said Kagawa, president of Hawaii 5-0 Properties. “The high-end luxury market has been affected to a certain degree, but it hasn’t been dramatic. I think that there’s still people that want to come to Hawaii, and want the best.”

“Pretty bullish”? I just checked out the March MLS numbers for Maui (yes, I know, this project is in Waikiki, but I only have Maui numbers), and sales are down 48% YTD and sales prices are down 39%. They were similar for January and February. Bullish?

Three years ago, real estate, tourism and Donald Trump were soaring to new heights in Hawaii.

Some 1,600 potential buyers from across the globe put down $20,000 deposits for an opportunity to reserve units in the celebrity tycoon’s first condominium-hotel in the islands. In eight euphoric hours, all 463 suites in Trump International Hotel & Tower Waikiki Beach Walk were sold for an average $1.5 million. Hundreds were placed on a waiting list.

Today, Hawaii’s real estate values are faltering and several other Trump-branded projects around the world are in trouble, but his Trump Waikiki tower appears to be withstanding the downward spiral.

The lowest-priced unit is a 355-square-foot, furnished studio on the 20th floor for $750,000, with a $542 monthly maintenance fee. The highest priced is a 1,660-square-foot, two-bedroom, 35th-floor unit with sweeping ocean views. It was listed for $4.5 million by Hawaiian Joy Realty LLC.

Get that? The lowest priced unit has only 355 square-feet and its $750,000 USD. For that price you can get a 3+ bedroom unit with 3,550 (or ten times the space) in Punta Mita. Not oceanfront, but oceanview. And for the most expensive? We’ve barely been able to break the $2 million-dollar market (and that was a year ago – not today) for an oceanfront unit at Hacienda de Mita, penthouse unit, more than twice the size. Is the Trump name worth that much or are these real-time prices in Hawaii?

Meanwhile, plans for similar Trump-branded condotels stretching from Mexico to Tampa, Fla., have been scrapped and are mired in legal battles. Buyers at the failed Trump Ocean Resort Baja sued Trump and Irongate in March for deposits totaling between $18 million and $20 million after they were told there was no money left to refund deposits. Trump, in turn, filed a $40 million lawsuit last month against Irongate, accusing the developer of failing to build the five-star resort.

Fortunately we weren’t so fortunate to have Mr. Trump in our marketplace!

In Waikiki, no buyers have dropped out — remarkable considering the severe shifts in the economy, real estate, tourism and lending. “There’s been no cancellations. The developer has no inventory,” Herkenrath said. “Every one of the suites is in firm-and-binding contracts.” A major disincentive of canceling is the 20 percent deposit that buyers risk forfeiting. At an average $1.5 million per unit, the average deposit was $300,000.

That sounds like a good enough reason for me to stick with the deal…

The 350-foot tower is located steps from the sand and Fort DeRussy Park in a revitalized area known as Waikiki Beach Walk. It features a library, wine cellar and a spa, along with 24-hour room, valet and concierge services. The fully furnished suites, which have views of the Pacific and the Honolulu skyline, feature everything from high-end appliances to Italian marble counters.

“Just steps away”? Isn’t that real estate talk for, it isn’t located on the beach? I checked out the website, this project isn’t on the beach. $4.5 million and you aren’t on the beach.

Kathleen Kagawa, who helped broker the sales of 25 units, said some of her clients have expressed concerns because of the economy, but the development remains attractive because, unlike most Waikiki properties near the beach, the purchase includes ownership of the land.

“So everyone’s pretty bullish and pleased,” said Kagawa, president of Hawaii 5-0 Properties. “The high-end luxury market has been affected to a certain degree, but it hasn’t been dramatic. I think that there’s still people that want to come to Hawaii, and want the best.”

“Pretty bullish”? I just checked out the March MLS numbers for Maui (yes, I know, this project is in Waikiki, but I only have Maui numbers), and sales are down 48% YTD and sales prices are down 39%. They were similar for January and February. Bullish?

Living month-to-month

This is shocking:

A MetLife study released last week found that 50% of Americans said they have only a one-month cushion — roughly two paychecks — or less before they would be unable to fully meet their financial obligations if they were to lose their jobs. More disturbing is that 28% said they could not make ends meet for longer than two weeks without their jobs.

50% of Americans have only a one-month cushion???

That rules out at least half the American population as potential home buyers!

Americans are in a collective state of financial depression as many admit they could only cover their bills for two months at most if they found themselves suddenly jobless, a nightmare more and more worry may come true. The results of a bevy of surveys found a growing number of consumers are only a couple paychecks away from a household collapse even as many scramble to shore up savings. Rainy-day funds appear to be a distant memory as households burn cash to cover food and energy bills as well as mortgage and car payments.

A large number of households say that even one missed paycheck would spell financial ruin. And even in households that remain well off, the surveys show a festering fear that financial problems are lurking.

For the complete article, click here

Vallarta’s Expensive? Compared to what?

In Friday’s edition of the Wall Street Journal, in the Home Section there’s a piece called “Relative Values – Diamonds in the Rough” that  features homes/condos at top golfing communities. Featured is a 2,300 f2 oceanfront condominium with three bedrooms that is located in Maui on the Kapalua Bay beach, one of 39 units  in the gated community of Coconut Grove. Its listed for sale at US$6.3 million.

Last year there were only three condominiums that sold for over US$1.5 million in the Vallarta region, all three located at Hacienda de Mita in Punta Mita, also a golf community. They are also oceanfront but 50% larger than this unit in Maui. Monthly maintenance fees are US$2,000 in Maui, compared to US$900 at Hacienda de Mita, which includes master fees for Punta Mita and insurance coverage.

Its all relative, I guess.

Credit Crisis Cripples Vacation Ownership

I wrote awhile back how it was interesting that timeshare sales seemed to be immune to what is happening elsewhere in the real estate economy. I guess that is no more. This article was featured in the February issue of Hotels magazine.

Would-be owners think twice about real estate investment, while timeshare companies are having difficulty monetizing consumer debt.

By Adam Kirby, Associate Editor

Just a few months ago, even as global travel was slowing dramatically and a U.S. recession loomed, leaders in the vacation ownership industry were upbeat and optimistic that the downturn would largely miss timeshare and vacation clubs. Even fractional and branded whole ownership were thought to be somewhat insulated from the recession thanks to their appeal to more affl uent consumers. HOTELS even went so far as to declare in its ill-timed October cover story that vacation ownership “defies the downturn.”

And then the sky fell.

The global credit markets collapsed, stifling an industry that had relied so heavily on loan liquidity from timeshare mortgages sold as assetbacked securities. The market for such “consumer paper,” as it is colloquially known, seized up almost completely—and for those companies entrenched in the asset-backed securities model, it matters little from a cash-flow perspective that consumer interest in timeshare remains relatively strong.

I was wondering about this. It was getting so crazy in the industry that some timeshare projects were able to have a new credit card issued, while the people were sitting at the table, for the purchase of their new timeshare, with the down payment conveniently already on it!

Good summary of recent Mexico Conference in Carlsbad

Brett Ellsworth, who puts on this conference, is now a developer as well in Sayulita with the Punta Sayulita project. Here’s the article: http://www.mexidata.info/id2135.html

MLS Inventory continued to climb

MLS inventories continue to increase with a total of 1,163 properties now listed with Multi-List Vallarta. The MLV print catalog is getting a little heavy and a little expensive to produce!

Since October of 2006, as shown in the attached graph, inventory totals have risen from just under 500 listing to now nearly 1,163. The most dramatic increase has been most recently, in the past three months. 

In the past I have commented that I thought these increases were just a normal adjustment of a market that has seen five-to-six years of incredible growth, especially with new developments coming online. Now, however, I think the increases we are seeing are because of what is happening to the US and global economies. People are putting their homes up for sale because they need to sell. Must be that reason because this certainly is not the best time to be listing a home on the active market. I think this upward trend will continue into the new year, as 2009 is not being forecasted as a very good year for the global economy.

Good Article in the Vancouver Sun about PV real estate

Good article – Thanks Victoria, and congratulations!

In Mexico, the asking price of a new-construction home is one-quarter to one-third the asking price of a comparable Canadian home. But property ownership by foreigners is restricted. The weather is lovely, but . . . And the scenery is so different, but . . .

A recent Mexican real-estate seminar by Canada2Mexico Consulting provided an opportunity to investigate the dream and the reality. Providing the answers below is Victoria Pratt, a former Vancouverite now selling Mexican real estate.

You can read the full article at:

http://www.canada.com/vancouversun/news/story.html?id=29b118ff-fe7c-4bc6-9a20-9579c72d6060

Rio Amapas announces Ecological Furniture Package

In collaboration with Carlos Alberto Style Lab from Los Angeles, homeowners at Rio Amapas will preview an exciting ecological turnkey furnishings package that is exclusive to residents. Designed in harmony with this unique tropical paradise, the Rio Amapas Collection boasts many environmentally-friendly features high thread count organic hemp upholstery, limited edition halogen lighting, hand-crafted accessories from reclaimed driftwood and bamboo luxury linens sourced from one of the world’s best bedding manufacturers.

The collaboration between Rio Amapas developer Claudio Javelly and interior designer Carlos Alberto Gutierrez runs as deep at the property’s protected rainforest ravine. The lifelong friends traveled internationally as teenagers and vowed to introduce a new design perspective in their native Vallarta.

Conceived by Javelly as an environmentally responsible resort, Rio Amapas is an elite community of 20 residences situated in a tropical hillside paradise just south of the Zona Romantica. The forward-focused ecological development balances town and jungle with luxurious on-property amenities, responsible living and the security of ultimate privacy.

“I am pleased to collaborate with Carlos on this project because of his deep understanding of low-impact luxury,” commented Javelly. The interior design firm’s CRATE by CA turnkey furnishings program is already widely available throughout resort markets in Puerto Vallarta and is featured at LEED certified EVO South in Los Angeles.

Rio Amapas was designed by renown architect Manuel Vizcaino. The quality and distinction built into each home is truly impressive, blending the best of natural materials with the elegance of contemporary architecture. Homes are minimally invasive, sitting above ground on pylons and are naturally ventilated by the site’s extraordinary cross breezes.

Carlos Alberto Style Lab creates furnishings solutions that provide ultimate one-stop convenience in interior design. Customizable packages include high quality branded furniture, artful accessories, bed and bath luxuries and tabletop essentials.