Mexican housing booms despite US crisis

There’s a good article in the San Jose Mercury News that explains well how Mexico’s real estate and housing market is currently doing.

Long thrashed by swings in the U.S. economy, Mexico now boasts a thriving housing sector whose record growth leads Latin America—a sign of increased economic stability and an outlet for investors looking to escape the U.S. downturn. 

…President Felipe Calderon has set a national goal of a million new mortgages a year by 2010. On Monday, he unveils a set of measures to ensure growth continues, with plans to boost Mexico’s small resale market and combat the urban sprawl that has begun to carpet valleys with hundreds of thousands of matchbox rowhomes.

…Behind the boom are six years of economic growth and stability, and a national shortage of 6 million dwellings. While interest rates are falling, just 6 percent of Mexico’s 25.7 million homes are financed with mortgages—compared to about 67 percent in the U.S. Most Mexicans still inherit their homes, buy them with cash, or build them by hand.

…That pent-up mortgage demand in a nation of 108 million means lenders can be choosy, enforcing strict standards that held delinquency rates below 4 percent in third quarter-2007, compared to 5.6 percent in the U.S.

…”Mexico is in the early stages of expansion,” said Juan P. De Mollein, managing director for Latin American structured finance at Standard & Poor’s. “There are still plenty of points for evolution because there’s still plenty of demand.”

…In the U.S., lenders looking to expand their portfolios granted risky mortgages to borrowers with weak credit, but in Mexico, that “subprime” category doesn’t exist, because lenders don’t need it to grow. Also, few Mexicans flip homes or refinance mortgages, keeping the market more stable.

…”Mexico doesn’t have a credit issue. We can still choose our borrowers because demand is so great,” said Mark Zaltzman, chief financial officer at Su Casita, one of Mexico’s largest mortgage lenders.

…Even as home lending soars, overall debt remains low, making a Mexican credit bubble unlikely. Major mortgage insurers, including U.S.-based AIG United Guaranty and Genworth Financial, now back Mexican loans, slashing risk and making it easier for lenders to bundle and sell debt to investors as mortgage-backed securities—raising capital to grant yet more loans. 



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