How will US credit crunch effect the PV Market?

I received a comment recently from someone who felt that market prices would fall here by up to 40 or 50%. Let me say that that just isn’t going to happen. And here’s three good reasons why.

  • Vallarta is primarily a second-home market. The fall-out in the USA is with first-time, first-home buyers primarily, people who perhaps shouldn’t have bought the home in the first place. 
  • The fall-out in the USA is with regards to sub-prime and ALT mortgages, that are now coming back to bite the mortgage and banking industries. In Vallarta there are no sub-prime or ALT mortgages. Heck, there’s hardly any mortgages. Most sales are either cash or with very short-term financing.
  • I’ve been through two market turndowns (’95 and 2002) in Vallarta before and both times we did not see large drops in pricing. People held onto their homes because they were paid for, they weren’t forced to sell, and so they held onto them. Back then we had people coming in looking for great deals, but for the most part, they didn’t happen. People made low-ball offers, thinking this market was hurting just like back in the USA. But it wasn’t and it won’t. The market dynamics are very different.

 In my last few posting I’ve talked about their being quite a large inventory of condos on the market, perhaps as much as 3-5 years worth. That seems high compared to traditional existing home inventory levels, but you need to take into consideration that these are new developments and they expect their inventory to be sold over 2-4 years, (depending on how many units they have), in phases. Its my opinion that inventory levels are high, but no too far out of line, at least not yet! We’ll have to see how this plays out moving further into 2007. What we probably don’t need right now is more developers moving in and building even more condos and homes. We got enough to last us awhile.

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One Response to How will US credit crunch effect the PV Market?

  1. Steve Harold says:

    It is interesting and important to remember that not all places are affected by national headlines of doom and gloom in quite the same way and here you make the great point about your experience in PV from two past economic downturns. Sometimes I think the hype about the possibility of a recession is more likely to make it come about. Let’s hope not though.

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