Vallarta Real Estate Trends #1, #2, and #3

Trend #1 – Buyer’s Market
It is definitely a buyer’s market. There’s plenty to see, time to shop around, and no hurry to make decisions in most cases. And that’s exactly what prospects are doing. Lower offers are now common with the spread between list price and sales prices has moved from a more traditional rate of 6-7% to over 10%.

Trend #2 – Reduced Developer Inventories
We went into 2008 with about 7,250 properties on the market, a number obtained from a study we perform at the beginning of each year. This was after we saw 50 new developments introduced to the marketplace in 2007. However, in the past when we calculated on many properties were on the market, we took the total number of units that a development was going to consist of, rather than what was actually available for sale. Many developments release in phases, most certainly today when units are not selling as they once were, before they had even broken ground. We took that into consideration this time. We also saw that some projects, that never actually had broken ground, decided not to go ahead. We also saw some turn a portion of their inventory into another use, introducing a hotel component. When we took all this into consideration plus the sales that actually took place in 2008, we found that actual inventories were down to 4,200 units. Still high, but workable. And a lot better than some other places in Mexico.

Trend #3 – Shift from a “Developer-Driven” Market to a “Re-sale Driven” Market
For the past five years the market has been developer driven with people preferring the new products that offer the newest construction techniques, glitzy, luxurious extras, wonderful amenities that were not usually found in the existing market and larger in size as the average home and condo size increased dramatically. People were so tied up in this that they would upgrade to the “newer” project of a developer because it was “bigger and better”. Well in today’s market, bigger is not actually better and if the extras and amenities are going to add to the overall cost and increase maintenance fees, then some buyers are not as interested. 
There is also the concern on whether the developer will be able to deliver, not just on time, but also everything that has been promised. With existing product, what you see is what you get. And in the past, purchasers were paying a premium of up to 20% over what a similar existing unit may be selling for, just to have something that’s new with the latest add-ons. For purchasers considering new product and there are many reasons to still consider it, as mentioned above, plus items such as warranties and less maintenance as its new, this is still a very good option. Just do your homework on the developer and the development. And a good realtor can help you with that. A last advantage that the re-sale market has is that usually an existing homeowner has more room to play with on his asking price. The developer is more locked in to his price because of construction costs.

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4 Responses to Vallarta Real Estate Trends #1, #2, and #3

  1. Clay Lacy says:

    Hi John:

    You mentioned the following:

    “When we took all this into consideration plus the sales that actually took place in 2008, we found that actual inventories were down to 4,200 units. Still high, but workable. And a lot better than some other places in Mexico.”

    What places in the tourist zones of Mexico are worse than 4200 available units now?

    Thanks,

  2. johnlifestyles says:

    Anything in Northwestern Mexico, close to the border, in places like Peñasco or Rosarito are in very, very bad shape. Loreto, which had one project with 5,000 units that has now shut down, has very much effected that market. When considering the number of 4,200 units for sale and comparing this to other markets, you also have to take into consideration what their ability will be like to sell of their inventory. Vallarta has an edge in that it is historically more popular with Canadians buying real estate than in other top markets such as Cancun and Los Cabos. Both, traditionally, are very weak when it comes to national sales, whereas Vallarta is strong. And the Canadian dollar and Mexican peso have been holding well against the US dollar.
    Another trend I mention later on, is “convergence”, which means that people will tend to return to traditional, popular markets, rather than out-of-the-way place. I’ll post that shortly.
    Doesn’t mean that 4,200 units is not a problem, just means we have the means of reducing inventory over other places in Mexico.

  3. […] out Trends 1-4 here. Possibly related posts: (automatically generated)Real Estate Trends 2008Intro to upcoming Vallarta […]

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