Puerto Vallarta Realtors Reflect

Had dinner out on the town with a few Realtors a couple of nights ago, some of the top in the industry and who between them have many years selling and developing real estate in the region. Its been a tough year for them all. They have had to make major changes in their operations, scaling back, closing down satellite offices and getting more involved in the day-to-day operations of their businesses. When times were good they could spend more time away from the office, working on pet projects such as developing real estate. But now they are back at the office, keeping a very close eye on the bottom line – its all about cash flow these days.

For some it is rentals that seem to be keeping them going, and for other offices out there. Rentals have been good, at least compared to sales. The upper-end of the market for real estate sales has basically come to a standstill. Luxury properties are just not moving. It seems people are taking a year off, renting a few places to try them out, rather than jumping in and buying something themselves. There are still inquiries, people are interested, they just want to be a little more secure about the state of the US economy before moving forward with something. The active market right now is under $500,000 USD. There is some action above that, but nearly all below $1 million. And for the properties that are selling around $1 million, the eventual sales price was significantly below the asking/listing price.

There is some concern whether there is a “shadow” market, involving people who want to sell but are waiting for the market to get better. The number of listings in the MLS service Multi-List Vallarta has leveled off for the past year, so sales seem to be keeping up with new listed properties. But are there many people out there waiting, and when these properties will come on the market, how will it effect it? There are still a lot of investor-held properties out there; they have to put them on the market sooner or later.

In 2003 the MLS tripled its sales from the year previously. Tripled – in one year. Well sales have now been cut by about 2/3s, so are we getting back to “normal”? Problem is there’s a lot more inventory now than back then. Its not outrageous, and we’re better off than some other markets in Mexico, but its there and its going to take some time to get it back to normal. Fortunately for the health of the market nearly all the properties are held free and clear, as financing is still a small part of the market.

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4 Responses to Puerto Vallarta Realtors Reflect

  1. Ben says:

    These updates really give us the scoop behind the scenes and a nice filter from the “spin doctors.” Nice job, please keep them coming. Bottom line is that it is not just the shake out in the US Economy that has potential buyers reluctant to buy. From the anecdotes of those who were interested previously in buying in Mexico that I know, there is a concern about safety in Mexico: anywhere in Mexico, & a concern about whether Mexico’s government, locally & nationally are going to be able to manage their own economic, social and narco war issues without imploding. New consumption taxes,new tax requirements for foreign owners, they are all increasing and another hassle. There is a huge perception problem about Mexico in the US & Canadian & European markets. Mexico is not seen as sexy & romantic as it was with people getting sick, getting decapitated (even though the majority are in border areas), etc. People are not thinking of the beauty of Mexico, they are in fear mode. They get on a plane, they dont study a map of hot spots of narco activity. Hence, it is possible everywhere.

    Of course, the realtors are focusing on rentals, as there is no other revenue opportunities. That does not mean that rentals are hot this year, etc. Thanks for the market update on one million dollar plus properties. That is the market that I am interested in hearing about myself. I want to know about the beachfront homes.

    Every day there is a another scary newspaper article or TV report about issues in Mexico. Just Google “Mexico News” WE need a sustained period of good news. Finally, Mexico this year will be identified with the health crisis of H1N1 even though this is a true pandemic. We need this flu season to pass and dissipate before you will see the uptick of travel activity to resort areas of Mexico. Of course, there will be some travel (Xmas & Easter may be busy) and there may be some rentals, but it is a fallacy that the downturn in sales in 2009 in Puert Vallarta and surrounding areas can be fully attributed to the weakness in the US Economy, especially the higher end market over $500,000.

  2. Clay says:

    Ben, I read your comments. You are right on the money in your analysis. Puerto Vallarta is not an island. People think about Mexico in any purchase, and right now Mexico is suffering a perception issue. I am not going to spend millions on beach front property in Mexico, until this drug war ends, if ever. This drug war is taking up most of the government’s attention & resources. So, not many other initiatives are getting passed except higher taxes. Mexico can not afford their social agenda, and what you will see is more regulation, higher taxes and restrictions. People want safety & security as well as some glamour. Are we supposed to rely on the Puerto Vallarta police department in the event of an issue. I dont think so.

    Sales Activity will lag the American maerket by more than anyone here thinks. Finally, Mexico remains largely a cash market, that has prevented a foreclosure sales cycle but it also means that fewer buyers can now afford to buy what’s out there with 100% cash. Let’s be frank, the rates being offered and the appraisals are not going to be attractive terms for buyers now.

    John: Please report the first sales over 1.5 million dollars in Puerto Vallarta or Punta Mita soon. Keep us posted. When we see those come in numbers than we will have some light at the end of the tunnel with regards to perception issues being overcome. Let us know if the buyers are Americans, Canadians, Europeans or Mexican. That will help us to analyze.

    • johnlifestyles says:

      Perception is reality, in this particular case. Although I don’t think its fair. Drug violence has not effected the lives of Americans/Canadians that I know of (if you know of cases, please let me know). unless they were involved in the drug business. Again, perception is reality, and the way the exploit this drug war on TV is that the whole country is undergoing, literally, a war in the streets. That’s not the case in Vallarta. I am a lot more concerned walking in certain area of Vancouver, my previous hometown, (like right downtown at night), than I am in Vallarta.
      I’m not sure what can be done about this perception problem. I could say, sarcastically, that if every American chose not to do drugs, well, that would take care of the drug war problem quite quickly, but that’s not realistic. But no demand, no need for supply. They could crack down on gun sales in the lower states, as that’s where the guns that are doing the killing are coming from. But again, what’s the chance of that happening?
      This IS more of a perception problem than what is actually happening on the ground. There are a lot of people (Americans & Canadians) living here just fine, enjoying their lives in the sun, without any problems. Perhaps their testimonials need to get out there, for others to read.
      Its going to a long haul. I think that part of the solution lies on the other side of the border. Americans need to feel more secure financially. They need to know what they are actually worth today, what they can reasonably expect from what they have in saving and retirement funds, and what kind of lifestyles they can expect from that. I realize I’m talking more about the lower-end, to the middle of the market Clay, but that is a BIG part of our market. The luxury end is relatively new to the region.
      I don’t have access as much to sales anymore Clay, we no longer do the MLS for the real estate association, they are going through some changes. It may be some time before we see hard numbers coming from the re-sale market again. I will be doing a study on the new-sale market in January. But a property did sell for $1.5 million in PM this month!

  3. jonas says:

    Many great views, thoughts and perspectives.
    In regards to lending, I feel rates and terms in Mexico are now pretty favorable.
    I would say our rates can be pretty close if not in some cases on par with investment, second or vacation home rates in the US.
    Dollar program rates starting as low as 6% with security / property in a foreign country is great.
    Peso loans are not as favorable, but a great alternative for those who can not cash out the property.
    As the economy evolves with so much wealth lost, its simply a paradigm shift to (the necessary evil) loans.

    In Mexico we didnt care or many times even know, people used equity in their US residences etc to purchase property in Mexico. It was to easy to pull out needed cash, I personally closed quite a few of those north of the border.
    That possibility for the majority now being history, we have to focus on where and how can we tap into the $’s needed to keep some folks buying.
    We have many options available now, and are happy to state loans are closing!

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