Debunking Vallarta’s High Inventory Rumor

There’s been a lot of talk around town about how much inventory of homes and condominiums, primarily condominiums, is currently on the market. The most commonly heard number is somewhere between 7,000 to 8,000. Unfortunately I believe I’m responsible for this. For a few years, during the boom years of Vallarta real estate market (2003-2008), we did a survey of real estate developments to find out how much real estate they were producing and putting on the market and how much of it was selling. When we first began doing this we would take the gross number of units the project entailed, not considering that for many developments the project would be released in stages. But back in 2007 units were selling so fast that often the project was sold out before it was completed. Some sold out before construction began. So it was not a wrong assumption.

But that changed as the market started slowing down in 2008. We therefore decided to ask instead, how many units they currently have on the market that are actively for sale, not the total number of units once the project would be built out. To give a couple of examples, Punta Mita will have 1,000 homes when completely built out, but currently there are probably less than 100 actively on the market. Another involves the grandiose development that Homex was going to be built on the North Shore of the bay with 1,000 homes planned. In 2007 we counted all of those homes in the overall inventory of units available in the market. Well, that project never even got off the ground, so the inventory there is now “0”.

In 2007 we had established, using the “include everything” calculation method, there were 7,250 units currently on the market. However, in 2008 we decided to only count “on the market” units. As the market had started to slow down, many developments had decided to either scale back or release units in phases. Some, such as Homex, were cancelled outright.

This took the number down to 4,200 in 2008. When we did the count again at the beginning of 2010 (for the past year of 2009), there were even more cancellations of projects. Taking away these and also accounting for sales that had taken place, we estimated the inventory for new products to be 3,500. We did, however, find it difficult to get actual numbers from developers. Our only way of calculating for some (some just outright lied – they didn’t want to say they hadn’t sold much), was by comparing what their current inventory was and and comparing it to what they had said it was the previous year. Some actually showed a negative number as they experienced cancellations. Because we weren’t getting back what we considered were true numbers, we decided not to do the survey this year.

There continued, however, to be cancellations of developments, or that were scaled back from what was originally considered. I would think, including sales that took place (and some did take place!), there would be now less than 3,000 new units on the market available to purchase. To complete this you need to add the inventory of existing homes that are on the marketing, which currently is around 1,150 properties, which gives you about 4,000 units on the market.

In a previous post I talked about a “shadow” inventory. We have no idea what this may encompass, but it certainly isn’t anywhere near 4,000 to get the 8,000 units on the market, as goes the rumor. A guess may be upwards of 50% of the MLS, which would be less than 600 units, or then a total of less than 4,600 units. But, for what’s available right now, listed for sale, the number would most likely be 4,000.

Still a lot, but manageable. It will, however, take a number of years to go through this. In 2007, the top of the market, there were about 2,000 sales for new and re-sale properties. This dropped, however, by 50% in 2008.

Its going to be awhile before there’s a need for any new projects. And for those that do decide to go ahead, they better be suited for this market; under $250,000, minimal amenities and small unit sizes. Those projects offering 2007 product lines made up of over-size units, over the top amenities with an exorbitant price tag, are going to be with us for awhile.

Hope this helps dismiss the claims of the inventory rumor that’s making its way around town.


7 Responses to Debunking Vallarta’s High Inventory Rumor

  1. JONAS says:

    Thank you John,
    I love to see the real information in print. As we are off to a great year and very excited..

    Thanks for all you do John.


  2. Thank you for your permanent contribution to the Real Estate market knowledge. Your numbers are now more realistic as you mention, even though maybe inventory is much lower if you consider number of deliverable units ready to be used and also ready to be deeded.

    All the best,

    Ignacio Purpon

  3. […] by John Youden Val­larta Lifestyles Pub­lish­ing Group […]

  4. hm,hm : “Add to them the more than 7,000 new, unsold condos and you’ll fully appreciate why it’s such a bona fide buyer’s market in Vallarta today. The current supply of beautiful new condos and villas far outnumbers the demand…”

  5. hi John thanks for this information help us to see a different picture in terms of Inventory on the Bay, have a question for you…. do you know how many units we sold in 2010?

    • johnlifestyles says:

      I don’t have any numbers for developments. We used to do a survey each January but we didn’t this year, developers didn’t really feel like telling us what I’m sure would be bad or not good news. So we passed on it this time. For re-sales it is difficult as not all real estate offices report their sales. And now there are two MLS systems in town so its even more complicated getting good numbers.

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