BajaNomad - Baja feels the effects of housing downturn

Baja feels the effects of housing downturn

bajabound2005 - 12-5-2007 at 10:11 AM

Experts confident slump is temporary
By Diane Lindquist
UNION-TRIBUNE STAFF WRITER

December 5, 2007

CARLSBAD – The U.S. housing slump has spread south across the border,
dampening a coastal real estate boom boosted in recent years by
Americans snatching up vacation and retirement homes in Baja
California and elsewhere in Mexico.
How long the downturn will last dominated much of the conversation at
yesterday's Mexican resort development conference at La Costa Resort
and Spa. The event, sponsored by the Baker & McKenzie law firm and
Sausalito-based Contact Development, drew about 400 attendees on the
first day. It ends today.

Developers and financial executives speculated that the slump in
Mexico will continue for anywhere from six months to two years – or
perhaps even five years.

About 30 resort and housing projects that had been planned in
northern Baja California and Puerto Peñasco on the Sea of Cortez in
Sonora, south of Arizona, won't get built, predicted Embree "Chuck"
Bedsole, managing director of the global advisory firm Alvarez &
Marsal.

"There is a lot of supply in the pipeline," he said. "We've been
debating whether that's going to be developed."

Until recently, before prices fell and became more volatile,
appreciation rates on Mexican property had reached 15 percent
annually. That's expected to drop to 5 percent to 10 percent during
the slowdown.

Unlike the housing market meltdown in the United States, which has
been partially caused by young first-time buyers failing to make
payments on their adjustable-rate mortgages, the Mexican slowdown is
more associated with baby boomers who pulled equity out of high-
priced property to buy retirement or vacation homes in a sunny
climate. The condos, townhomes and houses range in price from
$150,000 to more than $1 million.

The boomers' monetary shortfalls are more temporary, the experts
said, because they have more equity and are inheriting money as their
parents pass away.

"Baby boomers have a lot of wealth. You've got a lot of people who
are going to have time and money to do stuff," said Textron Financial
senior vice president Adam Greene. "The feeling is there's a lot of
money waiting on the sidelines."

Over the past decade, the number of such buyers settling into active-
lifestyle communities in Mexico has increased from 200,000 to between
600,000 and 1 million. About 100,000 U.S. citizens retire to Mexico
each year.

Property sold in Mexico also tends to be in the luxury category and,
thus, more immune to impacts from the current U.S. housing situation.

"There's a temporary downturn in sales," said John McCarthy, chief
executive of Mexico Leisure Real Estate Development Partners, "but I
think the demographics are there. And once the psychological effect
of the subprime crisis passes, the market will come back."

The "Gold Coast" corridor from Tijuana to Ensenada could lag behind
other areas in recovery, said Bruce Greenberg, who heads an Arizona
real estate appraisal and consulting firm. He said the region's
developers tended to be smaller developers and builders who came
across the border.

"Two guys with cell phones" was the description offered by Justin
Mehren, managing director of Latin America Capital Group.

The current slowdown will spur a better quality of development, said
the experts. Mixed-use projects that anchor lodging with shops,
restaurants, attractions and entertainment will attract funding that
is available, several said.

"Diverse planning is needed. And there's a need to integrate with
tourism," McCarthy said. "We need to give people more to do than just
go to their condos and watch the sunset."

The most popular and lucrative projects now are those that are
branded, such as golf courses designed by champion golfer Jack
Nicklaus, who spoke yesterday about his role as the top golf course
architect in Mexico.

"As soon as golf became part of the equation, prices went up," he
said. "A branded golf course will boost the value and income of a
resort."

----------------------------------------------------------------------
Diane Lindquist: (619) 293-1812; diane.lindquist@uniontrib.com

Minnow - 12-5-2007 at 10:50 AM

I pity the poor ******** who bought property in that area in the last couple of years. This article doesn't even mention the latest crime issues. That is going to have a MAJOR impact on prices in the northern baja region. A fifty percent decline would not be out of the question. Let alone the mensos who bought on leased land. What were those people thinking. :lol:

They have nothing. :lol:

[Edited on 12-6-2007 by Hose A]

That's Life !

MrBillM - 12-5-2007 at 11:32 AM

Tough luck for those who made poor investment decisions. Just like the "DotCom" bust, the market was so obviously over-heated that anyone should have been able to foresee a downturn regardless of what ANY so-called expert said. Buyers tried to bet that they could time the downturn and many failed.

gnukid - 12-5-2007 at 01:12 PM

Anyone who has property on the coast or anywhere in Baja and Sonora has a wonderful place to live that is highly valuable, they may need to add a few security measures or reduce their expectations but to live on the beach is an amazing experience thats worth it. Camping is even better.

Al G - 12-5-2007 at 01:37 PM

Hmmmm....can anyone see this as anything but good?
I would never want this to happen, because of some Baja people getting hurt, but a cool down over economics will help Baja cope...I think :?:

Minnow - 12-5-2007 at 02:41 PM

Quote:

Originally posted by gnukid
Anyone who has property on the coast or anywhere in Baja and Sonora has a wonderful place to live that is highly valuable, they may need to add a few security measures or reduce their expectations but to live on the beach is an amazing experience thats worth it. Camping is even better.

Anyone who buys property for a "wonderful place to live", is better of renting. Buying property is an investment. Now buying a house on someone elses property is stupid. :lol:

castaway$ - 12-5-2007 at 03:27 PM

As with the states, where I am a veteran Broker of good markets and bad, this could be a tremendous opportunity to buy in Baja for investors and retiree's. The downturn in the market should have people asking once again "When is the bubble going to pop", because we are again in a bubble it's just 180 degrees from 2005. I believe there is plenty of opportunity in Baja and I would be willing to bet that most people selling have 1 of 2 reasons-
Need cash
Failing health
This usually means that people are more likely to be more negotiable than in the past when people are just buying up everything they can get their hands on for speculation. As always a word of caution that seems to be said over and over again, "If you are going to buy in a foreign country don't spend more than you are willing to lose". I don't own yet but I will, I am doing my homework and I plan on taking advantage of this temporary downturn.

tripledigitken - 12-5-2007 at 03:41 PM

Quote:

Originally posted by Minnow

Buying property is an investment.

Minnow,

When I have bought houses (those that we live in) in the U.S., they were bought for lifestyle reasons. As it turned out 2 out of 3 were good investments also, but not the reason for the purchase. Rental property and vacant land is most assuredly investments and we have done that also.

Likewise, from our point of view, our purchase of land in Baja (with the plan to build on it) was also a lifestyle decision. It is our investment in our well being and our daughter's (who will inherit it).

Just another way of looking at the world.

Saludos,

Ken

Al G - 12-5-2007 at 03:54 PM

Quote:

Originally posted by castaway$
As with the states, where I am a veteran Broker of good markets and bad, this could be a tremendous opportunity to buy in Baja for investors and retiree's. The downturn in the market should have people asking once again "When is the bubble going to pop", because we are again in a bubble it's just 180 degrees from 2005. I believe there is plenty of opportunity in Baja and I would be willing to bet that most people selling have 1 of 2 reasons-
Need cash
Failing health
This usually means that people are more likely to be more negotiable than in the past when people are just buying up everything they can get their hands on for speculation. As always a word of caution that seems to be said over and over again, "If you are going to buy in a foreign country don't spend more than you are willing to lose". I don't own yet but I will, I am doing my homework and I plan on taking advantage of this temporary downturn.

Nothing to do with you, but this is what the brokers in Baja want you to believe...Just keep the money flowing. This is the beginning of the bubble break...and if you buy now, you will bail-out some of the speculating brokers. Is this what you are saying to do now???
"this temporary downturn"...could last 2 years plus...market could fall 25% :biggrin:

castaway$ - 12-5-2007 at 04:17 PM

Al G your point is well taken, I think that we are at the beginning of the slide dowhill, it could last at least a year maybe two if it is dependent on the U.S. market. I want to stress that it could all be over in a blink of an eye and many could be left standing on the sidelines going damn I missed again.
I don't think anyone should be in a hurry but I would suggest for those that don't own and are serious I would start looking now because the search if done properly will take some time and if you find Nirvana play HARDBALL when you negotiate, if they need money they need it now and you may just get 25% or more off now, but of course if you do wait and have good timing you may get 50% who knows.

comitan - 12-5-2007 at 04:22 PM

All good info, I guess its time to raise the price on my property. For the hardballers. :lol:

vandenberg - 12-5-2007 at 04:44 PM

Quote:

if they need money they need it now and you may just get 25% or more off now, but of course if you do wait and have good timing you may get 50% who knows.

You must have just got home from a real estate seminar :biggrin:

Al G - 12-5-2007 at 04:48 PM

Quote:

Originally posted by castaway$
Al G your point is well taken, I think that we are at the beginning of the slide dowhill, it could last at least a year maybe two if it is dependent on the U.S. market. I want to stress that it could all be over in a blink of an eye and many could be left standing on the sidelines going damn I missed again.
I don't think anyone should be in a hurry but I would suggest for those that don't own and are serious I would start looking now because the search if done properly will take some time and if you find Nirvana play HARDBALL when you negotiate, if they need money they need it now and you may just get 25% or more off now, but of course if you do wait and have good timing you may get 50% who knows.

"damn I missed again" There is a saying in the game I play..."never try and catch a falling knife" :lol:

You are right about getting ready though...but pulling the trigger on the way down can be fatal to your investment unless you in it for a time and are aware it may never be lucrative.
If your timing is perfect you can still lose...crime gets worse or a socialist is elected and he declares all land returned to the state....both real possibilities. In fact they are the main reason I believe the Baja market is way over heated...prices have gone up over 200% in a couple years. Some much more then that, and I don't see the support for that kind of risk. Speculation is a major reason for the price spike and adds to the risk for the average non spectulator...now is not the time to buy...and spectulators better hang on to their shorts...

castaway$ - 12-5-2007 at 11:30 PM

I appreciate your opinions Al. As I have stated I don't own in Baja as of yet but Iintend to. Being a Broker here in Oregon I work with a lot of investors and I put on seminars to educate my clientele. So far myself and my clients have done very well investing and we have a very simple strategy- Educate yourself about the investment before you buy it.
I highly advocate finding and listening to people that are on the front lines, I will be the first to admit I really don't know much about buying in Baja, but I am educating myself and as I stated above I respect and appreciate your opinions. I am not in a hurry to buy and initially my intent is to buy a second/retirment home but I guess my investment background always has me sniffing around for the good deals. I do think there are some good buys out there now and I'm sure there will be better in the near future, but I also beleive that one key point that was made in the intial posting that started this thread is probabaly true and could play a major role in how long it will take for the market to begin an upward shift- "Baby boomers have a lot of wealth". There are certainly a lot of wildcards that can and will affect the Baja market and for now it may be wise to sit on the fence and watch, and for me, keep learning from people with experience.

rogerj1 - 12-6-2007 at 12:38 AM

I've somehow managed to keep my money in my wallet these last 3 years since that fateful trip to Cabo that reawoke a passion for Mexico in me. It was very difficult watching property prices take off without getting involved. It's been a huge learning curve along the way, which has been fun. Castaway, you and I are in similiar lines of work except I'm in the stock market business. Perhaps we could put our heads together to sniff out some good opportunities. I've met some great people on this board and elsewhere and as you know, contacts are very valuable in Mexico. I look forward to reading more of your posts.

gnukid - 12-6-2007 at 01:12 AM

Buy low sell high! wahoooooo!

capt. mike - 12-6-2007 at 04:58 AM

ha!! this is a great time to explore buying , well actually leasing for 50 years, in mexico and baja. I love a falling market except when i am selling of course!! - there are deals everywhere!!!!!!!!!

people buy on emotion and sell on need - just find someone who is ready to or has to bail out on their place and snipe it - good targets are older retirees who've had their good run and need to be in the states for their last years.

Osprey - 12-6-2007 at 07:55 AM

You shrewd speculators might want to hook up with Baja doctors up and down the peninsula, have them alert you when somebody goes on the DNR list. Perfect environment here for Sopilotes.

sopilote mojado

islandmusicteach - 12-6-2007 at 08:40 AM

http://music.yahoo.com/track/638362

Al G - 12-6-2007 at 08:48 AM

Ospray...There is not a tequila strong enough to get that taste out of my mouth...if the people who inherit then sell, because they don't like Baja, I will get my best price. It would not feel like I was stealing a dream...
BTW my spanish still sucks...Sopilotes...something to do with aviasion???

vandenberg - 12-6-2007 at 09:29 AM

Quote:

Originally posted by Osprey
You shrewd speculators might want to hook up with Baja doctors up and down the peninsula, have them alert you when somebody goes on the DNR list. Perfect environment here for Sopilotes.

Well 'O..Spray :lol:

My sentiments exactly :biggrin:

Al G - 12-6-2007 at 09:38 AM

Quote:

Originally posted by castaway$
I appreciate your opinions Al. As I have stated I don't own in Baja as of yet but Intend to.

I do understand...your opinions are based on desire not need...and mine are based on desire to bring down prices in my target area that went up 1000% in 1-2 years. I know brokers sitting on many properties that have prices that would give them 1000% +. now if they went through a development process, with high cost and time...I would feel different. Now I will hope they get it broke off deep. These prices are not justified for a 50 year lease...that is dependant on who gets elected. Put it this way...if a retiree has the desire to live out his/her life in Baja on a 50 year lease, with the hope that it will be passed on to their children, and in reality they lose everything. If the price is within the reasonable expectation for the risk...then they may have enough left to live in dignity somewhere else. If the spectators get their way there will be many people that may lose their golden years....You must remember this is a LEASE nothing more...if you don't believe me then you didn't see old women crying and old men hands tremble in the last election when there was a possibility the socialist would win...

vandenberg - 12-6-2007 at 09:51 AM

It's beyond me that, with that mentality, you would even look at anything in Baja.
You should consider a 3 bedroom, tract like home with a picket fence, somewhere in the middle of a cornfield in central Kansas.

Al G - 12-6-2007 at 10:16 AM

Quote:

Originally posted by vandenberg
It's beyond me that, with that mentality, you would even look at anything in Baja.
You should consider a 3 bedroom, tract like home with a picket fence, somewhere in the middle of a cornfield in central Kansas.

Everyone has an opinion...mine are based in reality. I have a draw to Baja and will act on that. I do not have to agree with you or the over hyped prices...or the people who advocate paying more then something is worth...

Minnow - 12-6-2007 at 11:41 AM

Quote:

Originally posted by Al G
"damn I missed again" There is a saying in the game I play..."never try and catch a falling knife" :lol:

Damn Al, there really is something rolling around up there besides marbles. :lol:

Wait until all the finance fraud issues shake themselves out. 25% drop from the highs, is way, way positive.

Houses are still selling in Vegas. The builders are having sales events where they cut their prices by over 15%. Of course, the discount on the ones that fell through from the original boom is way, way more. More like 27%. We had 40 of them listed, and managed to sell them all, but I think the current value of those is 15% less, than what those people paid. Can you imagine living in a gated, golf course community, and your neighbor paid 100k more than you did 2 years ago for the same house, and you are still upside down.

This thing has a long way to go yet. Mexico is going to be an after though for most people after this whole mess plays itself out.

DENNIS - 12-6-2007 at 01:20 PM

Quote:

Originally posted by vandenberg

Well 'O..Spray :lol:

Would that be O'Spray of the Dublin O'Sprays? Or was that Jersey City of long time gone?

Al G - 12-6-2007 at 03:18 PM

Quote:

Originally posted by grover

Hey grover...are you inviting me to the wet buzzard for a breakfast burrito and a cup of joe...how did you get the buzzard wet :lol:

Slowmad - 12-8-2007 at 12:55 PM

Say it again.
"When the U.S. sneezes, Baja catches pneumonia."

Add gangs of rogue cops, assasinations, corpse-snatching, sexual assault, and accelerating extortion and you have the perfect recipe for a crash c-cktail.

Two new armed carjackings on Blvd. 2000 (Popotla bypass) last week.
Donnie Combover has taken down his billboards--even the vaunted Trump project is on its heels.

We'll see high tide again some day.
Just might take a decade or so.

In the meantime be safe out there.