By Harriet Murray ● Cochran Real Estate ● July 2014
George Soros is a well-known Canadian businessman. He is a speculator. In 1992 he forced the British to crash and made a billion dollars. From his perspective, self-regulating forces in the free market don’t work. Financial markets tend towards excess. They work more like a wrecking ball than a pendulum.
The story goes like this:
1. Promising company enters the stock market
2. Expectation is higher than reality
3. Expectation and reality are the same
4. Expectation explodes
5. Perception is distorted
6. High point
7. Reality is weaker than expectation, slump in the market (bust)
The most recent extreme market world-wide was precipitated by the housing bubble crash in the United States 2008. It will happen again.
1. You want to buy a home?
2. You don’t have any money?
3. Property prices never fall.
4. Run starts on the housing market (bubble)
5. Building boom, more real estate agents
6. Oversaturated housing market
7. Mortgage becomes higher than value of the house
8. Mortgage can no longer be paid.
In the past, the lender checked the borrower with more realistic criteria. Today the mortgage broker sells to anyone.
In the past Insurance was on what you won. Today you insure what you don’t own, and bet that there will be a loss and you will make money by selling short or betting on failure.
10. No cash flow
11. Banks and investors are not paid
12. Government pays bail outs
13. The American public gets the bill
In Mexico, the housing crash hit hardest after the US crash. 2009 was our nadir. No Americans had equity in US homes to pull out and buy their second home in Mexico.
US became concerned about their recession. Didn’t want money seeping out of the country into other financial markets. Had to prop up the US and deny we were in a recession which we caused. Fear of money being spent outside of the US. Bad news on Mexico: US is better, Mexico is a danger. Seepage stopped.
No one takes responsibility. Same people who ran the real estate derivative investment vehicles into the ground and caused bailout, are hired to run remaining investment companies – to repeat the cycle.
The question is not if, but when will it happen again. Who will make money and who will lose? Same players as before…
This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review.