By Harriet Murray ● Cochran Real Estate ● September 2012
All realtors and real estate agents will tell you that having their market implode from a natural disaster, negative publicity, or an epidemic of disease or illness is about as bad as you can get.
For the first time in my 30 plus years of real estate, the 2007 meltdown of financial institutions in the USA and the reporting of a flu epidemic in Mexico were two events as bad as I have ever experienced.
During the 5 years we have struggled in the market, many lessons have been learned. As a wise person said, you have not lost a market; your market has changed. Well, that is true when you have a market at all and in Mexico, we still do. I don’t think there is a market in a war-zone like Afghanistan, but I may be wrong. I don’t know an Afghani real estate agent who can enlighten me to his market during the current conflict.
In 2007, we went from losing many American clients to focusing on Canadians and those few independent thinking Americans rich with cash looking for great deals in higher end properties. When new construction began again, we found Americans buying new condos in pre-construction construction. They made down payments, hoping things would get better in the US and that they would have money to finish transaction at the end or be able to obtain a mortgage. These condos were much less in price than those coming out of the ground during our boom days before 2007. The “sweet spot” was 250,000usd and under.
Regarding mortgages: American lenders came in and left, never getting the system down well on the procedure for ownership in Mexico. Another problem that became apparent later was that small profitable individual banks which made loans on Mexican properties for nationals and foreigners, were absorbed by a bigger banks during this period from 2007-2011. The small profitable bank could not produce the volume of loans to meet their new owners’ expectations. So the BIG bank pulled out, and loans dried up.
Now we have pesos mortgages for everyone: National, Canadian, American, and European. These peso loans use bank account balances to verify ability to handle a mortgage, and not tax returns. These banks have experience with the self-employed and have satisfied their underwriters that bank balances are the way to go. Interest rates and terms are competitive. A new market of available money has open up for us in Mexico.
Who are the buyers’ right now in the middle of the wet summer with foreigners elsewhere at the moment? They are the important middle class of Nationals who now can obtain competitive peso loans. These buyers are tired of renting and have money for a down payment. It would be usual that the borrower’s family will help him with the down payment, as family is close and supports each member in many ways.
We have a market and this time it is the National who lives already in the area and wants to buy a first home or sell his current and move-up or down, depending on his age. This should sound very much like the USA 50-60 years ago during its first experience with mortgages and growth in home ownership. ….when things were healthy and normal in the USA but we didn’t realize it then. At that time, lenders weren’t creating mortgages as a reason to pay their overhead and profit without regard to demand. When natural and normal demand went down, lenders began to lend to borrowers not qualified to take on the degree of financial responsibility required to keep a mortgage current.
Current local buyers and sellers are not flashy, but low-key. Their choices are more basic and not the breath-taking villas and condominiums on the sea or on the mountains. There is a real estate market here, and we are grateful for it.
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.