Are Real Estate Prices Getting Soft?

David Simmonds

The 3rd annual Mexico Resort Development Conference has just concluded in La Costa, near San Diego, with some new, but not surprising, revelations. For many years these type of affairs have been very upbeat cheerleading sessions designed to synergize the attendees into prolific deal-making. Many of the industry’s heavy-hitters were in attendance, including Jack Nicklaus, the number one golf course builder in Mexico.

But this year there was a different tone, as the inevitable U.S. real estate meltdown has begun to drift across the border, with reports that sales are significantly down and at least 30 on-the-drawing-board housing and resort projects will probably not be built in the near future. The predictions as to when the climate will turn around range from 1 – 5 years, which is a long time for people who like to see hammers swinging and concrete being poured.

I do believe that the number of gringos retiring and investing in Mexico will continue unabated, as the benefits afforded them remain very enticing. The coming-of-age-in-the-sixties baby boomers are searching for a life more similar to what they remember from thirty years ago, at a price that they can afford. Mexico meets many of these requirements, offering small-town, live-and-let-live life-styles without the convoluted, litigious day-to-day b.s. that has tragically become the norm in the U.S.

The real estate downturn in Mexico is not surprising to some of us. I have predicted this for a couple of years. But this is the first time I have seen it acknowledged by the developer class. And my guess is that the situation is worse than they are admitting to. With housing equity drying up in the U.S., there just isn’t as much available cash to drive the prices in Mexico. And with a surplus of inventory that has accumulated over the past decade from Northern Baja to Riviera Maya, there will be a significant correction. Bottom line: the next few years should be a very good time to buy in Mexico. Just take your time, do your research, and bargain hard.