| Let's start out by assuming that you're a better than | | | | Once they committed, most of them (the reputable |
| average investor; your 401k, IRA, or personal | | | | and fully capitalized ones!) felt it necessary to |
| investments have kept up with the S&P 500 | | | | complete their projects regardless of sales. |
| average during the past ten years and you've lost | | | | Consequently, with the recession driven reduction in |
| only about 35% of your life's savings! Did you realize | | | | demand and a supply of more than 7,000 units, |
| that the Mexican Exchange Traded Fund (EWW) | | | | prices for new condos are at a bargain basement |
| which represents the Mexican stock market, even | | | | level with some of the developers selling their surplus |
| though it was annihilated during the current recession | | | | inventory at not much above their cost. This is truly |
| along with all other markets throughout the world | | | | a buyer's market in PV for new condos however this |
| (but is recovering rapidly), has advanced by 200% | | | | supply/demand imbalance has had minimal effect on |
| during the same time frame? In other words, $100 | | | | the value of existing condos. |
| invested in the S&P 500 in 1999 would now be | | | | The situation regarding the resale of existing homes |
| worth $65, whereas if it were invested in the | | | | and condos south of the border is entirely different |
| Mexican EWW fund it would now be worth $200. | | | | than in the US. In Mexico, there are seldom any |
| Please refer to the ten year graph below in order to | | | | promotions or transfers requiring a housing upgrade |
| see the comparisons between these two areas of | | | | or relocation, i.e., business related issues almost never |
| investment and perhaps you can speculate as to | | | | require the sale of a resort property. Also, very |
| where might be the best market to place your next | | | | seldom do owners decide to upgrade or downsize |
| bet! | | | | once they own a retirement property. More |
| We have lived in Puerto Vallarta during the entire ten | | | | importantly, almost all real estate purchases in Mexico |
| year period and have witnessed the changes and | | | | have been done on an all cash basis and therefore, |
| growth firsthand. As the economy has boomed, | | | | regardless of the economy, there are no |
| unemployment in Vallarta has been virtually eradicated | | | | foreclosures on these fully owned properties. |
| while the population has doubled, prices for materials, | | | | Mortgages became readily available in Mexico about |
| labor, and land have tripled, and of course, real estate | | | | five years ago however they require at least 20% |
| prices have also tripled. | | | | down and substantial documentation proving one's |
| Now, let's compare this growth and real estate value | | | | ability to pay. (Sorta like the good ol' days in the US!) |
| appreciation in PV to what has been experienced in | | | | With this kind of financially solid buyer and this level |
| the US. The latest government released graph below | | | | of equity, there are virtually no foreclosures in |
| from the Federal Housing Finance Agency (FHFA) | | | | Mexico. Although the rate of sales of existing |
| shows that average housing prices in the US | | | | properties has slowed to a snail's pace, in the |
| appreciated by nearly 70% from 1999 through 2006. | | | | absence of foreclosures, prices of resale properties |
| Since then, the rate of appreciation has dropped | | | | have held up fairly well; certainly not plummeting as in |
| precipitously until the fourth quarter of 2007 when | | | | the US. |
| values actually started depreciating. Throughout all of | | | | As we look to the future, we see very promising |
| 2008 and the first quarter of 2009, prices have | | | | growth in the Mexican Bolsa as well as in Mexican real |
| plummeted by about 10% and as you can see in the | | | | estate sales. In fact, FONATUR, the Mexican Tourism |
| graph below, we can project prices to fall by another | | | | Board is still forecasting explosive growth in the |
| 5-10% before they once again start appreciating. In | | | | Nayarit Riviera area, just north of Puerto Vallarta, |
| other words, the average investment in housing in | | | | during the next decade; only time will tell. As they |
| the US made 10 years ago will have increased in | | | | say, "past performance is no guarantee of future |
| value by 40-50% by the end of 2009. Even though | | | | results"! Assuming the global economy eventually |
| housing values have recently been crushed, real | | | | rebounds, it is a given that the millions of baby |
| estate has still way outperformed the stock market | | | | boomers, just starting to retire, will be heading south |
| during the past ten years; hopefully, your real estate | | | | for the benefits that Mexico has to offer. When this |
| gains have more than offset your stock market | | | | stampede of boomers hit the beaches in Vallarta, real |
| losses! | | | | estateprices that have been essentially flat for a |
| With the US real estate market currently | | | | couple of years, will continue escalating. |
| experiencing a serious recession, no real appreciation | | | | With seven months of perfect winter weather in PV |
| in housing values is expected for at least two more | | | | from November through May, when the average |
| years. In summarizing, most Americans have enjoyed | | | | temperature is 73*F with virtually no rain and blue |
| roughly a 40-50% gain in their property value over | | | | skies, eight magnificent golf courses, hundreds of |
| the past ten years and can expect the equity in their | | | | tennis courts, world class deep sea fishing, hundreds |
| residence to be, at best, essentially dead money for | | | | of fine restaurants, clean food and water, and 50,000 |
| the next couple of years. | | | | other gringos to play and party with, our portfolios of |
| Due to the extreme demand in second homes and | | | | stock and real estate investments south of the |
| retirement properties in resort destinations, Vallarta | | | | border are "en fuego"! |
| has witnessed an explosive ten year period of | | | | If you're recently retired or considering retirement in |
| growth. So much so, that with the current global | | | | the near future, you really ought to check out the |
| recession, the developers of the large condominium | | | | investments that lie south of the border; enjoy your |
| projects requiring long term planning, financing, and | | | | retirement to its ultimate, and put your dead money |
| construction have been caught totally off guard. | | | | to work for you in beautiful Puerto Vallarta. |