Vallarta/Nayarit Real Estate Market – Shifting Tides

It is said that when the USA sneezes, Mexico catches a cold. The influence of the American economy is so dominant that Mexico would not be the only country to develop cold symptoms, others such as Canada and many in Europe would, as well. Mexico, however, would be the most affected, ending up with a rather severe case of “la gripa.” And while this catchphrase is most often employed when the US economy is experiencing a downturn, it is applicable on the upside, as well. When the US economy improves, Mexico usually rebounds right along with it or just behind.

The concept is also appropriate when considering the Vallarta/Riviera Nayarit real estate market. In 2008 local real estate activity was at its peak, with nearly 60 percent of sales coming from Americans and the remainder split evenly between Canadians and Mexican nationals. However, the intensity of the US recession saw Americans nearly drop out of the market and provide few sales, the slack taken up by Canadians, whose real estate market was not as severely affected, and Mexican nationals. Today, most real estate professionals report the market as evenly split among the three nationalities. And that is probably a good thing, offering a more diverse and stabilized market moving forward.

As in the US real estate market, Vallarta experienced a substantial increase in inventory, which is slowly being reduced to normal levels. The downturn in Vallarta wasn’t as severe as it was in some regions of the USA, however. Because mortgages are not as common here, many properties paid for in full, there were fewer foreclosures.

Although sales dropped across the board, the “middle of the market” price range ($500,000 to $800,000) was most affected, while the lower end was still seen as “affordable,” and the upper end, well—those looking for properties over a million tend to be those who weather downturns better than others can. For the past few years, most activity has been under $250,000, but that is changing.

Recently, the middle range has become quite active, assisted by rising US stock markets and domestic real estate values. Americans simply can afford more. And there are some great deals out there. Many of the mid-range properties purchased in the last year were listed for over a million at one time. With some very good deals taking place, it is starting to tighten up now, even creating a lack of inventory for those looking to buy in this price range.

The upper end of the market has seen more activity, as well, most noticeably in the Punta Mita area, where record-breaking prices are being set for oceanfront properties.

Since 2008 little new real estate offered by developers has come on line, and that offered mostly has been under $300,000. This is changing, though, with new higher-priced developments scheduled for release this year, most noticeably Bolongo on the north side of the bay, which will offer condominiums and single-family homes in the middle- to higher-end price ranges. When developers start coming back into the market, it is because they believe price points are now strong enough to support them and that demand is there. It usually marks a tipping point in the real estate cycle where price values begin rise.

The worry of violence, a serious concern a few years ago, has ebbed, with few incidents regarding Americans or Canadians living in Mexico and the sensationalism elevated by mainstream media subsiding as they have redirected coverage to places like the Ukraine and Middle East. Today, Vallarta/Nayarit is looking better and better, back to being seen as a very affordable place to retire or have a second home, with its wonderful weather, friendly people and a culture that is familiar and comfortable.

Long-term winter/spring-season rentals are also in demand. A few years ago, a renter had many properties to choose from; today, not so. Good properties available for an extended period are hard to find, property owners able to charge more by the week or demand more for long-term rentals. Some of those who are looking decided they’d rather rent than own because it seemed more cost effective—why buy if you can easily rent for a reasonable price? They are people who would have considered purchasing in the past but are now a little conservative because of what happened in 2008. These are buyers; they just don’t know it yet.

They will see that finding properties at prices they are happy with will not be as easy next season. So, if they want to be able to return to the neighborhoods they have come to know, to the friendships they have made, to the events and restaurants they have become fond of, they may have to start considering buying something that is truly their own to ensure availability.

This situation has created a pent-up demand for real estate in the region; as quality rentals become harder to find, renters will turn into buyers. And the ones who move first will get the best deals, before prices start going up. If you are one of them and you’ve been thinking about a property in paradise, it may be time to get a little more serious about it, while the selection of properties is still good and prices remain much below what they were five years ago.