Will U.S. Real Estate Recession Affect the Riviera Maya of Mexico Market in the Mexican Caribbean?

U.S. Existing Home Sales Fall for 5th Straight Month. Will it Affect the Riviera Maya Real Estate Market in Mexico?8 Top Area Professionals Share their Points of View on the Future of Real Estate in the Riviera MayaAnnual existing U.S.A home prices declined in August for the first time in more than a decade as U.S. home sales fell for a fifth straight month. The year-over-year drop in median sales prices represented a dramatic turnaround in fortunes for the once high-flying housing market, which last year was posting double-digit price gains. “Pop goes the housing bubble,” said Joel Naroff, chief economist at Naroff Economic Advisors. He predicted prices will tumble farther as home sellers struggle with a record glut of unsold homes. The National Association of Realtors reported this past Monday that sales of existing single-family homes and condominiums dropped 0.5 percent last month to a seasonally adjusted annual rate of 6.30 million units. That was the fifth straight monthly decline and left sales 12.6 percent below the pace of a year ago.Okay, so how will a now confirmed U.S. slowdown affect the real estate market here in the lovely Riviera Maya?Well, to answer that question first we need to understand what’s really happening in the U.S. First, it appears that the slowdown in U.S. sales meant that the inventory of unsold homes rose to a record 3.92 million units at the end of August. At last month’s sales pace, it would take 7.5 months to clear out the backlog of unsold homes, the longest stretch since April 1993. The median price of a home sold last month fell to $225,000. That was down 2.2 percent from July and down 1.7 percent from August 2005. That marked the first year-over-year drop in home prices since a 0.1 percent fall in April 1995.Is this a temporary issue or is this the future of doom and gloom in the Riviera Maya? Find out what the areas 8 Top Pros say. Read on……mls4rivieramaya8Last year, when the five-year U.S. housing boom was reaching its peak, median prices posted a string of double-digit gains on a year-over-year basis. The median price is the point where half the homes sell for more and half for less. David Lereah, chief economist for the Realtors, predicted price declines would continue for the rest of this year as sellers adjust asking prices downward in light of the inventory glut. “This is the price correction we’ve been expecting,” Lereah said. “With sales stabilizing, we should go back to positive price growth early next year.”But some home sellers around the U.S.A. worried that cutting prices may not be enough, have been offering incentives to attract buyers, including in some cases new cars. Dave Armon, who lives in the New York City suburb of Pelham Manor, said he started out asking $1.6 million for his six-bedroom Tudor-style home three months ago — below the $1.82 million a neighbor received — but has slashed the price by $300,000 because he has attracted few interested buyers. “l am sitting here thinking maybe if I buy a car and park it out front with a bow on it, that will help,” he said.Could this happen here in the Riviera Maya? Will this type of potential buyer forgo buying here in the Riviera Maya now that his profits have disappeared?We asked the areas 8 Top Professionals to opine and share their thoughts about this market trend and how it affects our robust real estate market here in the Riviera Maya.RANDY BONDS – BRIC INTERNATIONAL “This decline in existing home prices was expected by everybody in the market.” say Randy Bonds from Bric International, a major developer who has several large projects in the Riviera Maya. “Real Estate is a cyclical market just like the stock market and there will always be ups and downs in the trends. This correction that we are experiencing is greatly needed to put some sort of normality in the appreciation. The Riviera Maya, as well as the rest of the world, is going to be directly related to what is occurring in the US. These are some of the savviest purchasers all around the world and when they are trying to figure out their next move in the states and where the market is leaning they are more likely to avoid the foreign market. The Riviera Maya over the last two years experienced some of the highest % returns out of any other region in the world. This doesn’t go without certain consequences following when most investors are priced out of the market. The next two years are going to be very important to see the reactions of the builders and owners of condominiums and houses in this region. Builders that are under funded and in the middle of a build are going to be running into financial disarray with the lack of funds for completion and therefore selling at a great discount or packing up and leaving the project incomplete. Investors that currently own with the intention of reselling for a great profit are going to be a little disappointed with the buying market. We will start seeing another buyers market when builders and current owners start the price war downward. Investors, builders, and owners need to realize that patience at a time like this is very important and this region is going nowhere and is still one of the most beautiful and highly desired areas for real estate in the world. Looking back at the stock market in the early 2000’s and where it is now is not much different than what we are going to see in the real estate market over the next 2 – 3 years. This is a time to relax and reevaluate the up and coming years.”GARY WENDT – PLAYA CITIZEN From downtown Playa del Carmen, Gary Wendt from Playa Citizen, a broker builder says “Most people know that the real estate market, especially home building, has carried the economic growth in the USA (after removing oil). This has been going on for years. The housing sector has also generated nothing short of an amazing run UP of VALUE. Thus, a little downturn should be expected and not feared. And there’s the rub. Oh, pesky human nature! We humans just can’t help but look for things to fear and fear is the fuel for self-fulfilling prophecies and politicians. So who knows for sure what’s next. I believe in cycles and location, location, location! Except for oil and real estate, the world economy has been positioned on the edge of a recession for 6 years. Recession is not good for business anywhere in the world. It is still true that as the USA goes, so goes the rest of the world. Here in Playa del Carmen? Well, I am not an economist. But I slept at a Holiday Inn recently (in Puebla – Central Mexico) and I believe that tourist properties situated along our most beautiful caribbean sea will suffer less than average in a recession. In fact, they will suffer much less than all the rest during a recession. It’s also true that a great location is the best hedge against cycles in real estate. So, personally, I look for sales to slow a bit. At the very worst, should a recession actually arrive on the scene, prices probably will flatten. Then, as experienced in mid-2002, less than a year after 9/11 when this area of the world rebounded with a frenzy of interest and record growth and sales, we’ll bounce again faster than the rest. Anyway, I suggest buyers and sellers plan for the long run in their investment horizons. Farsightedness made Warren Buffet rich. Remember he said,”when everyone else is selling, I’m buying”. To me, this levels a recession. Not EVERYONE panics and the calm people who plan for success profit.”NANCY EDWARDS – COZUMEL LIVING From the lovely island of Cozumel, Nancy Edwards who is the owner broker of Cozumel Living says “While real estate in Mexico is greatly affected by what is happening in the US, I don’t feel our prices will drop in Cozumel. They never do. We may have a stagnant market for awhile, but prices never drop in general in a resort area. It is true that we are still suffering a lower than low market due to the effects of Emily and Wilma last year, but prices have not fallen and while we were hoping for a price increase with the coming of this high season, it appears, we might have to buckle down and brace ourself for a mediocre high season this year. The clients that I have had come to the area recently are talking about the slowing US market, and have properties there for sale. As soon as they sell, they still plan on purchasing here. Their purchases probably will be delayed though. Clients with cash are still purchasing because it is a ‘buyers market’ now with many properties for sale at stagnant, last year prices.”RONNIE POOL – PLAYEXPERT.COM Caribbean Beach Properties Investments and PlayaExpert Ronnie Pool, a broker from Playa del Carmen says “Any major economic slowdown in the USA will have an effect here because it means those prospective buyers don’t have as strong a financial position, and may have fewer disposable assets to spend here. However, if real estate is not such a good investment there right now, by comparison our market can look even more attractive! So that can compensate. In the final tally I imagine that the sale of the lowest priced properties in our market will be hit harder than those at the upper end. The very wealthy usually ride out economic waves better than the marginally well off. But as a real estate broker I know that I create my own reality, so if I believe that my business will go down because of this ….no doubt it will. If I believe that despite challenges I am better able than anyone to get my share of the pie and still grow….no doubt I will. We reap what we sow, in life, at work, and in our own minds.”GABRIEL VILLARREAL GUERRA – CENTURY 21 MARCOS & ASSAD “In my opinion, a slowdown in the housing market in the States will be most definite beneficial for our market. A weaker market means less demand for new homes and therefore less homebuilding. People could have foreseen such a slowdown, as it is clearly stated by the National Association of Home Builders (NAHB) figures: forecast is for starts to drop to an annual rate of 1.55 million – Inventory/Sales ratio – by the end of 2007, or 27% below their peak level…. reflecting less buyer traffic and a bias towards building fewer homes in the future. Eventually people will start looking for better “deals”, will start keeping an open-mind in purchasing a second home in Mexico, will be on the look out for investment opportunities, and guaranteed they will follow a trend… put their money in a safe emerging market close to home where they have all the guarantees as foreign investors – e.i. Banktrusts – and a positive cash flow with higher ROI’s (rate of return), making it more appealing to invest than back home. Plus, we should never forget what we have in our market that nobody else has: a fabulous Caribbean Sea and gorgeous Mayan built pyramids! Just to name a few. If there are no major upcoming changes in economic events that could somehow affect the Riviera Maya, our market will be booming higher than what any professional can foresee… and the slowturn that has taken place in the States will shift our sales figures, in my personal opinion.”THOMAS LLOYD – PLAYA REALTY EXECUTIVES Thomas Lloyd of PlayaBuyerBroker.com says “Projecting the future economic and real estate market results is an incredibly difficult task. An entire collection of books are needed to demonstrate and learn the relations and influences upon pricing of homes, condos or upon the price per meter of raw land. Below please find a very general brief on this topic. First, many factors influence the local real estate market including that of the international economic indicators as mentioned in the question above. Twenty five years ago, a very soft correlation existed between USA market results and its influence on the Mexican market and vice versa. Ten years ago, as in the majority of most countries of the world, international market results have had and has continued to have a much stronger affect upon the Mexican national economic activities. Mexico┬┤s strongest trade partner, USA, has increased their commercial relation with the Mexico with the passing of the NAFTA(North American Free Trade Agreement) which only makes our two countries influence even stronger. The trend therefore would indicate that as each decade passes, the international market results and indicators of every individual country will have stronger and direct affects upon the markets of neighboring and/or those countries with the closest economical ties. Second, the Real Estate market is driven more by local indicators than by national, and of course of international indicators. As stated above, pricing is established by many many factors. The majority of the factors are varying/constantly moving and each factor has a different weight of influence upon a final market price. Some factors that weight heavily are generally found in the regional/local economical indicators such as of Population growth, Costs of Doing Business, cost of capital (loans), Quality of Life, Employment and Income, Local Taxes, Property Taxes, ISR taxes vs. (competition). In Summary, Real Estate in California is different than real estate in Indiana, Real Estate in Canada is different than that from Mexico. Each regional market has its own strategies and influences, therefore its own proper real estate opportunities.JEN LYTLE – TIERRA YUCATAN Even in the Yucatan near Merida, they have a point of view on the U.S. recession. Take Jen Lytle, owner/broker of Tierra Yucatan Properties in Merida. She says “I have not yet seen any slow-down in business which could be attributed to the slow-down in the US real estate market, although one might predict several possible long term effects. It is possible that our investor clients will find our property in Yucatan an even more attractive option, as the market here continues strong with good appreciation. I would also expect that for those retiring on a fixed income, it might become more difficult to purchase a retirement property in Mexico if this purchase depends on obtaining equity from the sale of an existing property. Over-all, I am optimistic that our market will be only minimally affected by any slow-down in the US.”SHAWN BANDICK – ONE STOP REAL ESTATE Finally, Shawn Bandick, owner/broker of One Stop Real Estate says “In every shifting real estate market there are pocket markets. These are areas which with stand the shift with little or no effect. In British Columbia Canada the Okanagan Valley is one of those areas. I’m sure you can see areas like that in your state or province. So how will this shifting market effect us in the Riviera Maya? If there was ever a Pocket market this is it. The Mexican government recognizes that, and they are putting millions of dollars into the development of Q Roo. Most of our buyers are baby boomers who have paid off their homes, and have the cottage, and are now looking for the sunny hide away. Many of these same buyers have substantial inheritance money that they are investing as well.” Also these clients are not just from north America, they are from all over the world and this gives us an even more stable market. Mexico is a new area of investment and the buyers tend to be higher-income they are not the first time home buyers nor are they the first time investors. History shows us that the baby boomers will not be denied! This is no exception. Baby boomers have discovered the Riviera Maya and they are bringing their money here to invest and enjoy.” View MLS Listings for One Stop Real EstateWe invite you to come into our discussion by posting your comments into our Forum. Simply go to Riviera Maya Real Esate News at www.rivieramayarealestatenews.com and click on FORUM. Oh, don’t forget to View MLS 4 Riviera Maya and Search Listings.

How To Make A Lot Of Money In Real Estate

Real estate is one of the many possible ways of making money. Whether from investing or from being a real estate agent, many people are making a lot of money from the industry and if you have the desire to join them then you need to understand the business. Before you can invest in real estate there are several things that you need to know. Firstly, real estate is a long term investment. Secondly, you require a huge sum of money to invest in property, unless you are planning to earn money from being a real estate agent, and lastly the property you invest in needs constant management. The bottom line is you need to make a commitment in both time and money to succeed in the real estate business.Strategies Of Making Money In Real EstateThere are many things that you can do to make money from real estate, and you only need to find the channel that works for you.1. Buying And SellingBuying and selling of properties can be a great way of making a lot of money from real estate. One way that you can make money is by buying a home that is undervalued then selling it at a higher price. Buying homes that have been foreclosed can also give you some good cash if you renovate the house well. Most foreclosed homes are usually sold way below market price, if you buy the homes you may get back double the money you put in. The only trick with foreclosed home is to buy them early before they are listed as foreclosed.2. Renting And LeasingMost people are using this strategy to make money from real estate. For you to rent houses you need to have management skills. You can buy a property or build one then you can rent the houses. You will then be collecting rent money from every tenant every month. This is a good way of making money. Leasing on the other hand is beneficial to those people who can’t afford mortgages. You can lease a property, and have the option of getting the property for less money when the time is right.3. Becoming A Real Estate AgentIf you don’t have the money to buy a property, you can still make some good money from being a broker. The real estate agents get their money from the commission they get from the homes that they sell. The only requirement with becoming a broker is you need to have a license of operation. As a real estate agent, you can also earn money from being a consultant. With this business you will be giving people advice on properties and earning good money from that.4. Buying LandAs you know land appreciates over time. So if you buy land and sell it at a certain period of time, you will get a huge sum of money from that. You will however have to consider the location of the land and the market situation before you sell the landTips For Making Money From Real EstateResearch And Evaluate Your CashReal estate can be a great way of making money but it can also cost you a lot of money and time if you don’t know what you are doing. It is thus important to conduct a market research of the available properties before buying them. Observe the market situation so that you can know the amount of money you will be required to part with if you decide to invest in property. You will also have to evaluate the amount of cash you have before you can buy a property. By knowing how much money you have and how much you are willing to part with will help you in knowing the kind of property that suits you. You will also be required to know your target market before investing. This will help you know how to remodel the property to be suited for the right market.Buy Cheaper Homes And Consider The Add Up CostsIf you want to make a lot of money from real estate, it is advisable that you buy cheaper homes. This way you will either sell or rent at a higher price that is also favorable. If you buy an expensive home you will be required to sell or rent the house at a price that is too high, a move that may chase away potential buyers. The fact that you are buying a cheaper house does not mean that you have to buy houses that are of poor quality. It is good to consider the quality of houses so that you can determine the amount of money that you will be required to use in repairs.Consider The Cost Of Entry And The Capital GrowthThere are certain countries that impose extra fees when it comes to buying of properties. It is therefore advisable for you to research about the country you want to purchase the property in. You will also be required to know the capital growth, and if there are any businesses or companies surrounding the property. A high valued property is one that is surrounded by social amenities. Considering the cost of exit will also determine the amount of money you get. The cost of exit usually refers to any tax money that is imposed on sold properties. There are countries that demand tax for any sold propertyGet Professional HelpConsult with the real estate professionals before investing in real estate. This will help you in making the right decisions. You may seek professional help in determining the quality of the property, and the current value of the property. You may also consult the professional to find out the period of time that you will have to wait to sell the property, and the amount of money that you expect to get from the property.

Real Estate Submarkets and Their Characteristics

The Jamaica real estate submarketThe general market for goods and service is made up of many submarkets. When left free to operate without private or governmental interference, each submarket and the general market as a whole should theoretically regulate itself by the laws of supply and demand.One of the submarkets of the general market for goods and service is the Jamaica real estate market. While the real estate market differs in a number of distinctive ways from other markets, it acts much like all markets with respect to changes in supply and demand, but with a slower response time. It has the appearance of being a single, simple entity when in fact the real estate market is itself composed of many complex sub markets. This would include Jamaica homes for rent as well. This would be known as a parent category.Real estate is a commodity just as wheat, gold and sugar. By combining the other factors of production with land we can produce wheat, gold and sugar or buildings.Major sub markets of Jamaica Real Estate
Most authorities agree that the five major submarkets of Jamaican real estate are:
1. Residential homes for rent in Jamaica;
2. Commercial;
3. Industrial;
4. Agricultural;
5. Governmental and special – purpose propertiesEach of these five categories is further divided into minor submarkets. For example, “residential” as a major submarket can itself be divided into minor submarkets as follows:
1. Urban;
2. Suburban; and
3. RuralEach of the minor submarkets can be divided further into single-family and multifamily, which could then each be classified as owner-occupied and rental. The point is what appears to be one big, but simple real estate market is in reality, a complex structure of many individual submarkets, each of which contributes to the overall market.The characteristics of the real estate market
If the real estate market were allowed to operate without any interference or restraint whatsoever, each person could use his or her property in any way that would produce the greatest return. This could result in one person’s use of Jamaican property causing a loss in value to another person’s property. Obviously, we cannot permit land to be used for whatever purpose the owner thinks best for his or her private gain.For example, if you lived in a very fashionable up-market residential subdivision and your neighbor bought two undeveloped lots adjoining your property for use as a pig farm or for a paper mill with its offensive odors, the social costs to you and the rest of the subdivision would far outweigh the private gain to your neighbor. Therefore, the real estate market cannot be permitted to operate free of all controls and restraints.Listed below are five primary characteristics affecting ownership and sale that set real estate apart from other markets.
1. The market is local in nature; the product is immoveable.
2. It is slow to respond to change in supply and demand.
3. There is relative permanence of improvements; land is durable and fixed in location.
4. The market is not organized and is without central control; there is no standard product and no central information.
5. Governmental controls influence the market through zoning, building codes, taxes, etcLocal in Nature – The market for real estate is uncommonly local in nature compared with other markets. The reason, of course, is that land and the improvements thereon are immoveable. For example, we cannot transport sugar cane lands from Westmoreland to Kingston. If we were in the market for tomatoes we could haul our produce to the place where demand might be greatest. However, despite the demand for housing in Area A, we cannot produce an apartment complex or single-family subdivisions on land located in Area B and take it to where there is greater demand.Slow Response – The property market is unusually slow to respond to changes in supply and demand. Very often the number of houses (supply) in an area begins to fall behind the demand, however, since the design, land acquisition, site preparation and construction phases of real estate are so time consuming by the time demand responds the market becomes flooded. The equilibrium between supply and demand is thus destroyed because the supply of the town houses exceeds the demand at the time.Permanence of improvements – The characteristic referred to as permanence of improvements is also closely related to the above characteristics. The typical bungalow-housing unit has a long economic life compared to other commodities. Once we have built a block of offices we are stuck with it when perhaps we could have invested our time and money in a hotel. Therefore, the permanence of the improvements created eliminates many alternatives available to markets.Decentralized nature – Another characteristic of the real estate market is the lack of a single, central exchange for dealing with the real estate island wide. If one wishes to buy 100 shares in General Motors, California, the product will be the same as General Motors, Florida. However, if one wishes to buy 100 hectares of beachfront property in Westmoreland, Jamaica the product will be different in many respects from beachfront property in Portland. This focuses the attention on the two main reasons why there is not a central exchange for real estate.First, the product cannot be standardized. No two tracts of land are the same. Even two lots side by side on a street have different geographical locations on this earth. This concept is referred to as heterogeneity or non-homogeneity.Second, no central data bank or information source tells about all real property in Jamaica. Also, one needs to be careful when using information about properties in one area to assess properties in another. If one wants to know about real property in any location, it is best to go to that particular place and seek local information.Governmental Controls – The fifth and last of the primary characteristics of the real estate market, governmental controls, plays an inordinately important role when compared to other markets. Most people are familiar with direct controls such as zoning and building codes which govern construction and use of property.Governments also exercise indirect controls, such as the monetary policies of Central Government. For example, if Government reduces the overall money supply to slow the inflation rate, higher rates for mortgage bans turn, drives many potential buyers out of the real estate market in Jamaica. This does impact heavily on the drafting of a rent agreement in Jamaica.