Mexican Housing Prices

Everybody said there were no Mexican housing price indices, but Fulano found one. The Sociedad Hipotecaria Federal (SHF) [Federal Mortgage Society in English]) produces an index of Mexican housing prices by states and even certain cities. Their index uses January 2008 as the base of 100. Unlike the housing indices published on US home prices, the Mexican prices are not adjusted for inflation. The index only goes back to 2005.

Click on chart to enlarge

Since this chart is not inflation-adjusted, it is helpful to know what the Mexican inflation rate has been over the same period:

Click on chart to enlarge

The SHF is a federal agency that acts much like FannieMae and FreddieMac does in the US. It is not a direct lender to home buyers, but creates a secondary market for mortgage originators to sell their loans and provide liquidity in the Mexican home mortgage market. The home values they are picking up does not include the Gringo resort properties, as they are not a lender on these. If you want to understand what the average Mexican home is valued at, here is a chart that Fulano extracted from the SHF brochure:

The average home price in Baja California Sur is 430,468 pesos, or about $35,000, and that includes the land. That means all those high-priced Gringo-owned properties in Baja can only be sold to another Gringo. The Mexicans would not pay anywhere near those prices. It is known as the “greater fool” theory of home ownership.

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What Is Oscar Smoking?

The Minister of Tourism for Baja Calfiornia, Óscar Escobedo Carignan, never ceases to amaze Fulano.

Escobedo Carignan announced to the world that over the next four years he anticipates $4 billion of new investments in tourist projects in Baja Calfiornia. He predicted that 65 new condominium and housing projects will be developed for Americans retiring in Mexico, along with two new meeting and convention centers.

Link to article in Spanish.

Óscar Escobedo Carignan
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What Is Oscar Smoking?

The Minister of Tourism for Baja Calfiornia, Óscar Escobedo Carignan, never ceases to amaze Fulano.

Escobedo Carignan announced to the world that over the next four years he anticipates $4 billion of new investments in tourist projects in Baja Calfiornia. He predicted that 65 new condominium and housing projects will be developed for Americans retiring in Mexico, along with two new meeting and convention centers.

Link to article in Spanish.

Óscar Escobedo Carignan
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How To Make a Small Fortune in Mexican Real Estate – Update

On August 9, 2010, Fulano posted a blog about losing money by investing in Mexican real estate. Here is a snippet from that blog:

Here are some examples of Americans who managed to make a small fortune out of a large one in Mexican real estate:

2 Bedroom, 2 Bath furnished Riverfront home on the Mulege River for sale on leased land with 4-years left on the lease.
Asking price in August, 2009 was $175,000.
Asking price in August, 2010 is $49,950.

Nels and Amy Dawson’s home in Mulege

The latest word is that the Dawson’s have just walked away from the property…a total loss.
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How To Make a Small Fortune in Mexican Real Estate – Update

On August 9, 2010, Fulano posted a blog about losing money by investing in Mexican real estate. Here is a snippet from that blog:

Here are some examples of Americans who managed to make a small fortune out of a large one in Mexican real estate:

2 Bedroom, 2 Bath furnished Riverfront home on the Mulege River for sale on leased land with 4-years left on the lease.
Asking price in August, 2009 was $175,000.
Asking price in August, 2010 is $49,950.

Nels and Amy Dawson’s home in Mulege

The latest word is that the Dawson’s have just walked away from the property…a total loss.
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Do You Want to Buy An Island In the Sea of Cortez?

Rosa María Unzón Geraldo

This comes from Colectivo Pericú. Rosa María Unzón Geraldo, also known as Rosa Unzón Steere these days, had a 3-hectare piece of Isla Espíritu Santo with 103 meters of beachfront for sale for only $2,250,000. The really weird thing is that the entire island is owned by the Mexican government and is in a protected biosphere. The island was purchased from the local ejido Alfredo V. Bonfil and then turned over to the Mexican government. The area is protected under UNESCO as a biosphere.

Rosa María Unzón has an interesting background. She runs a real estate company in Los Barriles, Bahía Real Estate.  She was arrested last March of this year and accused of “plunder.” It seems she moved her family into sombody else’s home in Las Barriles and then refused to leave.

Link to article on arrest of Rosa María Unzón in Spanish.

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Baja Real Estate Complaints

There are websites on the Internet where people can post their complaints. Complaints about anything. If one looks, complaints about real estate in Baja can be found. Here are a few from Complaints Board.

2007-08-11 by Janis Smothers:
I saw the CBS story and because it was on the news I thought it would be accurate. Now I have a major financial problem because I bought a house in San Antonio Del Mar. By the time I sell, if I can, I will have lost thousands. Right now I am losing money every month on the interest and finance charges. What happened to responsible reporting? If something sounds too good to be true it certainly is. The people who make money on these things are the ones who get in early and out fast. It is like a pyramid scheme.

2007-08-28 by Justin Brooks:
Know first hand what a problem buying in a place like that is. I bought a place in Real Del Mar in 2004 for $170,000.00. It cost $12,000.00 in closing costs, and another $2,000.00 in other fees to establish the trust. I am now trying to sell the place, and have only been offered $220,000.00. I have been to told it is worth $260,000.00 by people in the development and realtors, but I have only had one offer is eight months. I have been paying almost $1,200. a month for three years. That is over $40,000. in interest. When I sell I have to pay 35% capital gains on what the Mexicans consider capital gains, the difference between the $220,000. and $170,000. It is easy to see with the money I also put into furnishing it, this has been a very expensive and not profitable experience. If I had put that money in the same mutual fund I have my 401 K in I would have received dividends, capital gains distributions, and growth on the price of the shares. I thought I was investing, but instead I was getting an education, and I learned a lot from this mistake. I paid a lot for this education.

2007-07-18 by Mario West:
Moving to Baja is like moving to a Ghetto. You are surrounded by deplorable poverty, exploitation, and crime. The police pull over tourists and foreign residents expecting bribes. The drug cartel is out of control. Some developers are also politicians and are the ones running the show. You will definitely get what you pay for if you buy Baja real estate. No services, the sewage is regularly dumped in the ocean or surrounding areas from the trucks that pump the septic tanks. You need to read back issues of the Gringo Gazette. It is true, the residents of beach communities get no help from the city with these types of problems. When they complain, the city retaliates against those who complain. Stay away from Baja real estate.

2007-08-07 by Mathew Warner:
This really makes me sick. I researched about buying a home in Mexico, and there were all kinds of sites put up by sales groups, like Baja Relocation that make it sound like heaven across the border. Now I see what I should have known. I should have looked for complaints about Mexico, Baja, etc. to get to see what problems others have already had. I have a property that has all kinds of issues and I can’t sell it. The real estate agent says there is nothing I can do about the seller not telling about the structural problems. And I smell raw sewage that is dumped in the ocean regularly. The agents should be left to rot in Mexican jails.

2007-08-28 by Nestor Torres:
When a true Mexican leader, like [Hugo] Chavez, is finally elected, we will take back all the land the foreigners have taken, and give it to our people. It is our Mexico, and those who violate our land shall lose!!

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Yet Another Conversation On a Mexico Message Board

This is an actual exchange on another Mexico message board:

Diamante Residencial has reduced their price on two beachfronts over 50%. They are willing to sell these at $150,000 each. These are the original sale prices from 2005 and they are reduced hoping to stimulate the market again.   …DonJulio on 5-31-2009

Down to $120,000.   …DonJulio on 10-16-2009 

Somebody needs to come make an offer on this beachfront. I only say that so I can bump it up so perhaps any new folks that have joined us can see it. All you old timers forgive me. Mans gotta eat.  …DonJulio on 2-1-2010

Obviously the market has been down everywhere. In the last 4 months in San Felipe there has been more sales than the entire previous 22 months. We are seeing more purchases but on the lower end. I had more traffic and inquiries since Christmas than I had in all of 2008 and 2009 so it is picking up  ….DonJulio on 2-2-2010

Sadly after 10 years of being involved in real estate in Mexico, I would not only never sell property here again, but I would never buy it either. Renting is the only way to go, and much, much cheaper now with the economic crisis. …DonJulio on 8-31-2010

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Conversation on Another Mexico Message Board

This is an actual exchange on another Mexico message board:

loscabosgirl: hello there I am having a lot of trouble concerning my land bought in 1989, from a neighbor who is trying to squat on it. I’m just outside of cabos, anyone here who can give me some advice? I’m a single woman who had hoped to have a retirement place to go to and I really need advice. thxs.

Fulano: Do you have a fideicomiso on your land?

loscabosgirl: Hello, yes I do, done in 1998. Held in trust in the bank.

loscabosgirl: Hi FURLANO, THANKS FOR REPLYING, i HAVE SO MUCH MORE INFO, LOOKS LIKE THEY ARE TRYING TO SELL MY LAND i REALLY NEED SOME ADVICE, THE LAWYERS SAID i HAVE TO GO DOWN THERE AND LIVE ON MY PROPERTY FOR 6 MTHS BEFORE i CAN CLAIM IT AND SELL IT TO PAY MY TAXES. PLEASE HELP ME

Fulano: You are not giving us all the information. Why would you have to sell it to pay the taxes? If you have not paid your predial (property taxes) there are laws in Mexico that allow anybody else to pay them and take title to your property. You need to tell me the WHOLE story. If you have not paid your taxes, have you paid your annual fideicomiso fees? Those fees should be much higher than property taxes on vacant land. Probably about $500 per year.

loscabosgirl: Hello Furlano, it seems I have been a “mark”, and yes it is a story, and I have spent thousands, and was never informed about fideicomiso fees. When I asked the company whom where taking care of my property taxes to give me the telephone number of the bank and my fideicomiso #, they asked..”why”? Every time I went to pay my taxes they said that someone else had already paid and would give no further information. This company is still holding onto a lot of my personal papers and are denying knowledge.Is there any way we could speak privately,…I don’t even know if you could be someone I should not be speaking to,…please take no offense,..it is just that I have lost so much.

Fulano: With what little you’ve said already, I think you have a total loss. You can spend money on a Mexican lawyer, and they will be happy to take your money, but the odds are about 100:1 against you. You will only lose more. You should tell everybody the name of the company so others can avoid your fate. In Mexico, they would just say you are jodido. Sorry, I cannot be of any help.

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The Ugly Gabacho – #2

This is another example of the ugly Gabacho in Mexico. Las Gaviotas is a mostly-American beachfront home development south of Rosarito. Several of the homeowners got into a fight about the management of the homeowners association. Names were called, egos were bruised, and lastly, lawsuits for defamation were filed. The whole story is explained in the court decision linked below, so enjoy the cat fight.

Link to the court decision.

The real story of Las Gaviotas is another Mexican nightmare. Every federal, state and local government ministry routinely marches through the project looking for any excuse to find something wrong, which of course means penalties. They then hold the gabachos up by their ankles and shake all the loose change out of their pockets. It would take five pages to explain in detail the crap the homeowners have to put up with. Some of it is their own fault because they cannot get along, but most of it is because they are soft targets.

Las Gaviotas has some pending litigation with CONAGUA because they did not report their well meter readings from 2003 to 2007. CONAGUA is looking to fine Las Gaviotas a whole tonelada of dinero for this infraction. As you know, Mexico is broke and they are looking at them rich gringos as a source of cash.

Then there was a Chinese fire drill over their federal zone concession. It seems when the property was first developed back in the 1970’s, the developer applied for the federal concession on the beach in front of them. They paid an annual concession fee for decades, but never actually got the concession. Then they stopped paying the concession fees for a number of years. One day they woke up and learned that their neighbors could apply for the federal concession for their beach. So, they spent the next 8-10 years trying to get it back. During the entire process, they paid the concession fees again to protect their interests, even though they did not actually have that concession. They finally got the federal concession back, after much expense and numerous trips to Mexico City. So then, after they got it back, they inexplicably stopped paying on the federal concession AGAIN, and lost it.

After not paying and losing it, they went back and started the process all over again to get back their federal concession, for the third time. Then when they got it back for the third time, cash strapped Rosarito, which gets the federal concession fees, assessed them some unGodly amount, like over $100,000 per year for the concession. So they went to battle with the City of Rosarito on the assessment.

I swear, that not a month passes that some government agency is in the door at Las Gaviotas looking for some kind of past fee for something. It is a relentless assault. They might as well just paint a bulls eye on their ass and say, “shoot me, please.”

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