Mexican home in Lake Chapala, Ajijic Mexico
We started to see a bit of a slow down here in Ajijic and Chapala in the last quarter of 2007. Things had been, like most North American markets, booming right along. When the sub-prime mortgage fiasco took effect in the U.S. obviously it slowed things down for the Americans coming to Chapala and Ajijic. They couldn’t sell their house in the U.S. and therefore couldn’t purchase here since most properties in Chapala and Ajijic sell for cash. The Canadians however still kept the market perking along with their stronger dollar. Since we didn’t have the huge slow down many of the U.S. markets did, the opportunity to “bottom feed” didn’t really exist (with a couple of exceptions).
The U.S. is currently trying to decide if they should bite the bullet and bail out the financial institutions that were negligent and greedy. No comment required here and it isn’t my place to editorialize. Weather they do or weather they don’t it looks like there will be a large adjustment to real estate prices around the world. That would include The Lake Chapala area even though it is more heavenly than worldly ( I know, that’s lame ).
The negative influences are obvious. The economy in the U.S. and Canada are going to restrict retirement incomes because so many people have the majority of their capital tied up in their house and if that depreciates it makes retirement that much tougher. Sales will slow down here. No question. If sellers here don’t adjust their thinking to a more realistic level they will be left behind and we will go back to the days of having some houses sit on the market for years rather than months. Many retirees will be forced to “downsize” here if their income is strictly based on stock market investments.
There is an upside to this market. 1. The “Boomer Generation” is still going to have huge numbers of people coming to retirement age in the next several years. They are going to go somewhere and if their budget is limited it could make this area even more appealing because of the tax situation and the less expensive lifestyle one can enjoy here. We don’t have to access a large portion of that market to drive this market. 2. The Lake has never been higher. This was a huge issue for many people in years past. While the lake is still polluted it has reached levels that most people thought impossible. Thank Goodness. 3. With limited budgets for the retirement community, having two homes may not be feasible. This makes our year round climate even more appealing. The “snowbird” lifestyle of going to the beach might well be replaced with a permanent address right here in Chapala or Ajijic.
I don’t have a crystal ball. I don’t know what the future holds. I do know the market here has seen tough times before. Anyone who was here after 911 remembers well the “slow times”. I have countless clients who have said to me recently “Man, I wish I had bought something back then”. The same will be true of this upcoming market. The Lake Chapala area will rebound quicker than most markets but there will be opportunities in the next little while. That might seem like shameless optimism but it is my honest opinion. Here’s the shamelss part. If you are going to take advantage of this market you’ll need a good realtor. One who knows the market and has seem this situation before. In case you missed it, that would be us at Collins Real Estate. Even in this market 2008 will be one of my best years ever and people are turning to agents with experience (even thought their neighbor / agent is a nice guy and wonderful dancer, clients want someone who’s been here before and has a beter sense of the realities of this market). Give us a call or e-mail us to discuss this and other issues further.