Sales Softness Continues

Real estate sales continue to trend down, and the end does not appear in site. Recently released sales figures show that market volume declined by about 10 % in 2007 over 2006, and the trend accelerated in the 4th quarter with an almost 15% decline. The number of listings on the MLS rose by 10%, the first statistically significant rise in Puerto Vallarta MLS listings since they have been kept.

The north shore of Bandaras Bay, in the state of Nayarit, has been renamed Riveria Nayarit. The re-naming was done by the Mexican government's crown corporation for tourism called Fonatur. Fonatur is co-ordinating development in the area. Riveria Nayarit is adding new product to the Puerto Vallarta market far faster than it can be absorbed.

There are now 7,000 recreational & investment properties available in the Puerto Vallarta market, up from 5,500 last year. The inventory represents about 4 years supply of sales. Another 14,000 properties are planned in the next 7 years.

2007 also saw a decline in Puerto Vallarta real estate prices, although that decline shows considerable variation from location to location. The best locations in such areas as Zona Romantica or the Hotel Zone are showing 5% price declines for new product, and steeper declines of up to 10% for re-sale. Amapas which is considered a prime location is now showing declines in price, especially for re-sales, if a sale is even possible due to the infrastructure problems in the area. These declines are even occuring at signature projects such as Horizon. Nuevo Vallarta prices are down 15-20%, mostly as a result of discounts from list prices being offered at new developments. For example Grupo Real del Mar is offering discounts of up to 25% for its projects in Nuevo Vallarta.

We have studied many specific boom-and-bust markets and they all have different profiles. But there some things we have learned. When sales volumes and prices both fall, over a period in excess of one year, in an environment where credit becomes tight, it takes at least an additional 2-4 years before volumes increase and price appreciation occurs.

The Puerto Vallarta real estate decline would actually have been much sharper than experienced except for the Canadians that have entered the market since the Canadian dollar has risen to parity with the US dollar. The problem is that the influence of the Canadians is likely to be short lived. There are simply not enough of them. The state of California has more people than all of Canada.