Buyers Market in the US Bodes Well For Second Home Purchasers

During the run up of real estate prices in the U.S. and Canada between 1996 and 2006, HSC Financial became bullish on making second home and other real estate investments along the west coast of Mexico. American and Canadian investors could access equity in their first homes or use available cash to make solid, good value investments in Mexico. Mexican prices did not escalate rapidly until the period 2004.

In the past 15 months there have been significant changes in the structure for real estate investments across Canada, the US and Mexico.

The most significant change is the decline in property prices in all traditional retirement and investment home markets in the US. since early 2007. Miami and Las Vegas, which experienced a burst of speculative building during the housing boom, led the way with annual declines of 22.8 and 21.7 per cent, respectively. Prices are also down sharply in California – Los Angeles (off 19.4 per cent), San Diego (19.2 per cent) and San Francisco (17.2 per cent). The result is that there are now some excellent investment opportunities available to American stateside. Those with access to money do not need to invest in Mexico to get good investment value.

The second change is the drop in all housing prices across the United States and the leveling off of housing prices in Canada. U.S prices are down nearly 15 per cent from their July, 2006, peak. Home equity loans have declined. Investors must now rely more on their own capital.

The third change is the strengthening of the Canadian dollar from 64 cents U.S. just a few years back to parity. There are few good real estate investment values available to Americans in Canada, compared to years past.

As a result of these changes, HSC Financial expects to make more recommendations for Americans (and Canadians) to make real estate purchasers in their domestic markets rather than in Mexico. We are of the opinion that Mexican investment real estate will have to drop by at least 25% in price to justify new investment. We also expect that Americans, who are heavily invested in Mexico, to re-balance their portfolios by taking advantage of lower cost investment properties in the United States. We are of the opinion that, over the longer term, U.S. real estate investments will outperform Mexican investments on a risk adjusted basis.