There are no doubt a few more gringos giving the idea of relocation to Mexico serious thought as the wildly unpredictable U.S. Presidential race gets into full swing.
Since every new arrival needs a place to live, one topic I’ve been studying recently is “Mexpat” real estate markets, i.e. Mexican towns that draw a disproportionate number of American (and Canadian) immigrants.
And while there’s nothing wrong with renting (it’s your best move if new to expat living) plenty of foreigners prefer to sidestep unpredictable landlords and escalating rents by purchasing their own place.
So let’s take a closer look at the current real estate landscape.
What’s happening in Some of Mexico’s Top Expat Markets?
Before we dive in, you should be aware that market data for Mexican real estate is generally limited and spotty. Figuring out how many properties are for sale, what things should cost, and how much discounting is going on is really difficult, because there is no obligation to disclose sales data, and there’s no nationwide MLS that consolidates listings.
The one exception to this rule is certain expat markets. Because foreign brokers play an outsized role in these areas, in my experience, they’re far more likely to share data than Mexican brokers in more traditional markets.
This is likely because foreign brokers (mostly American) are more accustomed to having public data in their native countries, and it’s what foreign shoppers seek to feel confident in the buying process.
For an in-depth look at buying Mexican real estate as a foreigner, check out my three-part real estate series from 2023.
Because of this openness, evaluating the health of popular expat markets is much easier than in places like Guadalajara or Oaxaca, where local brokers dominate the scene.
My personal experience living in Mexico stretches back only a few years. But even in this short time, things have noticeably changed in the real estate markets.
Back in 2022 when we first arrived, demand for housing was surging in places like Ajijic (an expat mecca along the shores of Lake Chapala) and perennial “world’s best small city” San Miguel de Allende.
Because we hadn’t yet settled on a place to live, we were moving around and casually shopping in multiple areas. What I remember most from that period was the fierce competition between expats in these destinations because inventory was tight. Nice properties got snapped up quickly.
Fast forward to 2024.
As you can see from the table below, home inventories are piling up in San Miguel de Allende, Ajijic — and Puerto Vallarta. Relative to the pace of sales (as reported by the leading agencies in each market), home inventory now vastly exceeds buyer demand, resulting in 4-5 years (!) of supply, depending on the location.
Current Trends in Top “Mexpat” Housing Markets
In addition to surging inventories, asking prices on listed properties are exceptionally high. The average 3-bedroom, 2-bath home price in Ajijic and Vallarta now exceeds the median U.S. single-family home price of $420,800. And Vallarta (which is mostly condos) is nearly double the U.S. median price.
The current situation begs a few questions. Will a new wave of deep-pocketed immigrants (or locals) emerge to absorb all this real estate? Or will this mountain of inventory only get worked off after a sizable price correction?
Time will tell.
Maybe the U.S. will export more citizens to Mexico post-election, and maybe it won’t. Income requirements for residency have increased sharply in Mexico during the past two years, and the truth is that some aspiring expats don’t qualify anymore.
A Spillover Effect from the U.S. Market?
For the past few years, mainstream media in the U.S. has relentlessly hyped the escalation of U.S. home prices. And because many are still doing it, it’s easy to miss how badly the market up there is struggling right now.
New home listings have also begun to surge in recent months, while price cuts on existing listings are becoming far more common.
The reality is that many buyers have gone on strike because prices are too damn high. Combined with 7% mortgages, purchases have become untenable for many households, particularly first-time buyers.
In addition, those who already own homes with a mortgage below 4% are unwilling to give them up if it means taking a new loan at 7%+. The result has been marketplace paralysis.
At the same time, pending home sales have cratered, with sales activity at the lowest level in 30 years — even below the depths of the financial crisis of 2008.
More recently, data from realtor.com showed new listings in June increased 93% year over year in once-hot Tampa, and were up roughly 80% in Orlando, Denver, and Phoenix.
This trend is likely to continue as sellers (many of whom were waiting on the sidelines for interest rate cuts that haven’t come) now race for the exits.
And wouldn’t you know, little by little media coverage is starting to shift. More sober assessments of market health are starting to puncture the bubble.
A recent article in Fortune suggesting the U.S. housing market resembles a feudal society (where wealthy older generations own multiple properties and younger generations are resigned to life-long renting) struck a chord.
What Does All This Have to do with Mexico?
Since most real estate in Mexico is paid for 100% in cash, i.e. without mortgages, housing market paralysis up north is likely to keep a lid on demand for homes in these popular Mexpat destinations. After all, fewer home sales in the U.S. means less cash available for expat purchases here in Mexico.
And while this phenomenon won’t have much impact on the markets in huge Mexican cities (where expats play a small role) it could trigger an earthquake in smaller towns where expats are a significant share of home buyers.
The only caveat would be the luxury homes niche, as the wealthy are doing as well as ever, and don’t generally need to sell housing in one market to buy in another. But that phenomenon isn’t likely to dent all the “middle-market” inventory that’s piled up.
Some would say this is a good thing. Prices have risen so much in the past 5-10 years that it’s time for a reset.
So What’s a Prospective Buyer to Do?
If you had your heart set on buying property in a popular “Mexpat” destination Mexico in the next 12 months… my advice is to sit tight. There is no harm in renting and watching how this trend evolves.
With all the inventory piling up, buyers are about to get a lot more leverage to negotiate and transact at better prices, whether you’re a foreigner or a Mexican native.
Sources: Realtor.com, Fortune, Wolf Street, NAR, Census Bureau, MLS, MLS Vallarta, MLS San Miguel, San Miguel Realty, Chapala MLS, Chapala Realtors, Choose Chapala