Puerto Peñasco Post

Interesting reads...

A few articles related to Puerto Peñasco (Rocky Point) that I read this past week...

Arizona Republic article about the continuing widening of Route 85 between Phoenix and Puerto Peñasco.

Reuter's article about the strength of the Mexican mortgage market.

Mexico Premier blog post about the different regions of Mexico.

The Arizona Republic reprints the LA Times travel article from February, instead of taking the time to send someone from their travel page to visit and write up Arizona's most popular seaside vacation destination.

Arizona Republic article about Mexican dentists (that mentions Puerto Peñasco).

Arizona Republic article giving "Tips for Rocky Point first-time renters."

ALSO:  Party pictures from Club Elixir (tip to Myaann)

Cross-Border Mortgage Services Gaining Popularity for Mexican Immigrants Living in the U.S.

Leaving aside political discussions about emigration from Mexico to the U.S., the San Francisco Chronicle has an interesting story today about the rise of a relatively new phenomenon...Mexican-Americans and more recent Mexican immigrants living in the U.S. who are purchasing homes back in Mexico, planning for an eventual return to their native country or purchasing a home for relatives living in Mexico.

Su Casita (a mortgage company familiar to many in the real estate business in Puerto Peñasco) has been opening U.S. branches of their Mexico-based mortgage company catering to this group over the last several years.  They are offering fixed-rate Mexican mortgages for purchase of homes in Mexico.  Conficasa is also mentioned in the article as providing these cross-border mortgage services.

Obviously, higher wages in the U.S. relative to Mexico allow Mexican immigrants the ability to more quickly amass equity in their new Mexican home.  With prices of the new "tract homes" in Mexico starting as low as $25,000 USD, these loans can be paid off relatively quickly.

BBVA has also moved over the last several years to purchase several banks operating in the southwest U.S. - like Laredo National Bank and Compass Bank - in acquisitions meant to complement their Bancomer operations in Mexico by providing cross-border financial services catering both to the Mexican immigrant population living in the U.S. and presumably to the American vacation home buyer looking to purchase a residence in Mexico.

The full S.F. Chron article can be read here.

Mexico Mortgage Market News (Updated)

For those of you working in real estate in Mexico, I found a very interesting article the other day analyzing Bancomer's (BBVA) growing position in the Mexican mortgage market.  It discusses in detail various Mexican economic and financial indicators and their relation to the continuing expansion of the Mexican credit markets over the last several years.  The full article can be read here.

As I have written about several times before, the Mexican credit markets are booming and are contributing to an expanding middle class in Mexico who are taking advantage of credit cards, car loans and mortgages.  In Puerto Peñasco (Rocky Point), the issue is increasingly becoming not whether mortgages are available for Mexican citizens, but whether there is enough housing supply on the market aimed at the emerging Mexican middle class.

Update:  BBVA also announced that it successfully completed its second offering of mortgages into the secondary market in Mexico, selling $100 million (USD) worth of home loans to investors today.  Article can be read here.

Article on Mexican Housing & Mortgage Markets

This has been posted several different places already but I wanted to share this AP article with readers of my blog.  It does a pretty good job highlighting the current state of the Mexican housing and mortgage markets (i.e., excellent and growing) despite what is going on in the U.S. with real estate. As I have indicated before, the Mexican housing market is a little more complicated in Puerto Peñasco (Rocky Point) because of the high land prices.  But there are certainly real estate opportunities beyond the standard beachfront condominiums, particularly with the increased availability of mortgages for Mexicans.

Click below to read the article in its entirety...

Mexican Secondary Mortgage Market Update

BBVA Mexico announced this week that it is placing $250 million USD in mortgage-backed debt into the secondary market - its first offering of Mexican mortgage-backed debt. 

While this amount may not seem significant to those who follow the mortgage markets in the U.S., this news is significant to the expanding Mexican home loan market.  BBVA Mexico (operating under the Bancomer name in Mexico and using the name Hipotecaria Nacional for its Mexican mortgage lending division) has been offering mortgages to Mexicans only for the last two or three years and has been working on putting together a portfolio of mortgages attractive enough to offer into the secondary market.   They have been able to accumulate enough good mortgages to attract a AAA rating for this $250 million USD mortgage-backed debt offering. 

This debt placement comes at a time when the U.S. secondary mortgage market is struggling under the weigh of so many failing subprime loans.   One of the key differences in Mexico is that lending standards are much tighter so subprime loans do not exist in Mexico.  Because a consumer credit ratings system for Mexicans is still in its infancy, Mexican banks are forced to do additional due diligence to check on the creditworthiness of borrowers.  This process harkens back to the day of the community banker in small U.S. towns who would call employers, neighbors and other references to assess the creditworthiness of a potential borrower.  This hands-on approach allows Mexican banks to keep their default rates very low and earn good ratings when offering these mortgages into the secondary market.

For the mortgage novice (including myself), an offering into the secondary market of mortgage-backed debt allows the issuer (in this case BBVA) to free up cash to issue additional mortgages to consumers.  As BBVA is able to issue more mortgage-backed debt into the secondary market, they are able to issue more and more loans to Mexican citizens with better rates and terms.

This news is significant to Puerto Peñasco (Rocky Point) because a strengthening secondary mortgage market will further allow the growing Mexican middle class to be able to obtain mortgages on favorable terms and to purchase better homes - increasing their standards of living.  More of the housing being built in Puerto Peñasco will therefore be in a range that is affordable to these families.

Articles on Buying Property in Mexico

The San Francisco Chronicle published the second of a two-part series this past weekend written by Kathleen Pender about foreign property ownership.  This part focuses on owning property in Latin America and gives some good tips for owning property in Mexico.  You can read the article here and I am also posting it after the jump to preserve it in my blog archive.  She also includes an abbreviated article on avoiding pitfalls of Mexican property ownership that can be read here.  I am also posting it after the jump.

Click below to read both articles...

Fitch Ratings Bullish on Mexican Real Estate Market

Fitch Ratings today released its assessment of the Mexican real estate and mortgage market in a report entitled 'Credit Availability Underpins Homebuilder Growth - Challenges and Risks Remain'.  According to this article in Investors Business Daily, Fitch believes the Mexican real estate market, while experiencing some growing pains, has strong fundamentals, not enough homes to satisfy demand and is seeing increasing availability of mortgages due to competition among institutional mortgage lenders - all pointing to continued strong growth in Mexican real estate.  Governmental stability has also played a factor in allowing the Mexican mortgage market to expand.

Fitch Ratings is one of the three major credit rating agencies (S&P and Moody's are the two others) and is an important voice in determining how quickly the Mexican mortgage markets grow.  Ratings agencies are called upon to rate commercial and residential mortgage backed securities issuances into the secondary market and therefore play a critical role in determining whether Mexico's secondary mortgage market continues to grow and mature - thus providing better access to mortgages for Mexicans.  So it is good news that Fitch is bullish on Mexican real estate.

Increasing access to mortgages and credit is important to Mexico because credit allows the large numbers of Mexicans living in poverty a way to improve their lives, start businesses and to move up into an emerging Mexican middle class.  As credit is extended to more and more people, Mexico's economy should continue to grow, a good thing for Puerto Peñasco and Mexico in general.  As mortgages become more readily available to lower income Mexicans living in Puerto Peñasco, we should expect to see more offerings of new low-priced housing for locals and improvements in the living conditions for locals in town.

Good News for Mexican Secondary Mortgage Market

HSBC Mexico announced yesterday that it sold $321 million of Mexican mortgage backed bonds, the first non-governmental sale of Mexican mortgage backed securities since the subprime meltdown a couple of months ago in the U.S. The Bloomberg article I am posting below points out something that distinguishes Mexican mortgages from U.S. subprime mortgages - they are much less risky due to the tight controls banks place on issuing credit in Mexico and, for Infonavit loans, the required direct employer contributions. See my post on the Mexican mortgage market and the follow-up discussion and clarifications on the market from several industry leading mortgage brokers in Mexico.

The continued growth of the Mexican secondary market for mortgages is an integral piece of Puerto Peñasco (Rocky Point) development. As the secondary market continues to mature, mortgages for vacation home and condo buyers will become more and more attractive, helping Puerto Peñasco to continue its sustained growth.

The full article is posted after the jump.

Mortgage Market Clarifications

I was getting ready to sit down with Ron Ridgway from Playa Capital & Mortgage next week in Puerto Peñasco to get some additional clarification and comments on my post on the current mortgage market and more detail on the effects of the current U.S. mortgage markets.  However, Eric Levitt from their office beat us to it and was kind enough to send in some corrections and clarifications today.  They are important points, so I wanted to dedicate a separate post to it.  The most interesting point to me that Eric makes is that the U.S. "credit crunch" has in fact not slowed down their business.  I had heard otherwise from some of my other mortgage friends.  As a developer, this is good to hear.

Please read in conjunction with my previous post on the topic.  Thanks for the feedback Eric and for creating some dialogue on the subject.  I think it is one topic that there is a lot of confusion over among consumers (apparently aided by people like me making some of the generalizations I did) so the more specific feedback we can get on here from people who are in the trenches working in the emerging Mexican mortgage market the better.  It would be great if some of you other Mexican mortgage gurus out there weigh in on the conversation and give your take on the topic.  If you have different (or similar) experiences from Eric in your mortgage business or just have a note to add, please comment to this post or shoot me a separate email and I will post.  Note that I review comments before they post.

Eric's comments are after the jump...

Interview with CEO of Finance North America

Came across this interview with Russ Schreier, the founder and CEO of Finance North America talking about the Mexican mortgage market for U.S. borrowers.  It is a pretty comprehensive interview that includes some sample mortgage terms and thoughts on the direction of the market.

Puerto Penasco Mortgage Markets

[Editor's Note:  Please read this post in conjunction with the follow-up discussion located here.]

Historical Perspective - As a real estate developer in Puerto Penasco, one thing I try to keep up on is the Mexican financial markets, particularly credit markets.  The Mexican mortgage market is in its infancy due to financial and political instability throughout the country's history.  The most recent financial crisis occurred in 1994, brought about by a severe devaluation of the Mexican peso at a time when credit was readily available and borrower screening was lax.  During the crisis, default rates on consumer credit products - notably mortgages - soared.  The crisis was short-lived and the Mexican economy rebounded by 1996, but the damage had been done to the credit markets.  Access to credit that Americans take for granted, like credit cards, car loans and mortgages, was non-existent until the after the turn of the century in Mexico.