Real Estate Foreclosures in Puerto Vallarta, Mexico

Foreclosure, by definition, is the legal procedure for satisfying claims against a mortgagor in default who has not redeemed the mortgage; satisfaction may be obtained from the proceeds of a forced sale of the property.

There are many reasons why mortgagors may fall into default but historically it happens when the mortgagor loses his job, loses his health, or for some other reason is unable to make his mortgage payments in a timely manner.
Today, the majority of reasons for default are totally different. Many recent mortgagors were able to obtain loans with little or no credit history and little or nothing as a down payment. They received adjustable rate mortgages and if they were ever able to afford their monthly payments, they were no longer able as soon as the interest rate increased and consequently the mortgagee was forced to foreclose on the buyer. As the foreclosure rate in a given region started to increase, so did the availability of distressed property sales. Of course, an increased volume of distressed properties in the neighborhood resulted in a rapid depreciation of the neighboring properties. With the value of a given property well below its mortgage payoff balance, many mortgagors merely elect to abandon their property and walk away from their mortgage; thus the mortgagee is forced to foreclose on these borrowers as well.

This vicious circle of foreclosure events last occurred at an unprecedented rate in the US in 2008 after the stock market “crash”. Headlines such as “US Foreclosures Up 24 Percent in 1st Quarter “,” US Banks Step Up Home Foreclosures “,” Las Vegas Tops Foreclosure List”, “Sun Belt States Lead Q1 U.S. Mortgage Foreclosures” and “Foreclosures May Hit 1.5 Million in U.S. Housing Bust” were seen in the news on a daily basis.

Okay, know that we fully understand the cause for and frequency of the foreclosures in the US ten years ago, you might be considering shopping for a foreclosed property at a distressed sale price in a resort such as Puerto Vallarta, Mexico. If so, you might as well forget it; you’ll not see a foreclosure sign in Mexico! A thorough Google search will not locate a single foreclosed condo in Puerto Vallarta.

Well, that pretty well sums up your opportunity to “steal” a nice condo in PV! There are numerous reasons why foreclosures are essentially nonexistent in Vallarta however the primary reason is that up until just recently, all purchases were done strictly on a cash basis. Mortgages are now available in Mexico but only with a substantial down payment. With a solid credit history and income stream, one might be able to purchase a property in Mexico with only 20% down, however most of the mortgages are with down payments approaching 50%. As you can imagine, it takes an awfully good reason to walk away from a property when you have that kind of investment in it! Consequently, with 98% of the properties owned outright and the remaining 2% with well funded mortgages, there are virtually no foreclosures in Paradise!

Because there are no foreclosures, there has been only a minor depreciation of values in Puerto Vallarta. After the effects of the 2008 market “crash” in the US, the real estate values in Vallarta weakened accordingly. They remained weak until around 2014 when the demand started to return once again. Fortunately, during that real estate recession in Vallarta, the Canadian Loonie was very strong; at or above par with the US Dollar. The Canadians pretty much held the PV real estate market together from about 2010 until 2015. During the past seven years, the Loonie has lost 25% of its value, relative to the US Dollar, consequently the purchasing power of the Canadians, which had been as high as 30% of the foreign purchasers in PV, has fallen off to a trickle because real estate prices in PV are based on the US Dollar. In fact, during the past five years, the Loonie has weakened so much that the Canadians are basically on the sideline, just waiting for their opportunity to return.

The past five year building boom in Vallarta has been partly due to the reduction in prices of steel and other construction materials as well as the decrease in construction labor rates as the Peso has been devalued by 35% relative to the US Dollar during the past five years.

For the reasons above, you should never see your investment value plummet in Vallarta as it has in many desirable locations throughout the US. There are 1,000´s of new condos currently on the market in PV and with interest rates at an all time low, the time to buy will never be better. Where else can you live in a climate better than Hawaii, 2-4 hours from home, all the amenities of home, as many or more activities than at home, and at a fraction of the price? So, why wait; come on down and explore the possibilities; just don’t look for any foreclosure signs!