As the US economy, the Mexican economy, and indeed the world’s economy dips ever lower, then higher, then lower again, this is a barometer check on the Merida real estate market as it stands in late spring 2009.   We’re viewing the roller-coaster ride from afar, as well as up close and personal.

The last quarter of 2008 and the first quarter of 2009 were the slowest 6-month period we have experienced in this market place since 9/11/2001.  It was not as bad as it was after 9/11…  we have had a few deals nearly every one of these last six months.  After 9/11 the market died for a long, long time – about 6 months in fact.  But we survived.  Nonetheless, the last few months have been a real challenge.  The good news is that we are seeing an upturn in activity and more potential buyers are actually "buying."  Many people have come here to do their homework, working with us to lay the groundwork of searching areas, prices, and what they are looking for in a home, whether it is to move to permanently, for a vacation home, or simply as an investment.  Many of these potential buyers will be poised to pounce once the volatility of the market settles a bit; they’ll know exactly what they want.  Other buyers will come once things are better, and start at the beginning.   When I began in real estate here over 5 years ago, most of our business was in the winter tourist season… but that has changed as people plan in advance for their next winter season, by coming in the summer months to get everything underway and organized. In summation, we have been through tough markets before and we have emerged stronger, leaner, tougher and smarter.  We will emerge from this one as well.  Despite everything, this place has too much going for it to simply be forgotten.

As always, I am very interested in real estate values and activity in several parts of the US and Europe, including checking in regularly on the value of my former Manhattan condominium apartment.  Manhattan prices have dipped, but only slightly, being as it is a world capital made up of people from every country.  There are “bargains” to be had in Manhattan, but these bargains remind me of the Barney’s Sample Sale I used to attend… where such bargains as shoes formerly priced at $1,700.00  or dress shirts that were $3,000.00 were suddenly available for “only” half price. I also check prices in Grosse Pointe, Birmingham, and other Michigan locales, where the prices have basically followed the decline in the fortunes of the former “big three” to devastatingly low lows.  Huge, magnificent 1920s Tudor mansions fronting the lake or river can be had for under a million dollars now, and many stunning, architecturally significant homes throughout the metro area are back to their prices from 25-30 years ago.  The exodus from “rust belt” states out to “sun belt” states resulted in cities of the west growing exponentially in recent years, to such an extent that there is a movement to actually allow parts of the Midwest to become forest again, as they were before there WAS an auto industry.  Even so, when builders construct tens of thousands of homes, over and over, there was no choice but for it to slow sooner or later.  As a result, prices in the Phoenix and Las Vegas megalopolises are down similarly to the Midwest’s tumble. While here in Merida we have finally seen a small dip in the asking prices of homes for the first time in 6 years,  it is closer to the Manhattan dip than that of the beleaguered manufacturing capitals.

Because of the fact that mortgages basically still do not exist in our particular market, nearly 100% of homes are owned outright, thus we have no mortgage foreclosures… imagine that!  It is still, as it always has been, a market where “nobody NEEDS to sell, and nobody NEEDS to buy!”  This translates into homes remaining on the market much longer here than they would elsewhere.  No homeowners feel the need to give their properties away for a song.  Conversely, some of those who actually live in Mexico full time have had the advantage of being able to reduce the prices of their homes, either outright, or by accepting lower offers, since they actually make more money than they would have six months ago considering the exchange rate of US$ to MXP.

One new local happening we’ve seen is a small influx of people from Mexico City.  At the moment they are usually looking for properties in the north of Merida, where they can have a “new” home with land and easy parking, access to their children’s schools, shopping, etc… but there are a few who are choosing to buy in the Centro Histórico.  A huge percentage of Merida locals do not value the Centro Histórico AT ALL, and get out if they possibly can.  The folks from Mexico City understand the value of these historic Merida homes, as the homes in such historic districts of Mexico City as Coyoacán and San Angel carry some of the highest prices in the capital.  This will utterly change the landscape here, where nearly 100% of our buyers have been foreigners up until now.  More interest from more parties should eventually, maybe even quickly, translate into increased property values.

In short, the question becomes “is Merida still a good place to invest in real estate?”  Yes.  We are still one of the easiest cities to get to from the US and Canada, we still have wonderful tropical weather, we still have beautiful modern and historic homes at almost every price range, and we still have extremely low maintenance and yearly tax costs. There is every reason to be bullish on Merida and the Yucatan.

I want to include in this issue of the newsletter several independent newspaper reports on the “Mexico situation”, addressing several of the subjects regarding our area and country.  They summarize, independent of a real estate person’s views, what is going on here.

By ELISABETH MALKIN, The New York Times
MEXICO CITY — If you are looking for a cheap travel destination, try Mexico. Just a few people, most of them wearing surgical face masks, were willing to brave a tour bus in Mexico City on April 26.

Short of war, Mexico has endured about the worst calamity that can befall a country’s tourism industry over the last few weeks. A few people who had traveled here came down with what looked, initially, like a potentially highly contagious flu. Within days, pictures of civilians clad in surgical masks, like scenes from some science fiction disaster movie, were leading newspaper and television reports around the world.

It will take a long time for would-be vacationers to forget those images, but the Mexican government is trying to help them, with a multimillion-dollar campaign to restore Mexico’s brand, as hotels cut rates 50 to 70 percent.

Some are not even waiting for the World Health Organization pandemic warning to be lifted. AM Resorts, a hotel chain, announced a “flu-free guarantee” at 10 of its 11 Mexico hotels beginning Friday. The company will give three free vacations over the next three years to any customer unfortunate enough to pick up the H1N1 flu virus at one of its Mexico resorts.

The company is also offering discounts of 37 to 55 percent, as well as credits worth as much as $250 for food and other items.

“During the last few weeks, we have continuously encouraged travel to Mexico based on the real facts about the H1N1 virus,” Alex Zozaya, AM Resorts president, said.

When Mexican officials announced almost $2.1 billion in tax breaks and loans to help the Mexican economy recover from the residual effects of the flu, the tourism industry received special attention — loans for hotels and airlines, cuts in airport and port fees, and tax write-offs for businesses — worth, all told, $450 million.

The reason is clear. Foreign tourism earned Mexico $13.3 billion last year. Tourism employs more than two million people and accounts for about 8 percent of the economy.

The number of foreign visitors had already plunged since the beginning of the year because of the sinking global economy. And graphic press reports from Mexico describing gruesome drug violence were no help. Then, came H1N1.

Though it is impossible to know how much damage the flu will inflict in the end, Mexican officials have said that in the worst case, the revenue from foreign tourists could fall $5 billion this year. The finance minister, Agustín Carstens, has estimated that the outbreak will eventually shave 0.3 percent to 0.5 percent from the gross domestic product.

There are a number of worrying signs that pessimism is hurting the tourist trade, at least right now. Although the normal pace of life is returning here, the State Department still advises Americans against all but essential travel to Mexico.

Continental Airlines cut capacity on its Mexico routes in half beginning on Monday, noting that demand was already soft before the flu outbreak and dropped sharply on the news. Hotels in Cancún and south along the Mayan Riviera reported that guests did not bother to cancel; they simply did not show up. Cruise ships have canceled all ports of call in Mexico.

“It is not necessarily the risk” to the passengers, Cynthia Martinez, a spokesperson for Royal Caribbean Cruises, said. “It’s more about whether our guests feel comfortable visiting Mexico.”

Hotel occupancy in Cancún dropped from 77 percent the day the alert began on April 24 to 42 percent by the end of the month. By the end of last week, it was down to about 23 percent, said Marisa Setien, the executive director of the Cancún Hotel Association.

“We did not think it would be that bad, but it was a chain reaction,” she said.

Health authorities have confirmed about 1,360 cases of the new influenza virus and 45 deaths in Mexico. The vast majority of the cases have been concentrated in Mexico City and the surrounding suburbs, far from tourist resorts on the Caribbean and Pacific coasts.

Hotel occupancy in Mexico City fell to about 10 percent as the city shut down. The city’s tourism secretary, Alejandro Rojas-Díaz, estimates that the city is losing $10 million a day.

But he argues that the tough line the city took against the illness, closing restaurants for a week and most other entertainment, including bars and soccer stadiums, for even longer, will ultimately pay off in credibility.

“We have told the truth and when we tell the truth that the city is safe again, the world will believe us,” Mr. Rojas-Diaz said. “It will be squeaky clean.”

That may be true, but travel agents in the United States say bargains will help.

Hotels, hoping to restore their occupancy rates, have dropped their prices sharply and that is reducing the prices of packages to Mexico, said Tim Mullen, senior president of Apple Vacations, a large agency near Philadelphia.

Compared with four weeks ago, packages are 70 percent cheaper for May and 50 percent cheaper for June, he said. There will be “a bonanza of good deals this summer.”

Mr. Mullen said the first rush of concern among vacationers had slowed.

“This week, all of a sudden it became less ominous than what was reported,” he said. “Hopefully, it’s a short-term blip on trips to Mexico.”

The Cancún Hotel Association plans to work first with travel agents in Mexico to bring back Mexican tourists. When the global flu warnings are lifted, the association will begin working with tour operators in the United States and elsewhere.

Oscar Fitch, the executive director of the Mexico Tourism Board, said that once the United States and other countries lift travel advisories to Mexico, Mexico will start a broad campaign to bring visitors back. “The country is closed right now, not by us, but by everybody else,” he said.

“In a couple of weeks people are going to want to go back to Mexico,” said Mike Trujillo, a travel agent in Santa Rosa, Calif. “There were some great deals before this and there will be better deals now.”

And this from reporter Linda Ellerbee…

One Journalist’s View of Mexico
By Linda Ellerbee
 
Sometimes I’ve been called a maverick because I don’t always agree with my colleagues, but then, only dead fish swim with the stream all the time. The stream here is Mexico.
 
You would have to be living on another planet to avoid hearing how dangerous Mexico has become, and, yes, it’s true drug wars have escalated violence in Mexico, causing collateral damage, a phrase I hate. Collateral damage is a cheap way of saying that innocent people, some of them tourists, have been robbed, hurt or killed. But that’s not the whole story. Neither is this. This is my story.
 
I’m a journalist who lives in New York City, but has spent considerable time in Mexico, specifically Puerto Vallarta, for the last four years. I’m in Vallarta now. And despite what I’m getting from the U.S. media, the 24-hour news networks in particular, I feel as safe here as I do at home in New York, possibly safer. I walk the streets of my Vallarta neighborhood alone day or night. And I don’t live in a gated community, or any other All-Gringo neighborhood. I live in Mexico. Among Mexicans. I go where I want (which does not happen to include bars where prostitution and drugs are the basic products), and take no more precautions than I would at home in New York; which is to say I don’t wave money around, I don’t act the Ugly American, I do keep my eyes open, I’m aware of my surroundings, and I try not to behave like a fool.
 
I’ve not always been successful at that last one. One evening a friend left the house I was renting in Vallarta at that time, and, unbeknownst to me, did not slam the automatically-locking door on her way out. Sure enough, less than an hour later a stranger did come into my house. A burglar? Robber? Kidnapper? Killer? Drug lord? No, it was a local police officer, the “beat cop” for our neighborhood, who, on seeing my unlatched door, entered to make sure everything (including me) was okay. He insisted on walking with me around the house, opening closets, looking behind doors and, yes, even under beds, to be certain no one else had wandered in, and that nothing was missing. He was polite, smart and kind, but before he left, he lectured me on having not checked to see that my friend had locked the door behind her. In other words, he told me to use my common sense.
 
Do bad things happen here? Of course they do. Bad things happen everywhere, but the murder rate here is much lower than, say, New Orleans, and if there are bars on many of the ground floor windows of houses here, well, the same is true where I live, in Greenwich Village, which is considered a swell neighborhood — house prices start
at about $4 million (including the bars on the ground floor windows).
 
There are good reasons thousands of people from the United States are moving to Mexico every month, and it’s not just the lower cost of living, a hefty tax break and less snow to shovel. Mexico is a beautiful country, a Special place. The climate varies, but is plentifully mild, the culture is ancient and revered, the young are loved unconditionally, the old are respected, and I have yet to hear anyone mention Britney Spears, Lindsay Lohan, or Madonna’s attempt to adopt a second African child, even though, with such a late start, she cannot possibly begin to keep up with Angelina Jolie.
 
And then there are the people. Generalization is risky, but— in general — Mexicans are warm, friendly, generous and welcoming. If you smile at them, they smile back. If you greet a passing stranger on the street, they greet you back. If you try to speak even a little Spanish, they tend to treat you as though you were fluent. Or at least not an idiot. I have had taxi drivers track me down after leaving my wallet or cell phone in their cab. I have had someone run out of a store to catch me because I have overpaid by twenty cents. I have been introduced to and come to love a people who celebrate a day dedicated to the dead as a recognition of the cycles of birth and death and birth — and the 15th birthday of a girl, an important rite in becoming a woman — with the same joy.
 
Too much of the noise you’re hearing about how dangerous it is to come to Mexico is just that — noise. But the media love noise, and too many journalists currently making it don’t live here. Some have never even been here. They just like to be photographed at night, standing near a spotlighted border crossing, pointing across the line to some imaginary country from hell. It looks good on TV.
 
The U.S. media tend to lump all of Mexico into one big bad bowl. Talking about drug violence in Mexico without naming a state or city where this is taking place is rather like looking at the horror of Katrina and saying, “Damn. Did you know the U.S. is under water?” or reporting on the shootings at Columbine or the  Bombing of the Federal building in Oklahoma City by saying that kids all over the U.S. are shooting their classmates and all the grownups are blowing up buildings. The recent rise in violence in Mexico has mostly occurred in a few states, and especially along the border. It is real, but it does not describe an entire country.
 
It would be nice if we could put what’s going on in Mexico in perspective, geographically and emotionally. It would be nice if we could remember that, as has been noted more than once, these drug wars wouldn’t be going on if people in the United States didn’t want the drugs, or if other people in the United States weren’t selling Mexican drug lords the guns. Most of all, it would be nice if more people in the United States actually came to this part of America (Mexico is also America, you will recall) to see for themselves what a fine place
Mexico really is, and how good a vacation (or a life) here can be.
 
So come on down and get to know your southern neighbors. I think you’ll like it here. Especially the people.

Original piece from: http://www.haciendamexico.com/secciones/index.php?Idioma=2&IdArticulo=50

By Keith Heitke
Hacienda Luxury and Unique Real Estate in the Yucatan Tropics
Calle 68  #517 Merida, Yucatan, Mexico
+52.999.928.1116
or call: 212.400.1642
haciendamexico.com