The U.S. Market Slowdown is Being Felt Across the Border

In the past 12 months, Sullivan Group has conducted studies in numerous resort areas in Mexico and Costa Rica. Over the past two months alone, our staff has been conducting on-the-ground research in two major resort markets in Mexico – Cancun/Riviera Maya and Mazatlan. Since there is no comprehensive source of new home data in Mexico, our goal in both of these markets was to literally visit every single new home development in the respective regions. At every project, we gathered vital information such as unit sizes, floorplan configurations, pricing, absorption, buyer profile and construction status, and we even use hand-held GPS units to identify each project’s exact location. This information was then compiled into Project Profiles, a sample of which is included at the end of this newsletter.

Some interesting findings emerged from our research related to the second/resort home market in Mexico:

• The Market Has Slowed: The impact of the slowdown in the U.S. economy/housing market is certainly being felt in the resort housing market in terms of slower traffic and slower sales;
• But Tourism is Still Solid: Tourism levels, however, reached all-time peaks in 2007. People are still travelling but are tending to shop more closely for deals and spend less when they do travel;
• Americans are Looking for Deals: Like many markets here at home, most serious American buyers will only purchase if they find a perceived “steal”;
• Other Countries are Picking Up the Slack: Although the American buyer pool has gotten smaller, an increased number of Canadians (and to some extent Europeans) is helping soften the blow – particularly given the weak U.S. dollar. Further, the number of Mexican buyers has been increasing too;
• The Core of the Second Home/Resort Market is Still a Value Compared to Similar Product in the U.S.: Although pricing typically ranges from the $100,000s to over $10 million for a new home in these areas, the core of the market is typically between $200,000 and $500,000; and,
• Stacked Flat Condominiums are the Prominent Product Type: Condominiums – whether low, mid- or high-rise – are the most common product type, and they are usually offered in a two- or three-bedroom configuration

It is this level of granularity in our research – including notable time “on the ground” – that helped us create real-time conclusions in a market where this type of information is not otherwise available.

The following profile is an example of the type of information we collect in international markets. It provides a one-page summary of the most pertinent information for each project, they can be easily adapted to different market parameters and their information can be combined to form meaningful macro-level conclusions.