I AM A NEWBIE INVADER!!!!

Well, the south shore is from Jocotepec to Sahuayo in Michoacan...

Anyone remember when someone asked online what it was like to live on "the other side" of the Lake, and the great Bubba said you'd be lying on your bed looking between your toes at the bright lights over in Ajijic and wondering what the heck you are doing there? Well, the south side is lovely if you don't like crowds, don't need to be close to a doctor and hospital, speak really good Spanish, and like to drive long distances. Personally, I like Concepcion de Buenos Aires, but I am too old for adventurous living.

Yes, I remember that post.  
I quoted that post in the little something I wrote.  That was June 2015.

https://casalunademiel.wordpress.com/2015/06/30/southsiders-are-different/

We still don't speak fluent Spanish, nor raise sheep, nor pack guns and have yet to be victims of crime over here.  The only instances we have had living in Mexico is the one mentioned in my post and a break in of our vehicle in the Office Depot parking lot in Guadalajara.
We met a couple in a busy restaurant on one of our visits to the other side.  When I told her we lived on the south side she said, as she looked me up and down,
"Well, all you have other there is sex and booze."  ...like that's a bad thing...
I'll just leave that there for you...
Cheers.

Oh no I haven't un-invaded. I spent the last 10 days walking every neighborhood from Joco to Chapala in search of a place to live and possibly pick up a contrato directo. I met a ton of locals, many of whom opened their doors to a complete stranger to show me their homes or just talk a bit.
Like i said from the beginning you have a great community here. I even ran into a few realtors who had a brain and were wiliing to admit that what I had observed in the last 6 months was true. What has happened in this real estate market is truly unprecedented. After 5 years of being flat, it turned at the first of the year and supply today is at historic lows and prices are in the nose bleed territory.
So what happened? I believe it was a combination of factors. First Trump won in Sept. There was a strong uptick in visitors last high season and rents popped up almost 50% season over season. Then the peso went to 22 as a result of the Trump fear factor.
My question to you long timers here is this temporary? If the classic definition of a bubble (by economists) is when everyone and their dog says that something is never going to go back down- then this is a bubble.
My other question is who actually caused this bubble? I have noticed that many expats here are more of the wealthy class than i have ever seen in latin american. You might call them the 1-5 percenters. They have large cash nest eggs earning absolutely 0 in their bank accounts in the U.S.
I was looking at the 150k and under market around the first of the year and there were probably 100 properties in that range. They all sold in the last 7 months and similar properties today are priced 40-50% above that (using sq. feet values). So did newbies buy these or did local investors? In more than one case I noticed a house under contract and within a week it was listed for rent on facebook with a ROI of over 8%. This kind of buyer is not a newbie.
In Chapala I know of two wealthy forieners who have invested heavily in anything rentable in town. If you look at the usual handful of listings in Chapala it's entirely possible for a handful of wealthy individuals and a dozen or so newbies to change the Chaplala market in a matter of months. I believe this is what has happened in Lakeside as well (to a lesser degree). This is not a huge market and it didn't take a lot to upset the balance. And yes the outlook for newbies is bleak on both the rental and buying market.
So in the short term you long term renters are going to get gentrified out. And you long term owners are going to get gentrified. Lots of expats on a shoestring budget are going to get hurt just like the local Mexicans were when the current residents priced them out years ago. And this place is gonna change.
Are the newbies gonna have more money than you? Yes. Are these newbies going to be ready for living in Mexico? No. Are they going to speak Spanish or try to speak Spanish? No. Are lots of you locals and Mexicans going to make some money? Sure. Money always seems to rule is this day of greed Trumps all.
Again this is a nice place and this may take a few years to shake out. Buckle up because Trump could lose in 2020 and peso could go back down to 12 and newbie boomers might realize at these prices Lakeside ain't such a good deal after all. I like it here and may stay. I will be living in that brightly colored cardboard box by the malecon. Come by and visit if you like and please bring a bag of cold Coronas.

RE prices and rents are rising all over the US and Canada too. Relatively speaking this place is still an absolute bargain compared to Vancouver, Toronto, LA, SF, New York, Seattle, etc. Many Canadians have been absent from the RE market due to the weak Canadian dollar but if that turns around they'll be back in droves too. I have said in the past you can either be part of a growing, thriving community or be part of a shrinking, dying one. I prefer the thriving one.......

Here's an interesting article about the boom in Guadalajara. Look at the average apartment price there now.

http://mexiconewsdaily.com/news/construction-boom-led-by-high-rise-towers/?utm_source=Mexico+News+Daily&utm_campaign=4087ec8e00-september+30&utm_medium=email&utm_term=0_f1536a3787-4087ec8e00-349534941

Bill's take on rising home prices and shrinking inventory being generated by investors probably has some merit, but it's only part of the picture.

The financial news has some interesting articles about the retiring population; their lack of savings, the disappearance of company pensions and the sorry job market for older people.  Older than 50, that is.
What are they doing?  Some are becoming seasonal workers for very low wages.  Some are living in campers.  Most solutions involve a serious reduction in "lifestyle".

Some are running the numbers and realizing that they can actually live on their Social Security and home sale proceeds if they move to.....Mexico.  As a natural result, the inventory of less expensive real estate is shrinking and as rentals become scarce, landlords do what they always do: raise the rents.
 
There's no reason to assume that they won't try to learn Spanish or appreciate their adopted country.  That's overly cynical, in my opinion.

It is interesting when folks blame market conditions on "greed". A free market enables investors to make or LOSE money... Time will tell. In an uncertain rental market perhaps the best decision is to buy...

What a great post, bill, thanks for taking the time. Enjoyed it.

You are right, of course, but you are only talking about gringolandia - Ajijic and close proximity. I do not believe your findings apply to Santa Cruz, San Nicolas, Jocotepec, Ixtlahuacan, or the villages along the south shore. Plenty of inexpensive rentals and lower cost of living as you move out of gringolandia. Not a problem. If you must be in Ajijic, you will pay the price.

Another thing is, there are people who want to move to Mexico and there are people who want to move to Ajijic. The latter will be the ones that this applies to, and so be it. Most of them won't make the 5 year mark because they haven't yet discovered that AJIJIC IS MEXICO, in spite of what they think, heard from other newbies, or read on their multiple gringo Facebook pages.  imho

Ferret: Totally agree... I have been practicing my house investing using the formula: "Buy high and sell low but make it up in volume" Presently down $150k .... Maybe time to buy again?

The outer areas will slowly rise too as people are forced further out. It's all about supply and demand. As the "cheap rentals" get gobbled up the landlords will realize they can charge more.

The best time to buy is when no one else is and the best time to sell is when no one else is. The stock market works the same way.........IMO. Don't follow the herd.......

CanuckBob wrote:The outer areas will slowly rise too as people are forced further out.

I disagree, CB, I don't think there will be a rush to move to Ixtlahuacan or Santa Cruz or Tizapan when Ajijic fills up. The newbies all just want to live in Ajijic. People like me might move farther out but I don't think in significant enough numbers to raise the cost of living in these "non-Ajijic" areas.

It's an interesting phenomena, I don't read the FB gringo pages anymore but when I was reading them it looks like the newbies were so intent on living in Ajijic, they were organizing renting houses and having other FB posters move in as roommates. Just so they can be in Ajijic!

I believe most of this wave of newbies won't stay and will be gone with the snowbirds in the spring.

I was speaking more of the lakeshore communities such as Chapala, SAT, SJC and Jocotepec. I don't consider Ixthulacan to be even in the ballpark. There is still a lot of undeveloped land between Ajijic & Joco and Chapala & Mezcala too. Many newbies will still come to Ajijic. They will just drive out the "economically minded" renters that are already here when the landlords start raising the rents. Some current renters may decide it is better to buy.......

You may be right, vamos a ver.

I and others of you have been around Lakeside for a while. This is not the first time that housing costs have gone up, down, up.....  Maybe this is new for rentals, I don't know.

Ole "Newbie Invader" has been here for only a short while and is making some pretty 'informed' observations. But IMO, they are made in a narrow slice of time and may not be accurate for the long haul any more than they were the last time the market got tight... just to get loose again later.

But then again, maybe he is a soothsayer and I am just living in the past....

Those who speak "sooth" have usually been around here awhile. A good long while.

The observations were similar in 2005-6.

And it probably would have continued for many more years had the RE bubble not burst in the US in '08.

That is the way with bubbles; they all might have continued longer if not for... "something." People act surprised. Who could have known? I first got on the real estate roller coaster on the east coast of the U.S. in 1968. I got off it on the west coast in 2004. I have family and friends still riding, and it always eventually goes up and then eventually down no matter where. Whenever it is up there are those who think somehow this time it will continue to rise -- but it never does. "Something" always happens. Of course, also each time, there are those who say, "Not this time; this time is different because..."something".

CanuckBob wrote:And it probably would have continued for many more years had the RE bubble not burst in the US in '08.

You're right Bob, it probably would have.  And the crash in '08 ended up being global and it was a lot worse than anyone will ever know.  When we came down in '11 the US economy was still in poor shape.  The 10,000 new retirees per day were upside down on their mortgages, had seen whatever nest egg they had get knocked by 50%, and if they were lucky enough to be working they just tried to hang on.
Here we are 6 yrs later, the housing market is robust, unemployment down, stock market at all-time highs and a strong USD.  Those 10,000 new retirees per day are still their (and they will be for another 20 years) and they have more money than they did 6 years ago, can sell their houses if they want, they're trying to figure out how to make it and some of them are running the numbers and seeing there are alternatives to improve or maintain quality of life with their funds.  If 1/10 of 1% of the 10,000 decided to come down and checkout Lakeside, that would be 10 per day, times 365 days that's over 3,000 / year.  So my guess is that they are not going to stop or slowdown without some significant event like a global trainwreck, or a recurrence of the 2012 massacre.  So that's on factor.
The Mexican economy is much stronger now than it was 6 years ago, and the middle class is growing (by how much varies based on what you read).  It's very easy to see simply driving from the airport back to Lakeside.  Guadalajara is expanding to the south and there is no doubt when you see the new warehouses, and the low cost housing about 20 minutes away.  New industry, factories and more education are creating more and better jobs and the middle class has more disposable income.  The wealthier middle-class Mexicans will be buyers of properties and it stands to reason that the lower priced < 200K USD will be attractive to them.
So there are expats and nationals both finding Lakeside attractive and this is causing property values to go up, and corresponding rises in rentals.  Simple supply and demand.  
As was stated, there's lots of vacant property to the west of Ajijic, and a ton to the east of Chapala.  Based on my discussions with some Mexican's who would be in a better position to know than me, the investment in the vacant farm land is already taking place.  One guy I was talking to was describing a planned 160 unit development between Ajijic and San Juan Cosala.
I think this boom could have some legs if the 2 things I described earlier don't happen.
I truly don't think it has anything to do with Trump, I think for expats it's just a matter of evaluating the financial opportunities for a nice or modest retirement whatever the case may be, and the growing Mexican economy (remember the Mexican population is much younger than the US).
With that said, there's going to be a lot of change coming down the road over the next several years, and those that don't like change are going to become very frustrated.

Good post, Juan. I'm going to hold my ground as I think I'm in a good place for now.

Two things that really need to change though, the carretera and the internet speeds.

Had a conversation yesterday with the Guad techie man who came to our medical office to work on the internet lines. I complained about the speeds here at the lake and he smiled and nodded sympathetically. I asked if there was any way we could get TM to update the infrastructure or have faster speeds here and he said sadly no. He said our only alternative would be competing companies with better infrastructure.

There may be a RE "roller coaster" when looking at the market over short periods of time however over the long term (say 20 year increments) it always goes up. What was the price of a house here in Ajijic in 1998? What was the price in 1978? What was the price in 1958?

Me thinks that trying to predict ‘who and how many’ folks might move to Mexico is a very difficult task. It takes a special kind of person, even if/when one looks at the financial aspect of it, to even consider making that move much less actually doing so. There is SO much underlying bad press NOB about Mexico (it is pervasive!) that I think a significant portion of those who might otherwise be lured will not even consider it. That’s not to say of course that many WILL come take a look-see. “They” did back in 2005 and probably will continue. It’s the number of them that is the real question.

There is not as much bad press (or travel advisories, etc.) about Mexico in Canada and even less in Europe. It is not just Americans who come here. From 2009 to 2013 or so it was primarily Canadians, Brits, etc. When the US dollar rose it quelled the Canadian invasion. I agree there are lots of factors to consider. Some naysayers say the US in for another dramatic recession very soon.......

RickS wrote:Me thinks that trying to predict ‘who and how many’ folks might move to Mexico is a very difficult task. It takes a special kind of person, even if/when one looks at the financial aspect of it, to even consider making that move much less actually doing so. There is SO much underlying bad press NOB about Mexico (it is pervasive!) that I think a significant portion of those who might otherwise be lured will not even consider it. That’s not to say of course that many WILL come take a look-see. “They” did back in 2005 and probably will continue. It’s the number of them that is the real question.

Making predictions is extremely difficult, especially if they involve the future!