A Quick Update

In 2010, we moved back to the small town in Colorado that I never stopped missing while we lived in Mexico. Now I sometimes miss Mexico, but I wouldn't travel as freely as we did when we were there, camping out in remote areas and so forth.

Mexico today is in a period of change, and in many ways it is more dangerous now. That said, I have plenty of American friends who still live there very happily, just taking a few more precautions than they did in the past.

Just to say!

Rosana

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Last week Kelly and I had dinner with some American friends who own a home in Mexico. They were living down here full time quite happily. When the stock market dropped, so did their income and nest egg. So now they are mostly back in the states, living in the home they had kept up there, working up there, and vacationing down here when they can.

They had thought of selling their American home but hadn’t done it yet, and now they could only clear about $30,000 if they could even sell it. So they are hanging on, hoping the real estate market will recover in the next couple of years so they can make a larger profit on that house and come on back down. I’ve heard several stories of this sort around the Lake Chapala expat community.

Someone sent me the link this morning to this article: What if the real estate market doesn’t recover? I think it makes some good points. Loved the ending:

If Stupidity got us into this mess, then why can’t it get us out?
Will Rogers

This bit from that article is less of a chuckle:

Everyone has a theory of what the future of real estate will bring. For most people that theory is simply what they want to believe or what they hope will happen.

Some time ago, I read a book called The Art of the Long View, by Peter Schwartz which presented a way of thinking about the future that Kelly and I have used loosely ever since, chiefly in our business but also with some personal decisions. When considering the future, we imagine up to five different possible scenarios. For example, and just making this up off the top of my head, here are five possible scenarios for the US economy and real estate in let’s say the next few years:

  1. The economy recovers, real estate bounces back, credit is available.
  2. The economy doesn’t soar or tank, just stays kinda flat. Houses move, but more slowly than in the first scenario.
  3. The current economic downturn is a recession for a few months or years, and gradually things pick up. A lot of people go through some quite hard times economically. Real estate prices are lower than at present.
  4. We enter a depression and stay there throughout the next decade. Things get dire worldwide.
  5. Global climate change throws in wild cards (hurricanes, droughts, huge storms, unseasonal weather, forest fires, etc) with any of the above scenarios.

Fun reading, huh? Okay, maybe your list would be cheerier… or not. Then we evaluate our various plans of action in the light of these possibilities, and also talk about which ones appear most likely to us, in the absence of a crystal ball.

By the way, real estate here in the Lake Chapala area has slowed down too. There’s an old saying, “When the US sneezes, Mexico catches a cold.” One realtor I chatted with recently estimated that 2008 sales were about 35% to 40% down from 2007. Prices are dropping, though not as much as, say, California. But some people we know from the US are buying a lovely home in the Lake Chapala area at a price that I find astonishingly low for an attractive house with several bedrooms, recently remodeled, in a location with a stunning view. Oh yeah, and a swimming pool.

During the time we have been living in Mexico, I have tended to think that lots of boomers would come down here to retire. Now, I think it’s harder to guess. A couple of thoughts:

  • American boomers may be less mobile and have less disposable income than they expected.
  • On the other hand, they can live on way less down here, specially now with the peso dropping. It has been around 10.5 pesos to the dollar most of the past few years. It’s around 14 pesos to the dollar today and has been in the 13s for some time lately. That means our dollars go a LOT further. What’s ahead for the exchange rate? That would be another scenario list…

Now for my “real life” comment: whatever happens, this is our time to be alive, this is our time to love our families, friends, pets, and world. This is our time to do the things that are important to us, to whatever degree we can. If some of us have to put some dreams on hold, we can still find other dreams to fulfill. Don’t want to sound too pollyanna-ish, but I see many Mexicans around me so full of zest for life — and it rubs off.

Readers, your thoughts on any of this are most welcome in the comments section.

4 Comments from the old blog:

  • At February 03, 2009 11:12 AM,  John said…

    We all wonder about where we are heading. Clearly, the excesses of the last couple of decades have caught up with us. But your final comments point the way. We can find contentment and happiness even in times of recession. Sometimes scaling down leads to a better life in general.

  • At February 06, 2009 12:55 PM,  Anonymous said…

    I am grateful that we never fell into the “keeping up with the Jones'”. We never lived one day over our means and without an exit plan.

    My Sister always considered us TIGHT. She spent money left and right and thought the gravy train would never end. She is the Vice President of a large National Real Estate Company. They first lowered her salary 10% and then another 25% and she has not told me how much, but I know there was another large reduction in January. Her world is spinning and does not KNOW how to live without that kind of income. She did get out of her house and into a rental, while it could be sold.

    I have another Family Member that was the Manager of a Major Title Company and could outspend my Sister everyday of the week. She had a nice 6 figure income with gorgeous home, decorations and clothes. Her Company lowered her salary 40% in December and then her major client went bankrupt and her commissions are almost nonexistent now. She is in a deep depression, cries and throws up regularly.

    I have another Family Member that was a big Residential Builder. He saw this coming and got out RIGHT before the collapse in our area. All of his friends that did not get out, are going broke, losing their homes and cars and filing bankruptcy. He is surviving by playing Poker and trying to sell his personal house.

    I know that all of you probably have stories similar to this. Maybe a lot worse because we are in Texas and have not been hit near as hard as other states.

    Personally I do not expect this to be a short term blip. I can’t see any possible turn around for at least 2 years.

    Unfortunately I think the Lakeside area will suffer. Portfolios have been ruined and people can not sell their houses unless they give them away up here.

    Who is going to come SOB and buy houses, where there is no Medicare, no safety nets and so many stories about the Drug Cartels crime wave? They have enough fear here and it will only get worse with all of these job losses.

    Older people that own houses at Lakeside that die or need to move NOB for health and family reasons, will not be able to get all their monies out of the Mexican Houses. They will have to eventually sell for what the market will bring.

    IF your Mother/Father died, had a house in Mexico that was paid for and not being used and you were in financial trouble, what would you do? I’d sell it for what I could and get my cash out.

    I also think that you should be in possession of some CASH and or Gold or Silver coins. I do not trust the FDIC to be there when and if it all blows up in our faces. The Big Boys will have their money out before we ever know it is coming.

    Have you tried to go to the Bank and ask for a large amount of YOUR cash? I have and it took days with much complaining from the Banker! They actually ask me, ” what is this for?” I made up a story and they tried several times to talk me out of taking the money out. Even trying to make me fearful of having this money in hand. I just stuck to my guns.

    Just my dos centavos…….

  • At February 06, 2009 3:17 PM,  Rosana Hart said…

    Thanks for your two centavos. We will all see how it unfolds over time.

    I have a lot of friends who are doing fine, both north AND south of the border. Plenty of people are frugal or living carefully. Yes, there are lots of people in trouble but let’s keep the perspective that lots of people are employed.

    Lack of Medicare and safety nets, and fear of drug cartels, WILL keep many Americans from considering Mexico. But I still think the climate, inexpensive cost of living, and kindness of the Mexican people are huge pluses.

    Both countries have pluses and minuses. Mexicans use credit way less than Americans, and it’s relatively rare for a Mexican family to have a mortgage. They are willing to tighten their belts and live in much closer quarters with family members than most of us would be willing to. So average Mexicans are less likely to become desperate. OTOH, they don’t have much savings.

    We live in interesting times, as the saying goes.

    Rosana

  • At February 08, 2009 1:03 PM,  Calypso said…

    The financial predicament the world is currently NOT enjoying is about GREED & SELFISHNESS.

    In my mind anyone that could not see it coming was blinded by -greed -.

    Perhaps a cleansing from irresponsible behavior will be a good thing in the end.

    The way I hear it everybody’s property is worth less except the property owned by the person telling me that story ;-)

    Maybe housing will once again be about a place to live and family rather than an investment?

    There is no telling where this will all end – I hocked my crystal ball a couple months ago.

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