"In all things there is a kind of law of cycles."
TACITUS, c. A.D. 105

The other day I was watching my cat play with a woven basket that I had decorated for her with found bird feathers. She has always seemed to enjoy playing with the feathers, but has never climbed inside. I had hoped she would sleep inside, when I first bought the basket, 3 years ago. Well, this time, she climbed into the basket and took a short nap, safe from the irritations of her brother, Poncho. I realized that my plans for her were not hers, and when she was ready, she would use the basket as I had hoped. This realization started a serious of thoughts in my head about "timing" and cycles in real estate.

The couple (in a previous story) that wanted to buy a more permanent retirement home has found that the time is not right. I know that they sincerely want to move to Puerto Vallarta, but it will have to be at a better time for them. The schoolteachers (another previous story) are at the right time in their lives to buy a "starter" property like the small condo they are purchasing and re-modeling. The timing for both these couples is influenced by the amount of decisions they have to make abut living here full-time versus part-time.

An experienced real estate salesman from Oklahoma told me years ago, "Never forget that real estate goes in cycles. It goes up and it goes down." He was right, but some of us forgot that in Texas in the early 80's. We thought that prices would continue to go up and there was no end in sight. The lenders encouraged this way of thinking, as they were making lots of money closing on loans with the points and fees they made, in addition to the interest on the principal. The cycle of too much supply and no demand caused a collapse in the prices in the market for a long period of time.

Vallarta is in a cycle. Where? It's hard to judge a cycle when you are in one. It's always easier to tell where you have been, rather than where you are. How high is up? How low is down? The reported number of sales for the first half of the year has been 25% less than the same period in 2001. Listed prices are the reported values in the Multi-List database. Sales prices and sales volume are not accurately reported, for this reason. The reported number of sales through the MLS each month does provide valuable information as to what property is sold and who listed and who sold it.

There are a number of sales in 2002 up to the 300's (US Dollars). Sales of properties over 350's(USD) to one million dollars are slower. Homes over a million dollars on the market for a while, are still for sale or have been sold at large discounts. For the contrarian with a million dollars or more to spend, the time is now to find a bargain Homes in the two and a half million to three million dollar range are experiencing activity. This upper price range has recorded sales in categories of pre-construction and completed homes. These higher priced homes are in very desirable locations, which are gated and have great views and/or beach access. The south shore and the north shore, have pockets of these high-end property sales.

The cycle of economic conditions in the United States has definitely affected our local real estate market. Buyers, who previously could use income from their investment portfolio or retirement income, have downsized their price- range criteria. Their desire is to find an alternative to stock investments and to find a safer place to vacation or live. They now have to look in a different price range. This condition will increase the demand for certain priced properties in the 100,000US to $300,000US price range.

Pricing of real estate. If a property is priced too high in comparison to the rest of its competition, it loses the buyers who are looking at that period of time. The over-priced villa or condo stays on the market. The buying cycle comes and passes them. I can't think of a more important reason for a seller and his agent to pay attention to where the real estate cycle is, than when sales price is considered. If the price is wrong, the market will tell us. When the market changes, as it did this past year, a comparable property does not bring the price that its counterpart received six months prior. Going against human nature, we need to accept the reality of the price change and adjust to it. The faster the adjustment in price, the better chance there is of selling the property. To resist the basic law of supply and demand is to ignore the reality of the situation. To ignore the economic cycle, is to take a large risk.

The real estate community is in an upward cycle. There is more education and information available to the agents who wish to take advantage of the resources available to them. Multi-List Vallarta is upgrading reports that can help the agent and their client determine the proper pricing of their home. Actual sales prices may be in the member database in the near future. There is an effort being made to create standardized real estate contracts for use by AMPI members. The University of Guadalajara, both in the Vallarta branch and home city, offer real estate and law seminars. The trend is toward a larger number of real estate agents becoming better- educated, working in cooperation with each other.

In a "buyer's market," there are a larger amount of properties for sale than there is demand. The buyer influences the sales price in this case, as he is part of the limited supply. When the cycle is reversed, and the supply of homes is limited, the seller influences the sales price.

"Cycles are not, like tonsils, separable things that might be treated by themselves, but are, like the beat of its heart, at the essence of the organism that displays them." Joseph A. Schumpeter, 1939.

Harriet Murray, Broker

For additional information on properties for sale or lease within the bay, please call or e-mail me at: harriet@pvnet.com.mx

Thanks and until next week.