Luxury Collection Broker Greg Gunter owns Berkshire Hathaway HomeServices Colonial Homes San Miguel and is Mexico’s #2 Realtor by sales.
The residential real estate industry is witnessing a dramatic paradigm shift, thanks to the Covid-19 pandemic. Especially in heavily populated coastal areas, homeowners are choosing to search for more space and less density than the tightly packed suburbs they have grown accustomed to. Many homeowners, freed from the binds of an office commute, realize they can work from home, so why not make “home” somewhere better, sunnier, more fun — reflective of a second-home market — and perhaps even more affordable?
The pandemic has also shifted many homeowners’ priorities as they realize the fragility of life and make the conscious choice to choose a different, perhaps better, lifestyle. Some see the benefit of early retirement to spend more time in a vacation home; others simply see the benefit of a better work-life balance that can be found in traditional vacation-home markets.
But good luck being a vacation-home buyer in 2021 in the U.S.
The statistics for 2020 paint a difficult picture for home buyers this year. Economists at realtor.com say the nation’s median home price is on a path to reach new peaks over the next 12 months, rising 5.7% by the end of 2021. Zillow notes a 13% year-over-year increase in median list prices from November 2019 to November 2020.
Indeed, Bloomberg Opinion columnist Conor Sen aptly titled his December 2020 piece “Homebuyers Brace for Pain in Post-Pandemic Market,” noting that existing for-sale inventory fell to a 2.5 month supply in fall of 2020 — five months’ inventory is widely considered equilibrium. Data from real estate research firm Altos Research found home supply at the end of 2020 was down 40% from the same month in 2019. And we all know what the supply-demand equation does to pricing!
Ironically, we paint an entirely different picture here in expat-friendly Mexico, particularly in the city ranked as the #1 City in the World by Condé Nast Traveler three times: the UNESCO World Heritage Site of San Miguel de Allende, in the very heart of Central Mexico.
The vacation- and second-home market here has been over-supplied for two years, with the Covid-19 pandemic only exacerbating an already depressed market that began in early 2019. Our current six years of for-sale inventory in a fly-in-only market during an airplane-averse pandemic has decimated prices with discounts reaching as much as 25% from spring 2020 pricing in previously high-demand locations. AMPI Mexico, a National Real Estate Professionals Association, reported that while 2019 sales were down 35% from the year prior, 2020 sales dropped even more.
All this proves to be excellent news for home buyers with an international perspective.
Indeed, the last 90 days have seen visitors returning to San Miguel as travelers get comfortable with flying, with the market activity following airline-travel increases. Those up-to-25% discounts reflect a shortened market-adjustment period — after the Great Recession, the local market took four years to stabilize — leading to great pricing opportunities now.
The upshot? San Miguel is clearly a buyers’ market, perhaps one of the few remaining in the world. But the word is out among the international cognoscente, and the market is quickly stabilizing. For those looking for a post-pandemic lifestyle enhancement at a fraction of the cost, seize the day before this window of opportunity closes.