What seems to be on the mind of everyone I’ve talked to is how the slowdown north of the border will influence our local market. Many areas of the United States have been affected by a fall-out in key real estate markets, triggered by the abuse of subprime and other adjustable-rate mortgages. Borrowers either bought or refinanced homes with subprime loans that offered artificially low introductory rates. Now facing re-pricing, borrowers are experiencing their payments doubling or are having to pay off large balloon payments, just as their homes values are declining.

So how is that affecting Baja California’s market? First, Baja California’s real estate market has been driven primarily as “cash-only” – mortgage financing yet to become really popular or necessary for many purchasers. Most realtors I spoke to said that less than 10% of their sales involve financing, except for new product developments, which may offer short-term financing. So, Baja California doesn’t have to worry about a subprime meltdown; it doesn’t exist here.

What has proven to be the primary reason for the turndown north of the border has actually protected our local market, because of the fact that financing is still difficult to get in Baja California. Realtors report that it still takes too long to obtain approved financing and not enough has been done to improve the overall application process. There are good brokers, and there are not-so-good brokers, and finding the right one can make a world of difference. But it still is not working as efficiently as all would like to see it.

Second, the people caught up in this subprime meltdown got there because they couldn’t afford the terms of a regular mortgage or even the down payment. This has never been, nor will it be any time soon, the profile of the typical Baja California homebuyer. Americans who have the money to buy a second home still have that money – this turn in the market has not affected them to any great extent.”