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The boom heads south

While its neighbor struggles with its own crisis, Mexico enjoys a resurgent real estate market.

MEXICO CITY

In her bustling corner real estate brokerage, Ana Laura Pulido is doing her best business in years, enjoying a sort of Mexican immunity from the U.S. housing crash.

"It's a time of hope," said Pulido, who has sold hundreds of homes to middle-income families since 1992. "The buyer today is more aware. People buy with more ease. They can plan long-term."

Long thrashed by swings in the U.S. economy, Mexico boasts a thriving housing sector whose record growth leads Latin America - a sign of increased economic stability, and an outlet for U.S. investors.

Giants including the California Public Employees Retirement System, the largest U.S. public pension fund, are bankrolling projects in Mexico, where they see "more bang for the buck," said Clark McKinley of CalPERS, which has invested more than $300-million in Mexican real estate.

The trend could even slow emigration from Mexico, by generating millions in jobs and personal savings as a fresh supply of loans gives many their first chance to own a house.

President Felipe Calderon has set a national goal of a million new mortgages a year by 2010.

Behind the boom are six years of economic growth and stability, and a national shortage of 6-million dwellings. While interest rates are falling, just 6 percent of Mexico's 25.7-million homes are financed with mortgages - compared with about 67 percent in the United States. Most Mexicans inherit their homes, buy them with cash or build them by hand.

That demand in a nation of 108-million means lenders can be choosy, enforcing standards that held delinquency rates below 4 percent in third quarter 2007, compared with 5.6 percent in the United States.

In the United States, lenders looking to expand their portfolios granted risky mortgages to borrowers with weak credit, but in Mexico, that "subprime" category doesn't exist, because lenders don't need it to grow.

A recession north of the border could choke U.S. investment in Mexico, curbing job creation, discouraging new homebuyers and stalling housing growth. But that won't likely lead to mass layoffs and defaults, said Rafael Amiel, managing director for Latin America at the financial consultancy Global Insight. Expanding local markets have insulated it somewhat from U.S. downturns.

Housing demand could swell more as migrants are pushed home by the souring U.S. economy and crackdown on illegal immigration - generating four new jobs for every home raised, said Carlos Gutierrez, Mexico's housing policy director.

Mexico's housing sector is full of risks, including land ownership disputes, infrastructure delays and limited access to water. The emphasis on private building has concentrated developments in wealthier states, while masses of poorer people still live on dirt floors.

Even so, millions of first-time homebuyers have an asset to leave their children, or to use as collateral to finance future spending, fueling growth.

"I always had in my head that the only thing you can give your kids as inheritance is an education and a house," said Antonia Correa, a 37-year-old receptionist who paid $7,200 down on a stucco townhouse outside Mexico City. "You could be short on things. But a roof is the best. It's your world, your home."

[Last modified January 23, 2008, 00:45:05]