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South Padre Real Estate 2010 Year in Review
1100 Views :: 21 Comments :: :: South Padre Island
South Padre Real Estate 2010 Year in Review
A look at how the Island's real estate market performed last year. Sales, Prices, Pictures and Top Terms.

The bottom line, sale volume (and interest in general) was at near record low levels, but the median prices held. Most sales were 15% to 30% below the asking price. Political uncertainty, overall economic recession concerns and owners who don't have to sell, kept many buyers on the fence, yet also kept prices from falling.
  • See the South Padre Island MLS sales statistics on our market analysis page.
    (login in to see additional charts for median price history and buyer preferences or contact us and we'll send them to you)
  • Pent-up demand continues to build, as the always desirable south Texas coastal properties and climate has an enduring allure.
  • Once consumer confidence returns, we look for a mini-boom on the Island. Is that 2011 or 2012? that remains to be seen.
  • Most will continue to enjoy living the dream regardless and more will soon join back in, as the priceless values of the lifestyle far out weigh temporary economic concerns - which pale in comparison to the memories with family & friends that last a life time.
  • Some "silver linings" to the slower sales: more owner financing, more opportunities & choices, occasional super deals, lower lot & land prices and it also highlighted the best homes, communities and agents.
    (a few new developments didn't make it and about half the agents left the market or are hopping around.)
We're here to stay and are doing well. The Island is our home and has the lifestyle we love.
We feel blessed to be here and want to share some of the scenes we collected last year to show a glimpse what it is like to live the dream we call South Padre Island.

The top real estate search terms for South Padre Island real estate in 2010


We hope 2011 will be a good year for you and your family,
Mike and Alice
Rating
Comments
beach comber @ Tuesday, January 11, 2011 7:22 PM
Love the beautiful pictures! South Padre is a fantastic place! The pictures say it all!

Your statement is fascinating, that median sales prices are holding their own, yet properties are typically selling at 15% - 30% below asking prices. How can that be? When buyers put their property on the market are they asking for significantly more than they know they'll end up with? (i.e., Sellers who don't have to sell, but would still like to sell, so they list with inflated prices and end up taking what they can get?) Or, are lower end properties just not selling, which drives up median prices of actual sales?

Also, support your statement that "Pent-up demand continues to build" ? Increased web site activity? More traffic through your office, but no increase in actual buyers? Have you measured any of that? If you could prove that there really is building "pent up demand", that might get some buyers off the fence.

Thanks, and have a great new year!
Zeff @ Wednesday, January 12, 2011 11:05 PM
I have been curious as to why so many island realtors really believe that after the market starts to turn around, it's really going to take off fast. I suppose it is natural for most realtors to look at life optimistically, but the belief that a fast takeoff for the market is going to happen anytime in the near future seems out of touch with reality - at least in my opinion. On the other hand I can rationalize some of this. Any realtor who has been in the business a few decades has seen at least several boom/bust cycles. Let's face it, until now, the market has always bounced back, so it is reasonable to expect that some time in the future it will bounce back again. What's different this time is the depth of the recession, and the level of financial damage that has been done to buyers, sellers, and financial institutions. Nothing this severe has ever happened before. The worst world-wide recession in our lifetime. A major hurricane. Major problems in Mexico. It's like we have been hit by the perfect storm. I strongly admire any business which states that despite all the problems, "we're here to stay", followed by a confession that the situation is so bad that half competition has been forced out. Sad. Very Sad. We've lost a lot of good agents, and it's nothing they did wrong. Just bad luck.

On the bright side, the banks are slowly recovering, and that is an important factor in the island real estate business. Just yesterday J.P. Morgan Chase was talking to government regulators about reinstating investor dividends. That's a sure sign that things are slowly getting better, but I'm not expecting any more "loose money" for mortgages, at least not in my lifetime. This recovery is going to be slower than any we have seen before. Painfully slow.

Another thing I have noticed is that a lot of realtors hate the banks. They're mad that the taxpayers had to bail them out from their own stupid mistakes, and even madder that the new underwriting standards make it difficult for even people with good credit to get a loan. I guess that hatred is understandable, but what agents often forget is that without healthy financial institutions, we would all be living in caves, back in the stone age. We should all be cheering for the banks during their recovery period, because as they get healthier, so will the island's real estate business. Focus on the positive. It would be very useful and encouraging if this web site could periodically document the slow recovery of the banks, with undisputed evidence that the situation for borrowers IS slowly improving. It may be much more difficult now to get a mortgage than it was 5 years ago, but it's still easier than it was just two years ago. THE HEALTH OF THE BANKS IS A LEADING ECONOMIC INDICATOR FOR THE REAL ESTATE BUSINESS, AND IT IS CLEARLY TURNING UP.

The problems in Mexico that are having such a major impact on the island's real estate business can't last forever. They could easily last a few more years, but at some point the Mexican people are going to say "enough is enough!", and find a way to take back their country from the drug lords. Or, at least go back to a mostly peaceful coexistence.

As this web site has so rightfully pointed out before, no matter what the economic situation is, people still need vacations, and South Padre has the best beach in Texas. No war in Mexico, worldwide economic catastrophe, or hurricane can change that basic human need. One could argue that there's still a chance that prices could fall further, but nobody really knows for sure. One thing that is certain is that RIGHT NOW the deals and selection of available properties has never been better.

Good luck to all in the coming year.
Buzz & Banter @ Tuesday, January 25, 2011 5:21 PM
"... it is safe to say that real estate values are not likely to be pushed down in any material way by inflationary pressures. As diversity is the key to any long-term success in investment, real estate has to be included in any portfolio."

Read the story:

http://www.minyanville.com/businessmarkets/articles/inflation-real-estate-housing-market-housing/1/24/2011/id/32356
Jo H. @ Monday, January 31, 2011 10:08 PM
If you look at the rest of the country, the vacation property market is actually on the rise:

http://online.wsj.com/article/SB10001424052748704482704576071984006994652.html

So why is the real estate market on south padre still stuck in neutral? My best guess is that the problems in Mexico are responsible for much of the continuing slowdown. After all, half the island was built with Mexican dinero en efectivo. It is true that reluctant bank lending and the slow economy are major factors, but if those were the BIGGEST factors causing the slowdown, then most other vacation markets would also be stuck in neutral - and that doesn't seem to be the case.

Also consider that in general Texas has handled the recent economic crash far better than most states. Based on what's happening in other parts of the country, it would be logical for the SPI vacation property to have already started to recover, but that obviously hasn't happened. Clearly some other major external force is holding this market down, and my best guess is that it's Mexico. We all know that Mexico has always had a strong impact on the island's economy, and right now things aren't going too well in Mexico. In the past SPI's close proximity to Mexico has been a blessing; that advantage as a major tourist attraction now seems to be gone, and in some aspects may actually be a liability. For example, Nuevo Progresso has always been a great day trip for island tourists, but many tourists are now afraid to step foot anywhere in Mexico. Media reports of bullets literally flying across the border don't help attract tourists.

My conclusion is that the island property market will continue to struggle, until things get better in Mexico. As long as Felipe Calderón refuses to peacefully coexist with the drug cartels, as his predecessors did, South Padre will continue to suffer. Fortunately Señor Calderón has only two more years left in office.
Mikel S @ Thursday, February 03, 2011 10:07 PM
I think you will be surprised during the course of this year and next, at the scale of Mexican investment & development; and new members joining our community.

Because of
1. the investment opportunities we see them actively investigating and
1. as a "safe haven" [from the border issues which have reached Monterrey and financial concerns with Peso].

Already you can see the Kirana High-rise in progress; expect to see more of that scale on the beach and bay from our southern friends.
Mexico Watcher @ Friday, February 04, 2011 7:27 AM
It's clear that a lot of wealthy Mexicans are "jumping ship", and moving north of the border to escape the violence. This doesn't however seem to be translating into many current island sales. What I see is a huge increase in rental demand further inland, as if these refugees are just seeking temporary safety, and plan to return home when the crisis in Mexico eventually subsides. I'm also hearing about entire new neighborhood springing up in the San Antonio area for displaced Mexicans, built by very wealthy Mexicans. (I wonder if these new neighborhoods will become ghost towns after the situation improves in Mexico?)

So now I ask you - If you're a wealthy Mexican developer, where would you be putting your money right now? Into new neighborhoods for displaced Mexicans, or beachfront condos on South Padre? The answer seems obvious to me. People need a safe place to live before they figure out where they're going to take their next vacation.

I suppose that just having more wealthy Mexicans residing north of the border have to have some benefit for SPI, even if they decide not to live on the island. It's nice to hear of increased interest in island development from Mexicans. That could eventually translate into future development on the island, but in my opinion that would be wishful thinking. Eventually the situation in Mexico will get back to normal, and when that happens you're going to witness a huge migration of wealthy Mexicans back into Mexico. The average displaced Mexican doesn't want to live here. Mexico is their home, and they are just here seeking safety.

Perhaps the relative lack of island sales is due to the "shock and awe" of the crisis in Mexico. It's hard to seriously consider buying beachfront condos when you're constantly worried about being kidnapped. (I heard of one guy who was kidnapped TWICE; finally he gave up and moved here.) No human being would ever wish for the violence to continue, but if it does we may move from the initial "shock and awe" & "jump ship fast" phase to a more stable "refugee" state. That would be where Mexicans who have been forced to migrate here decide to settle down, move out of their rental homes, and start buying permanent homes and more vacation property. That could be good for SPI, but again I would never wish for that horrible drug war to continue. The truth is that relatively few Mexicans have the resources to leave the country, and the average Mexican did nothing to deserve this.

Really, it's hard to make the argument that the war in Mexico is good for south padre. In general, "What's good for Mexico is good for the USA.". I hope things get back to normal ASAP. Mexico is a good neighbor to have. Thank goodness our good friends to the south are selling us some spare electricity during the current winter storm. With the causeway closed this morning I'm feeling a little clausterphobic, and this electricity shortage makes me nervous. We appreciate the extra electricity this week, Mexico! Stay warm & safe everybody....
Tax Victim @ Saturday, February 05, 2011 1:18 PM
Sell now, before you get hit with the new "Real Estate Sales Tax".

http://www.marketwatch.com/story/be-on-the-lookout-for-new-real-estate-tax-2011-01-28

But don't feel too bad if you're in that higher income bracket and have to pay the tax, because the proceeds go to support a worthy cause: Obama's health care plan.
Zeff @ Tuesday, February 08, 2011 7:03 AM
2011 will be interesting as mortgage costs rise. It looks like the federal government is slowly trying to back out of supporting Fannie and Freddie, at least at the higher end of the market. If you add in FHA, the federal government is now on the hook for something like 95% of all originations, so something serious needs to be done. Now they're starting to mumble about raising guarantee fees, so if you need to get a mortgage anytime in the next few months, DO IT NOW. They're also talking about reducing the loan limit, from the current $729,750 for high-priced markets down to $625,000. (though still in the early stages of discussion, highly subject to change)

What comes next? It's hard to say. The housing market is seriously lagging the overall economic recovery, and I suspect there will be some level of government support for basic housing for many years to come. However, continuing support for the higher priced vacation home market, including tax breaks, is highly questionable. I wouldn't however expect any radical changes anytime soon. We we all know that a strong vacation home market helps support the overall economy, and right now this economy needs all the help it can get. But, beware, the winds of change are starting to blow (again).
Time Magazine @ Tuesday, February 08, 2011 9:37 PM
Interesting article in Time Magazine this week. Instead of a recovery in housing this year, they're now seriously talking about a double dip. Prices could decline by 5 - 20%, requiring a four to five year recovery. I don't think we're talking about some radical screwball economist - this is coming from TIME MAGAZINE. You can argue that South Padre is unique, and it won't happen here, but It's hard to imagine that south padre could completely escape another national housing downturn of the magnitude portrayed in this article:

http://www.time.com/time/business/article/0,8599,2045854,00.html

Regardless of whether or not you believe all the hype about a double dip in housing prices on the horizon, there will be many potential buyers out there who are expecting it, and they're likely to stay on the sidelines until prices start to go back up. Not good. In such an environment it would be especially useful to have an experienced agent working for you, such as somebody in Alice Donahue's team. If you're a seller, they can advise you on a realistic price necessary to attract buyers in the current market environment. They can also give you personalized advice on increasing the "curb appeal" of your specific property to help get the best possible price, ASAP. If you're a buyer, there is no need to wait for a double dip to get a fantastic deal, especially if you want to start enjoying your new property NOW. One of Alice's gorgeous agents can point you in the direction of truly motivated sellers, so you don't waste your time making offers that are never accepted, or wait years trying to catch the bottom of the market. Agents provide valuable services you just can't get on the internet.

Barbie Holingsworth @ Friday, February 18, 2011 1:51 PM
I heard an interesting argument this morning supporting the concept of a "double dip" in the nationwide housing market. The argument is based on the fact that many states are broke. Without the ability to print money, many states will have no choice but to significantly raise property taxes. The study I heard this morning came to the conclusion that for each $1,000 extra homeowners pay in property taxes, their corresponding property value goes DOWN by roughly $20K. Of course if property values go down any more then current levels, banks will be on the hook for more bad mortgages, we'll see more mortgage defaults, more foreclosures, etc.

Texas however is in a little better situation than most states, and Governor Perry loves to brag about it. By law we have pretty much maxed out our property tax rates, given that we have no state income tax revenue. In response to the current decreased revenue situation, the state is now going to be forced to splash spending on education and social programs, and the process has already started. It's possible that less spending on education could drive away potential homeowners, but I don't see that being a major issue for the vacation property market. Most SPI property owners could care less about the quality of the local Port Isabel schools, because their children are enrolled in school elsewhere.

Relatively high property taxes have always scared away potential Texas property owners. However, with other states now being forced to raise property taxes, it would put SPI on a more level playing field.

Do I think a nationwide double dip in housing is going to help SPI property sales? Nope. On the contrary, it would be very harmful to our tranquil little island. Many potential property owners from other states would be locked in their present mortgages, unable to make the move to our little island paradise. Banks would also continue to suffer losses, making it even harder for buyers NATIONWIDE to get new loans, not just here in paradise.

If it makes you feel better, the current problems in the Mexican vacation property market make the problems in the USA look small. First, they got hit by the swine flu scare a few years back. Then arrived the drug cartel violence, which only seems to be getting worse, with some people now questioning if Mexico will become a failed state. That's a real problem for their vacation property market, which like SPI depends heavily on foreign investment. I don't think the problems in the Mexico property market are that bad yet, but I've recently heard that if you can find a mortgage on a Mexican vacation home, you'll need a down payment of something like 30%, and that's IF you can find a lender. (I guess that's a major improvement from a decade ago, when there were almost no mortgages in Mexico.) Nobody can predict what will happen in the USA, but I wouldn't have a hard time imagining most lending institutions demanding down payments of at least 25% at some point in the future for condotels. Considering the nagging island property value decreases over the last couple years - such large down payments or excessive mortgage insurance doesn't seem at all unreasonable.

I don't know what's causing more problems for the island property market right now - the problems in Mexico or tight bank lending. A significant change in Mexico's response to the current drug violence could help matters, but I don't see that happening without a major change in government, and Calderón still has a couple more years in office. At some point I think the Mexican government will find its way back to the old days of peaceful and corrupt coexistence with the drug cartels, but as long as Calderón thinks he can win this senseless war, the violence is likely to continue.

From the standpoint of the USA, a big improvement in the unemployment rate could greatly help the housing market, but right now that is hard to imagine. Mortgage interest rates and lending standards will increase, that much seems clear.

(I hate to say it, and you can yell at me if you want, but the best thing that could happen now to this property market would be if Texas implemented some kind of income tax, AND reduced property tax rates accordingly. Property values would go back up. Building would pick up. The unemployment rate would go back down as construction workers return to the workforce. Banks would be healthier, because there would be less mortgage defaults. Unfortunately in Texas there has always been die-hard resistance against any kind of state income tax, so don't count on it.)

Are you stuck with an island property that you need to get rid of? If possible, consider Owner Finance, and don't be afraid to advertise your terms. As a rule of thumb, consider that when you include ALL your annual bills, it may cost about 10% of your total property value to sit on your island condo in a mostly unoccupied state for a year. (Of course the exact figure will greatly vary, depending on major factors such as future property depreciation and any personal mortgage expense, but the 10% annual cost figure is a good place to start the thought process.) With more than a 4 year supply of SPI condos currently on the market at the existing dismal sales rate, you really have to consider all the likely costs associated with hanging onto a property you need to sell.
Unemployed Pilot @ Wednesday, February 23, 2011 9:37 AM
Suppose you're a resident of the upper Midwest, looking to retire somewhere on a sunny southern coast somewhere, and then you read that prices in Florida are going to head south AGAIN this year:

http://www.clearcapital.com/company/MarketReport.cfm?month=January&year=2011

Jacksonville -10.5%
Miami/Lauderdale -6.4%
Tampa -7.4%

If you saw prices still heading down, you might be a little tempted to wait for a better deal. You would also wonder what is going to happen to prices on the Texas Gulf Coast, given the increasing competition from Florida.

Another strong headwind the market faces is that many potential retirees cannot sell their existing homes, and the situation looks like it could get worse before it gets better:

http://www.marketwatch.com/story/us-home-prices-slip-1-in-december-2011-02-22

At best, some experts are now talking about home prices bouncing along the bottom, but there are also some very smart economists out there saying that further price declines of 15% - 25% are not out of the question.

From where I stand it looks like the SPI market could remain stuck in neutral for some time. Too many stubborn sellers out there refuse to lower their prices to sell. What we need is a serious SCARE campaign to get this market moving again. The possibility of further price declines is very real, and sellers need to know that. As realtors you can't have face-to-face discussions with potential buyers that are hiding in the bushes, but you can have good conversations with your sellers.

If I was Dan Quandt at the Chamber of Commerce, my #1 priority right now would be to convince some air carrier to establish direct air service between Brownsville and Monterrey. Visitors from Mexico want to FLY, and having to transfer through Houston on a commercial flight and changing airlines en route just isn't convenient. Or, at the very least, start allowing private international flights into Brownsville at all hours of the day, as they are now allowing in San Antonio:

http://www.chron.com/disp/story.mpl/ap/tx/7439055.html

If you want to attract tourists with $$$ in their pockets, you simply have to start offering easy air service. The Mexicans are starting to understand this too:

http://www.oem.com.mx/elsoldetampico/notas/n1974180.htm

And here is proof that direct air service brings $$$ to the valley:

http://www.valleymorningstar.com/articles/mexican-83983-nationals-road.html
Mike S @ Wednesday, February 23, 2011 10:04 AM
Texas coast market gets most of its business from the Texas Metros and Mexico, so we don't currently compete for most of the customers going to Florida and California.

In the future that will change, hopefully, as we continue to make our resort areas more upscale and people find out about it.

Our prices are already at the low end for coastal property in the U.S and steady, so we did not (and do not) have the ups and downs of CA/FL.

In many cases our properties can "cash flow" with an acceptable ROI and be considered a good long term investment, not just a lifestyle enhancement.
Unemployed Pilot @ Wednesday, February 23, 2011 5:27 PM
To tell you the truth I cry every time I see another agent on this beautiful island throw in the towel. They did nothing to cause the current market downturn. I guess that's the downside to working in a very cyclical business. A few years ago we had how many HUNDRED active agents working this island? It's depressing to see so many little real estate businesses simply evaporate. If you're still in business these days, it's a real testament to the quality of your business. Congrats.

It's true that SPI property values have remained remarkably stable compared to places like Florida. Thank Goodness! But, if you can't sell your condo in a reasonable time frame for a reasonable price, then what difference does it make? Property is only worth what you can sell it for. Of course the great part of a slow stable market is that it proves there are a lot of rich property owners on this island that don't have to sell - which helps stabilize prices over the long run.

I'm still trying to envision how this island can be considered "upscale" anytime soon. The town is so anti-tax that we barely managed to pass the bonds for a necessary new fire station. It also seems like every time a private developer tries to create a new "upscale" beach resort, they end up doing a big painful belly flop.

I still can't help but to wonder if Florida is going to start giving this place a little competition in the coming years, at least behind the scenes. Yes, it's true that most SPI buyers come from Texas and Mexico. However, if there were significantly better deals in Florida, that might start to impact the local real estate business - or at least lure away serious investors. For example, without getting too specific, I've recently seen two bedroom high rise beach condos in Miami for under $200K. Some of these deals require a lot of patience because they're short sales, but the deals ARE there.

Now put yourself in the shoes of an elderly couple living up north, getting ready to retire somewhere near a south sunny beach. Would you rather retire in Miami or South Padre? Cripes, the nearest hospitals we've got are in Brownsville and Harlingen, and they're overloaded with poor Medicaid patients. That cute island dentist/politician who recently got caught by the Medicaid police told the judge that if he prohibited her from accepting Medicaid patients it would eliminate most of her business, and there weren't enough other dentists in the valley to make up the difference. (What a sick defense, eh?) I used to get my teeth fixed in Mexico, but now I have no choice but Valley dentists who mostly serve Medicaid patients. The bottom line is that although this island is MOST BEAUTIFUL, it is not exactly the perfect place to raise a family or retire. That helps explain why property has been such a relative bargain - but nothing in the real estate business lasts forever.

The economists think the deals are going to get even better in Florida during the coming year, and like it or not that will create more competition for investment dollars in the nationwide beach condo business. I don't see this being a major problem for South Padre, but it will create some undesirable headwinds that aren't likely to die down anytime soon.

Right now I think the biggest drag on the island market is Mexico. There are some creative ways to start addressing that, based on easier transportation to the island, but it will require some serious commitment & creativity. (Daily flights partly subsidized/packaged with local lodging businesses would be a great business opportunity, if you ask me. Just imagine how much extra $$$ a single direct daily flight from Monterrey would pump into the local economy.)

P.S. It's good to see them renourishing the SPI beach! That's something good worth writing about. This is still the most beautiful place in Texas, and the bigger beach is definitely worth bragging about.

Bus Advocate @ Thursday, February 24, 2011 10:10 AM
Want more buyers and higher property values? What we need is good direct charter bus service to the island, from Monterrey, San Antonio, Austin, Houston, and Dallas. Fortunately you can charter a nice clean bus for less than $3/mile. A charter bus can take you directly to the doorstep of your hotel. Once you get to the island, you can use the free WAVE shuttle service to get around. If you're healthy enough to walk a couple blocks, no car or messy bus station transfers are necessary to have a great vacation.

The fact is that Greyhound bus service in Texas sucks, and has for years. The buses are filthy, smelly, old, and unreliable. Plus, you have to find your way to the island once you get off at the bus station. Flying is a great alternative if you've got flight availability and lots of money, but when you add in the airport wait time and tranfers, many visitors could get to the island just as fast on a direct charter bus. (Maybe even faster, and more comfortably.)

With regards to Monterrey, I've noticed that a lot of Mexicans feel safer if they are traveling with other people. A bus can get the passengers quickly through the 24 hour customs facility in Reynosa. The bus drops them off right there at the customs facility with their luggage, and picks them up on the other side. The bus company could even bring along a porter, to help with moving bags, to make it as easy for the passengers as possible.

Even with typical border crossing times, Monterrey is only a six hour drive from the island. The trick to making it an easy trip is to drive directly to the island, and drop off passengers at their hotel doorstop. Even with a half filled bus, and increasing gas prices, you could make a nice profit by charging only $25 each way. I bet there are a lot of hotels on the island that would pick up that small fee for any guests willing to book a one week stay.

If you can get tourists to the island, property buyers will follow. As gas prices increase, direct group transportation becomes more viable and necessary. It also helps older people who don't like to drive long distances, and a lot of our senior citizens have money in their pocket to buy south padre property. Lowering the barriers to getting visitors to the island is key to the island's future economic development. A good transportation system also makes the island more attractive to future property owners. If you really believe that you can always have a good SPI vacation without a car, then it puts the island in a whole different category of vacation destinations - one that is more desirable and valuable.

Any investor who thinks they can make money putting up a new toll bridge on the north end of the island needs to reconsider. You'll make a lot more money running a private bus service to the island.
Warren Buffett @ Monday, February 28, 2011 10:10 AM
Warren Buffett sees housing market bouncing back by 2011

http://www.usatoday.com/money/economy/housing/2010-03-01-buffett01_ST_N.htm
Michael Stuart @ Monday, February 28, 2011 10:26 AM
Who can argue with the great Omaha of Nebraska?

Actually we are experiencing a big increase in internet traffic, leads and sales activity. We hope it is an indication that the market conditions are improving for good.
Diana Olick @ Wednesday, March 16, 2011 10:54 AM
http://www.cnbc.com/id/42071203

Some food for thought based on the content of Diana's interesting news blog above:

- Miami condo sales are up an incredible 134% year over year. Wow! Strangely enough, there is a three to four year supply in Miami, which is roughly in the same ballpark as we're currently facing on South Padre. So why is our SPI market still barely crawling? Well, it's different here in Texas. Real estate markets are uniquely local...

- Median price of a Miami condo is down to $91.2K. Yikes! That's hard to compete with, especially if you're living up north and looking for a sunny southern beachfront retirement. (Though I'll be the first to admit that most SPI buyers come from Texas/Mexico cities within a day's drive, so there is limited competition between the two markets) If you're a realtor who likes selling beachfront condos, Miami might be the place to be. If you consider what prompted you to originally "open shop" on South Padre, then moving to South Florida may not sound like such a strange idea.

- It looks like the prices of those distressed South Florida condos have finally come down to the point of attracting serious buyers. At some point the same thing is going to happen to South Padre, but the catalyst and rate of sales will probably be different. I think what's different here in Texas is that prices did not get as inflated as they did in Florida, so they have less room to fall.

Mexican cash buyers who use their South Padre condos as virtual piggy banks have less reason to sell. Also, with less mortgaged properties on the island than in South Florida, there are fewer owners practicing the new American tradition of walking away from underwater mortgages. In other words, on South Padre we have had fewer distressed properties to drive prices down and get the market moving again. The Mexican money that built half of the island has acted as a shock absorber as the economy slid down into recession, but a serious downward price shock may be exactly what we need right now to get the island market moving again. (I've noticed that some SPI realtors prefer to spin this strange phenomenon of relative price stability as "enduring value", but to me it looks more like a lack of liquidity.)

So what is the magic catalyst that will get the SPI market moving again? A return to calm and prosperity in Mexico, I would argue. That might take a few years, but a recovery is inevitable. At some point in the future the people in Mexico are going to decide that "enough is enough!", and they're going to find a way to take back their country from the drug cartels. Any way you look at it, the situation in Mexico is key to the island real estate market, and always has been.

If you're a potential buyer, I doubt if prices are going to come down much more. On the other hand, if you're a seller, don't expect to get any great offers anytime soon. And if you're an island realtor, I wouldn't expect any surge in business anytime soon, aside from the normal seasonal pickup. I'm not trying to encourage any realtors to immediately pack their bags and head for South Florida, but look at how many hundreds of agents used to work this island at the market peak, and how few active agents remain. I offer my deepest sympathy to all agents and sellers who were caught in this mess, and did nothing to deserve it. It's just the nature of this crazy cyclical business.

Over the long haul realtors are an evolving nomadic bunch, coerced into the business and migrating to where the money is being made. Another thing I've noticed is that a lot of people decide to become realtors when there is good money to be made, and return to their old professions when the real estate market dries up. When "the tide goes out", and it always does at some point, you get to see who are the real die-hard realtors. The bottom line is that the remaining realtors on this island are probably the best and most experienced!

On the bright side: Has anybody noticed a large amount of Spring Breakers around here this week? It seems like the problems in Mexico may actually be helping us this year, given that so many college kids are avoiding vacations in Mexico. A much needed ray of hope. Island tourism is usually a good leading economic indicator for real estate sales. When those college kids return home, they're going to tell their parents what a wonderful place South Padre is, and that will eventually lead to property sales.


Zach Zemanova @ Sunday, April 03, 2011 11:06 PM
Looks like we have more condo inventory coming on the market than we can possibly handle. So are prices going to go down even further?

I heard a rumor the pink Bahia Mar monster is finally coming back on the market, renamed "Solare Tower Condomiums", and in beautiful new brown/tan color. Originally built in 1975, and seriously damaged by hurricane Dolly in 2008 to the point of looking like swiss cheese, they're now converting the tower to $500K+ luxury condos with granite countertops? How can they get away with that for a building STILL made of cheap stucco? Whoever came up with that idea must be smoking something. Who in their right mind would buy into that place, knowing how bad little 100 mph Dolly punished it. The whole complex is still under a land lease, so you don't even really own it, right? (Somebody please correct me if I'm wrong.)

Well, on the bright side, if there is no more trashy hotel to permanently scare away tourists, that would be a good thing for the island.

http://solarecondos.com/
V. Boncorski @ Thursday, April 07, 2011 6:58 AM
The South Padre real estate market WILL recover, I have no doubt. A full recovery will however first require the violence to calm down in Mexico. That could happen after the next presidential election, when the new government is forced to call a truce with the drug cartels. The Mexicans are sick of all the violence, and change is already in the air:

http://www.time.com/time/world/article/0,8599,2063696,00.html

At the same time, north of the border, people's 401Ks are slowly regaining their losses. They're also paying off their bills and mortgages, and interest rates remain relatively low. Banks are also rebuilding their balance sheets and slowly cleaning up the foreclosure mess. Many businesses are starting to make money again, and eventually that will lead to employees having more disposable income. Unemployment is slowly decreasing. It's rough out there right now, but the future looks bright.

The bottom line is that although the island real estate market sucks right now, the processes are already in place for a full recovery. It may take a couple more years before we see appreciable results, but make no mistake - the long healing process has already started.

*** Take care, and God Bless All ***

Banker @ Thursday, April 07, 2011 4:44 PM
The reason the big banks are reluctant to issue new mortgages is because their whole mortgage divisions are still losing money. Once they finish working through the foreclosure mess, they'll be hungry again for new mortgage business. That isn't going to happen this year (and could be delayed if real estate prices fall any further), but it will eventually happen. "Bank on it."
Maria Gonzalez @ Friday, April 08, 2011 6:31 AM
If the government does shut down this weekend, will it impact South Padre? I'm not sure, but if the problem persists it could delay some real estate deals and the normal flow of money. (FHA mortgages, flood insurance, SBA loans, tax refunds, etc.)

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