In an effort to tame inflation, financial authorities in the U.S. and around the world are set to continuously raise interest rates during the coming months. The way in which the different sectors that compose the real estate market will be impacted is a focus of attention among the industry's players. In the following paragraphs Katie Mariscal, real estate professional at Los Cabos Sotheby’s International Realty, offers her reading of the current state of the market in Los Cabos. Read on and join the discussion!

Casa de Cascadas, an impeccably maintained home located in the exclusive enclave of Palmilla Sur. Currently under contract.

Prospective buyers and sellers are questioning whether the financial climate in the U.S., marked by higher mortgage rates, will have any influence on the real estate market in Los Cabos. In fact, most changes in the U.S. economy tend to impact our market, as we are mainly a vacation and second home market relying heavily on U.S. investment.

That being said, as per MLS data, Q2 2022 experienced a 22 percent increase in closed sales compared to Q2 2021. That figure is nearly six times higher than pre-covid numbers, and runs parallel with the 29 percent increase in condos and homes pending in the MLS since October 2021. The fact is that during the last five years Los Cabos has experienced a vertiginous growth rate. This is true not only of our second home market, but also of our primary real estate market, typically in the US$750,000 and under price point. This latter phenomenon is due to the growing workforce from new hotels and private clubs and to more flights from the U.S. and Europe. There was a 178 percent increase in the number of condos sold on the inland Cabo Corridor in the last 12 months, which is prominent for property under the US$500,000 price point.

Furthermore, it is important to note that there is a substantial particularity in the Los Cabos real estate market. We primarily deal with cash buyers, and homeowners here do not typically have any debt on their properties. This tends to nullify the effects of interest rate hikes in the U.S. Also, homeowners can balance the expenses of their properties by renting them out. And, although less frequently, there are opportunities to obtain seller financing and long-term cross-border loans.

This beachfront luxury condo is located within a five-star exclusive resort in central Cabo San Lucas.

This dovetails with a broad international trend. The attractiveness of markets that offer an ocean lifestyle remains strong: it is one of the most compelling property segments with international buyers today. As Philip White, president and CEO of Sotheby’s International Realty, recently said, “beachfront homes remain a popular investment for many homebuyers around the world. Searches for properties that offer a waterfront lifestyle on sothebysrealty.com have increased 63 percent year on year.” White adds: “Today’s luxury homebuyer is not just interested in a property’s location, but also one that aligns with their lifestyle. Beachfront properties offer the best of both worlds — stunning views and appealing activities for the family.”

Indeed, at the high end of the Los Cabos market (US$3,000,000 plus), inventory continues to dwindle, and, according to MLS data, there is a 25 percent increase of properties pending in this price point since October 2021. The homes on the high end of the market on the oceanside of the San Jose Corridor and East San Jose have seen an average sales price increase of around 15 percent in the last 12 months.

Translating to “Earth-Sun,” Terrasol, a beautiful beachfront community of privately-owned condos, was inspired by the surrounding nature and the raw, organic energy of Solmar Mountain.

The fact is that the Los Cabos real estate market, while not exempt from global macroeconomic forces, is based on strong fundamentals. Most notably among them is the region’s privileged, one-of-a-kind lifestyle, which has become even more attractive since covid and the permanent lifestyle changes it produced.

As Sotheby’s International Realty’s Luxury Outlook 2022 report points out, global trends are prompting wealthy buyers across the world to make moves abroad. For instance, at least 40 percent of the global workforce is now “location independent.” Brokers expect that demand for second homes will continue — and that those who have already purchased vacation properties since the onset of the pandemic will likely hold on to them for some time. There may eventually come a cooldown in demand, but prices will probably remain relatively high in the coming months.

Most types of residential properties in Los Cabos have experienced price growth during the last few years. For instance, the yearly average sales price for condos in the Cabo San Lucas beach areas in 2021-2022 increased by 37 percent when compared with 2020-2021, while the yearly average sales price for houses in east San Jose del Cabo increased by 18 percent.

When compared to the period from July 2020 to July 2021, the period from July 2021 to July 2022 shows a general surge in the number of properties sold. The strongest increase corresponds to condos in the Cabo corridor (inland and oceanside).

During the eight months leading to July 29, 2022:

• The active inventory of homes and condos in Los Cabos priced at up to US$250,999 experienced a 65 percent plunge.

• The active inventory of homes and condos ranging in value from US$251,000 to US$1,099,999 showed a 23.5 percent increase.

• The active inventory of homes and condos priced at US$1,100,000 and higher suffered a 12.3 percent decline.

Q1 2022 experienced an 84.7 percent increase in homes and condos sold in Los Cabos compared to the same period in 2021, while Q2 2022 saw a 22 percent increase compared to Q2 2021.

On October 18, 2021, there were 625 homes and condos pending on the MLS in Los Cabos. On August 1, 2022, there were 810 homes and condos pending. That is a 29.6 percent increase of properties under contract.

Katie Mariscal is a real estate professional at Los Cabos Sotheby's International Realty. Born and raised in San Clemente, California, she excels in educating and assisting her clients through the entire process of buying and selling property in Mexico. Contact Katie today about any questions regarding this article or if you would like data pertaining to a specific property that you are interested in buying or selling.

www.katiemariscal.com

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