Back in late 2005 I wrote an article for EscapeArtist.com’s Offshore Real Estate and Investment publication called The Riskiest Real Estate Investment? I pointed to all the canaries in the U.S. real estate coal mine and made the point that putting your money into international real estate—especially in Latin America or Eastern Europe—had far more upside potential that buying a vacation home in the U.S.
It didn’t take a crystal ball to see that, but everything has played out as expected. This past Friday the Wall Street Journal reported that home foreclosures in the U.S. have reached a record level. Surprise surprise, all those interest-only loans and teaser adjustable rate mortgages turned out to be big trouble when prices flatlined and investors couldn’t flip their new purchase to a greater fool. Naturally, the places where prices appreciated the fastest are seeing the most trouble. The foreclosure rates are the highest the in Mortgage Bankers Association’s 37-year history and the spike “was much steeper in California, Florida, Arizona, and Nevada.”
Meanwhile, when’s the last time you heard anything about a housing bubble in Mexico, Argentina, Romania, or Turkey? Prices may be high on the Pacific Coast of Mexico and Costa Rica, but so far the demand seems to be well outpacing supply. Beware of the reverse though, buying in an unpopular area based on bargain prices alone. A visiting author friend told me yesterday that he knew someone who bought a four bedroom house in Newfoundland, Canada for $18,000. “Because nobody wants to move to Newfoundland…”