House Glut Stuns Tijuana

San Diego — Prospective home buyers in San Diego have waited for months for prices to stop their upward climb. In Tijuana, they're no longer waiting. Many Tijuanenses are leaving the city's colossal rental market and buying their own homes, which in some cases are a third less expensive than they were a year ago.

"When this development started, the houses were selling for over $300,000," says Playas de Tijuana real estate agent Martha Becerra Rotter, as she steers her blue Suburban through the guarded gate of the development La Perla, a block from the beach and a few miles south of the border in Playas. Becerra, in her late 30s, has a round face and expressive light-brown eyes that match her business suit. She slides her sunglasses onto her head as she leads a group of home shoppers through the ornate Mexican colonial front door of a model home. A blend of modern and traditional Mexican architecture, the 2000-square-foot home features tile floors, tile showers, a large kitchen, maid's quarters, walk-in closets, vaulted ceilings, and a two-car garage. Natural light floods every room through large windows and skylights. All five model homes, situated across the street from the grassy park in the center of La Perla, are equally luxurious, though laid out differently. Becerra tells me that Esteban Loaiza, a Tijuana native who pitches for the Chicago White Sox, has purchased all five. This close to the beach, a house like this would sell for at least $700,000 in Ocean Beach, well over a million dollars in La Jolla. "These houses are priced at $208,000," Becerra says.

Back in her second-floor office a few blocks inland, Becerra, who is the president of the Tijuana Real Estate Association, explains the current drop in prices. "Prices are always dictated by supply and demand," she shrugs. "And in the last decade there have been so many houses built in the eastern neighborhoods of Tijuana that we finally have a surplus of housing."

Becerra offers an indicator of how housing supply is catching up with demand in Tijuana. "I have been ten years in this business," she says, flowing back and forth between Spanish and English, "and I normally show a buyer five, maybe eight properties in a certain area at a certain price. Now, I can easily show 20 houses in a given price range in a given area."

That fact, she says, gives the buyer power. "The buyer is thinking, if there are 20 houses he can afford, then he will make low offers and see if someone bites. He can go to a house that's being offered for $200,000 and say, 'Look, I can give you $120,000 cash,' and one of them might just take it."

With homebuyers in that position of power, prices are being driven down all around Tijuana, "and my sellers are upset about it," Becerra laughs.

Along with dropping prices, home-buying hopefuls in Tijuana have something else to be happy about. As recently as a year ago, bank mortgages, though still officially offered by banks in Tijuana, were "nonexistent," Becerra explains. "In 1994, mortgage rates were 90 to 95 percent. And recently they were around 50 percent, which is still too high. Now, mortgages are being offered at 15 percent, sometimes 14 percent. So people are starting to get mortgages. Cash purchases are going down because some buyers who could pay cash are choosing to get mortgages and protect their cash."

A high level of supply versus demand has also driven down rents 15 to 20 percent in Tijuana. Despite that fact, Becerra says she's recommending that Tijuana's legions of home renters buy new homes instead of lowering their rents. "A medium-sized house," Becerra points to a picture on the wall above her desk of a two-story modern home, "like that one there, you can buy for $150,000. It's three bedrooms, two bathrooms, about 1800 square feet. On that you would pay $1000 a month [mortgage payment]. It's better to pay $1000 to the bank than $800 in rent."

That kind of thinking is catching on. "People are buying more than ever," Becerra says. But she says cultural influences are slowing the home-buying revolution. "In the culture of Mexico," she explains, "people are not accustomed to credit. Mexico is not a credit society. We're not accustomed to owing money for long periods of time. For instance, people here would be very uncomfortable buying this desk if they had to pay for it for two years."

Consequently, the standard 30-year loan offered in the United States is nonexistent in Mexico. "Here it's 20 years, sometimes 25 years, and that still makes people uncomfortable. Because of that, the banks are marketing the loans by telling people the more you pay to the principal, the sooner it will become your property solely. That's how they've convinced the people, by saying, 'Yes, you do owe, but you can pay it off as fast as you can.' "

But the cultural aversion to credit, Becerra says, exists "mostly for the older generations. The new generations are more comfortable with the new credit system. It is a whole new way of thinking for Mexicans, so it will take time for it to catch on with the former generations.

"Another change in the younger generations," Becerra continues, "is that more couples have both husband and wife working. That's something that hasn't been the norm. The women who worked before were single, divorced, or single parents. Normally, married women would stay home."

These credit-friendly double-income families are looking for homes, Becerra says, "Normally, in the eastern zone of the city, all the way out toward Tecate. The older zones of the city are often too expensive. But Tijuana is like the country of Mexico -- in the majority of the areas you find all kinds of housing, except in areas like Hacienda Agua Caliente and Lomas de Agua Caliente, near the racetrack. Those areas are pretty much all expensive. But in the older neighborhoods, you can find all kinds of expensive and inexpensive homes. In some eastern neighborhoods they sell houses for a half-million dollars near the social-interest developments" -- government-assisted condominiums for low-income families -- "because there are a lot of people with money, people that work in the U.S. that live down here, and they want to be near the border crossing. So they build big houses. Here in Playas, we have social-interest developments across the street from $500,000 houses. When the developments were built, they were on the edge of the city. But the city has grown so much, and so many houses have been built, that they're in the middle of town now."