Money flows into coastal resort areas Foreign investment into Mexico is on track to hit $20 billion this year

By EVELYN IRITANI

Los Angeles Times

Real estate experts in Mexico worry that the giant sound they hear is the softening U.S. housing market sucking money Americans have poured into vacation homes south of the border.

But neither the cooling American housing market nor tense Mexican presidential politics so far has stemmed the influx of foreign dollars into Mexico's booming coastal resort areas, government and real estate officials said.

When FONATUR, Mexico's tourism development agency, put the first phase of its newest Pacific Coast resort, Litibu, on the market a few months ago, buyers snapped up the 500 acres for $125 million. Foreign investment in Mexico is on track to hit $20 billion this year, up from $17.6 billion in 2005, according to the government.

''We have some concerns about the slowing U.S. housing market, but there are many other things working for us,'' said John McCarthy, FONATUR's director general, who was in Beverly Hills last week to speak to U.S. investors. ''Most of our buyers are baby boomers who have paid off, in good part, their initial mortgage and are coming into inheritance money.''

Real estate experts said Mexico's resort properties market might experience a smaller price shock because it is a new area of investment and the buyers tend to be higher-income and less likely to be forced into fire sales.

''The cooling real estate market could take this from being a very, very positive trend to a mildly positive trend,'' said Christopher Thornberg, an economist with Beacon Economics, a Los Angeles-based real estate consulting company.

That's good news for Janette and Harvey Craig, who paid $60,000 four years ago for a piece of beachfront property in Litibu, a small beach community about 30 miles north of Puerto Vallarta. They expect the parcel, which is worth about $300,000 today, to become more valuable when the nearby resort is completed in three years. It will include hotels and condominiums, 910 homes and an 18-hole golf course designed by Greg Norman.

''It's just going to push prices higher and higher,'' said Janette, a part-owner of Garcia Realty in the nearby surfing town of Sayulita.

In the past, foreigners have been wary of investing in Mexico because of legal problems, corruption and red tape. But changes in Mexican laws have made it easier for foreigners to own property through bank trusts. Major U.S. companies have begun offering mortgages and title insurance.

Mexico also is drawing more attention from Europe. Last year, Spanish companies were the top investors in the tourist industry, pumping $416 million into resort properties. U.S. investors followed with $321 million, according to the tourism agency.

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