One of the hallmarks of the ‘American Dream’ has long been owning your own home— and it’s a dream people around the globe share.
But now that housing affordability has hit its lowest levels since the early 2000s in many parts of the world, this ‘dream’ is looking more and more like a fantasy.
When the pandemic started, governments and central banks in dozens of countries reacted by printing absurd quantities of money and hurling it all into their economies.
In the US, the Federal Reserve more than doubled the size of its balance sheet, from roughly $4 trillion to $9 trillion. And in Europe, the European Central Bank increased from 5 trillion euros to 9.
Central banks also slashed interest rates and made it cheaper and easier to borrow.
One of the very predictable consequences of this tidal wave of cheap money was that real estate prices soared.
In the twelve months from the start of the pandemic in March 2020, German home prices rose nearly 15%.
In Australia (which suffered some of the worst lockdowns in the world), home prices jumped 30% during the pandemic. Canadian home prices rose similarly according to the National Bank of Canada’s Home Price Index.
And in the United States, the median home price rose from $322,600 at the start of the pandemic, to $440,300 by the end of June 2022, a 36% increase.
In addition to these rising prices, however, mortgage rates have also recently started to climb.
The average 30-year mortgage rate in the United States reached a low of 2.65% during the pandemic, in January 2021. Today it’s hovering around 5%, and was recently as high as 5.8%.
This combination of higher mortgage rates and higher home prices mean that housing affordability is plummeting.
It also means that a lot of housing markets around the world are due for a steep correction. And in some places it’s already happening.
Just last month, for example, home prices in Sydney, Australia suffered their worst decline in four decades.
But prices have a LONG way to fall before they become affordable again. And my guess is that central banks probably won’t let that happen.
Home prices last crashed in 2008, and that sparked a worldwide banking crisis and meltdown of the financial system. Central banks don’t want a repeat of that episode, so they’ll probably pull out all the stops to prevent a collapse in home prices.
No wonder so many people are starting to look internationally to find their American Dream… because there are still plenty of places in the world where homes are extremely affordable.
Mexico is one such place.
I’m in Cancun right now; my wife and I are having our second child here, since the experience of having our first child here last year was so spectacular.
I always tend to look at real estate prices whenever I travel. And the market here in Cancun is ridiculously inexpensive.
For example, for about $480,000, you could buy a nearly 4,000 sq.ft. house with 4 bedrooms, 4 baths, and a pool inside a gated community with close proximity to the city center and beaches.
That’s about $120 per square foot… and that’s very hard to find in North America. Even in Detroit, the average price per square foot according to Realtor.com is $131 per square foot.
In Frisco, Texas it’s $198. Tampa, Florida it’s $269. In Phoenix it’s $298. And in San Diego the average home price is $666 per square foot. So $120 per square foot in Cancun is a great deal .
I’ve also seen large, stately homes here in Cancun— 10,000+ square feet for just over a million dollars. There’s all sorts of inventory available.
Another city near the northern coast, Mérida, is located three and half hours west of Cancún by car. Mexicans consistently rate it the most livable, and safest major city in Mexico.
Some restored historic homes in a central location with about 2,700-3000 sq. ft. of living space, are listed for around $250,000-$300,000 USD.
You can find something more modern, such as a 4,500 sq.ft. house with 4 bedrooms, 3 baths and a pool for around $300,000 USD. That’s less than $100 per square foot.
Our CEO and Sovereign Woman, Viktorija, has made her home in Mexico City— one of the largest and most cosmopolitan cities in the world.
This isn’t Muskogee, Oklahoma or St. John’s Newfoundland. As an ultra-urban area home to 20+ million people, real estate in Mexico City should be compared to London, Tokyo, Chicago, or Beijing.
And by that metric, Ciudad de Mexico is an incredible bargain.
You can buy a nice 3 bedroom 2 bathroom spacious condo in one of the best neighborhoods for less than $500,000. This is super-affordable compared to somewhere like New York City or Paris.
As Viktorija and I discussed in a recent podcast, Mexico City is not what most people think. It’s clean, green, picturesque. The food is some of the best I’ve ever had. The culture and vibrant.
And as for safety, there’s obviously crime in any huge city. But the violent crime rate in Mexico City is actually lower than most major American cities.
(Or in the Mexican state of Yucatan, where Merida is located, the homicide rate (at 3 per 100,000) is lower than in Nebraska (3.7) and Wyoming (3.1) – which are not exactly known for their hard core criminality.)
The cost of living is also much less expensive in Mexico. Labor is inexpensive and abundant. Food is cheap. Gasoline prices are a bit cheaper than the US, and MUCH cheaper than in Europe or Canada.
On average, Mexico is very attractive based on Sovereign Man’s cost of living index, which estimates typical monthly expenses in cities and countries around the world.
Personally, I live in Puerto Rico. We love the island, and the tax incentives are undeniably attractive.
But my wife and I do enjoy visiting Mexico. The government here was quite reasonable during the pandemic and generally remained open.
And the medical care has been so great that I’ve opted to have two children here. Plus, anyone born in Mexico automatically receives Mexican citizenship at birth.
Mexico is also an easy place to obtain residency, and this can lead to citizenship and a second passport.
All this makes Mexico at least worth considering for your Plan B.
Of course, we aren’t trying to convince anyone to move to Mexico.
The idea here is to demonstrate that there are plenty of options in the world. You don’t need to be constrained by geography.
And if you’re looking for a better life, you might just find the right place outside of your home country.
Members of Sovereign Man: Confidential can read our full report on Mexican real estate here.
If you want access to this, and our full library of past Alerts, Monthly Letters, Case Studies, and Black Papers, consider joining Sovereign Man: Confidential today.
Simon Black is an international investor, entrepreneur and permanent traveler. His daily letter is both educational and entertaining, and we suggest that those who want unbiased, actionable information about global opportunities sign up for Sovereign Man’s free, actionable newsletter at http://www.SovereignMan.com.
From Simon Black of SovereignMan.com
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