Yeah, there’s a bit of a bubble going on down there. Construction between Playas and Puerto Nuevo is absolutely incredible. The majority of the buyers are Californians financing with home equity from their primary residence in the U.S., as this is cheaper than getting a loan through a Mexican bank or U.S. finance company. There are, however, a couple of finance companies that now offer semi-reasonable rates (say 2.5% above LIBOR) because they’re funded with a line of credit through GE Capital, which gets AAA-rated funding itself. So the funding options are getting better. And, yes, you can now get construction loans there no problem as long as the title issues are clear.

I think there will be pretty sharp declines in prices over the next few years as home prices here decline and as the speculators down there move out of the market (yes, there are lots of speculators operating in the coastal Mexican properties). Having said that, you can buy a 15th floor 2BR/2BR condo right on the ocean with a pool, gym, etc. for about $250K these days. The same thing would cost you $750K+ in San Diego, depending on where you are of course. My guess is you’ll see a 30% or so decline in prices down in Mexico. They’re just building like mad down there – and only a fraction of the units are pre-sold.