SAN JOSE DEL CABO, Mexico — Lured by 300-plus days of sunshine and "good, fun waves," Greg Leach is tapping the equity from his three-bedroom Mountain View home to build a vacation getaway near this small Mexican resort town.
Leach, 52, who is splitting the estimated $100,000 investment with a surfing buddy, could pocket a sizable profit if he wanted to. Realtors estimate their house could fetch close to $400,000 in Baja's sizzling market, which has shot up at least 10% to 15% a year for the last two years.
"Cabo has just exploded," said Leach, a building contractor.
Buyers have been snapping up homes here in the southern half of the Baja Peninsula, usually in all-cash deals. Like Leach, most of the newcomers are Americans, many from California, leveraging the equity in their increasingly valuable U.S. homes.
Their purchases reflect a change in global real estate ownership: People no longer have to be super-rich to invest in homes in foreign locales. In fact, some economists are starting to worry whether places like Baja California, London and Canada's British Columbia are part of a global housing bubble driven by the same combustible mix that has fueled American home prices: low interest rates, flexible financing and sluggish stock markets that have sent investors looking for better money-making opportunities.
Official figures aren't kept on how many Americans are buying residential real estate abroad or how many foreigners are investing in the U.S. But a survey by the National Assn. of Realtors revealed that 15% of home buyers in Florida last year were foreigners, mostly from Europe and Latin America. Three-quarters of those buyers said the properties were vacation homes or investments.
Though a similar study hasn't been done in California, economists believe foreign buyers play a significant role in the state's housing market.
TD Bank economist Carl Gomez said Americans make up as much as 10% of the home buyers in the British Columbia cities of Victoria and Vancouver, which have experienced double-digit price increases in recent years.
Like most buyers of homes abroad, Mike Pariseau wasn't seeking riches when he bought his first four-bedroom house in Victoria in 1996. He and his wife, who is Canadian, had been going there for vacations and grew tired of borrowing beds from family and friends. That home proved to be such a good investment that they purchased a condominium last year where their daughter is living while attending college.
