Housing woes cross border

PLAYAS DE ROSARITO, MEXICO — The ripples of the U.S. real estate boom began washing up on the shores of this beach town a few years ago. Californians, feeling flush from the steep run-up in housing values stateside, pulled equity from their primary homes and snapped up vacation properties in northern Baja California as if they were buying $10 lobster dinners.

Ground zero was this mid-sized community about 20 miles south of Tijuana, where developers sold hundreds of condominiums on spec. Most jacked up their prices as their projects filled, fueling a sense of urgency among U.S. buyers to get in while the getting was good.

"We nearly had . . . fistfights" over choice units, said Michael Coskey, sales director of the Residences at Playa Blanca, a 274-unit development under construction north of Rosarito in which the average condo is priced at $500,000. "We were all appealing to people's greed."

Greed has turned to regret for some investors who now can't sell their Mexican properties.

Upward of 40% of the condos in some northern Baja projects were purchased by flippers who intended to resell them even before construction was finished. Their aim was to pocket a fast profit in an area where prices had been appreciating 20% to 30% annually in recent years.

But with contagion from the U.S. sub-prime mortgage debacle now spooking many would-be purchasers and credit drying up, the Baja real estate market is flagging. Speculators are starting to sweat.

Californian Chris Romero's biggest worry two years ago was missing out on the action. He had his eye on a $200,000, two-bedroom condo in a project called La Jolla Real in Rosarito. But by the time the then-Diamond Bar resident was ready to commit, the developer had raised the pre- construction price to $250,000.

Instead of folding, Romero doubled down, handing over a $120,000 down payment to lock up two units -- one for $238,000, the other for $270,000 -- before prices increased again. The retiree and his wife reckoned they'd sell the cheaper one just prior to closing and use the profit to help finance the other.

"The market was booming," said Romero, 60.

No more. With the development nearing completion, he's finding buyers scarce and competition fierce. Rosarito is littered with so-called "resale" units whose owners are looking to unload them. Romero is offering a $5,000 bonus to anyone who can bring him a buyer. His $290,000 asking price is "negotiable." And he's willing to provide financing.