“America is aging. As the Baby Boom begins to enter retirement years, new challenges are arising with significant implications for both borrowers and lenders. In particular, given the impact of aging on memory and other cognitive skills, there is a need to consider the implication for financial decisions made by older individuals. By the time individuals are arriving into traditional retirement ages, when many important financial decisions are made, cognitive skills are already in decline as part of normal cognitive aging.”

So begins a recent study by the Mortgage Bankers Association entitled Cognition and the Housing Behavior of Older Americans, which was drawn from interviews with approximately 25,000 Americans in 2012 and is a sample representative of 43 million individuals 65 and older.

We are living longer, and the retirement period of retirement today has been extended, once a period traditionally seen for slowing down, taking on fewer responsibilities, no longer challenged by work, only by, so it is suggested, by play. But not continuing to be challenged can lead to a loss of cognition skills. Memory and cognition seem to hold on relatively stable into our 70s, but then decline fairly rapidly thereafter. Likewise, the incidence of memory disease rises steadily with age. By age 90, the study reports, about 20 percent of us will suffer from memory disease, which will lead to difficulty in managing money. And as increased longevity pushes financial decisions to later ages, any way that cognition can be improved and/or its natural decline forestalled, are welcome.

“If, as the adage goes, 85 is the new 65, then 85-year olds will be faced with many financial decisions that 65-year olds once made, but now with lower cognitive acuity. Finally, with population aging, each year there are just more older individuals. So, greater cognitive burdens are be placed on greater portions of adult America.”

The study reports that “cognitive skills are seen as critical determinants of financial outcomes and economic well-being over the life course. Cognitive psychologists often divide skills into those involving fluid intelligence and those involving crystallized intelligence. The former are thinking skills: executive function, abstract reasoning, and memory. These peak in the teenage years and then slowly depreciate with age. As individuals age through their early and mid-adult lives, the decline in fluid intelligence is offset by rising crystallized intelligence, which can be characterized as knowing skills, accumulated from formal and information education, training, and life experiences. These rise with age until individuals hit their 50’s and then decline. So, by the time individuals are arriving into traditional retirement ages, when many important financial decisions are made, cognitive skills are already in decline as part of normal cognitive aging.”

Many who own property in Vallarta also have a home in their place of principal residence as well. This means twice of everything to take care of, and that can be demanding, especially financially. We want to ensure we are making the best decisions regarding our homes, which for many are the largest assets they own.

What can one do? One method we should all implement that the study recommends is the “use it or lose it” approach, in which more stimulating environments help to preserve, and perhaps enhance, cognitive acuity. By keeping active, both mentally and physically, any number of ways. Perhaps continuing to work part-time, writing that book you’ve always wanted to do, or becoming an expert in some field. Which, in this age of the Internet, is not difficult to do.

But that isn’t enough, as the study notes. As we get near 80 we all should have someone we have confidence in, younger than us, that we can discuss our financial matters with. In the best circumstance, a son or daughter, or a past, close business associate. Many may have been working with a financial advisor over the years, problem is they are aging right along with us so change may need to be made. But we shouldn’t go into our later years concerned about our finances, making a bad decision, because of what we inevitably cannot avoid.

As the high season in Puerto Vallarta begins to taper down, so, for the most part, does the peak period for the real estate market. Looking back over this past season many realtors have commented that it did not live up to their expectations – they did not meet their numbers of the previous season in 2014-15. There were a few that did well, some exceptionally, but for the most part, they were a minority.

So what happened?

1. Whenever an election takes place, especially an American presidential election, people tend to hold off making any large purchases such as real estate. They are distracted, concerned, and want to see it settled and who will be the next president before making any big decisions. This election has been on the minds of many Americans, especially one which has so far proven to be quite controversial.
2. For Canadians and Mexicans, their ability to buy has been hampered by the fact that real estate is sold in the Vallarta region in U.S. dollars. And in 2015 both the Canadian and Mexican currencies suffered large losses when compared to the USD. It meant in many cases that real estate was 50% more expensive for them than it was a couple of years ago, even though prices (in USD) hadn’t really appreciated very much, if at all. I cover this more in this article.
3. And the rental trend continues, with many choosing to rent over buying. There is a large inventory and variety of properties to choose from, at what have been reasonable rates.

So what can we expect looking forward?

1. The U.S. election will be over and settled by the end of this year. This will allow people to once again to begin thinking seriously about where they’d like a second- or retirement home. People who were interested this past year didn’t stop wanting to buy, their buying decision was just delayed.
2. Both the Canadian and Mexican currencies have bounced back some. Whether this will continue is uncertain, but if at least if they remained more consistent with the USD that would bring more confidence into the marketplace.
3. On any downturn in the Vallarta real estate market, recovery is usually led first by an interest in rentals. Slowly these renters turn into buyers as they realise they want a place of their own, with spend more time, or perhaps move full time to Puerto Vallarta. Perhaps we’ll see that shift beginning to appear next year.
4. Another trend that realtors mention is buyers saying they are tired of the uncertainty and fluctuations of the stock markets. That it seems to be due for a correction and they’d rather take some of their investments out and move them into real estate. And there certainly are some very good deals and pricing right now in the market for those wishing to diversify and/or reallocate.
5. What is taking place in Europe regarding migrants and terrorism attacks is horrible, and it will, unfortunately, influence people’s decisions regarding travel and real estate purchasing. Their unfortunate loss could be Mexico’s gain.

So although 2105 didn’t meet up to everyone’s hopes, many are of the opinion that the 2015/16 season will be much better, even topping 2014.

I recently collaborated with David Connell on an article about renting out real estate properties in Mexico, and the taxes that are due on the incomes received. Researching the article I discovered that although the tax laws are quite clear that Mexican taxes are due on any incomes received from rentals, it seems there are quite a few property owners that are not doing so. Quite a lot.

I looked extensively online for cases where the Mexican tax authority (SAT) has gone after people who are renting, to ensure they are paying their taxes, and could not come up with very much. There was one case in Cabo where SAT did an investigation online, downloaded photos of properties and then went looking for those properties to speak to the owners. And that was about it.

But as a Mexican taxpayer for the past 30 years, having watched how sophisticated SAT has become in its operations over the past few years, I believe it is only a matter of time before they will implement a more comprehensive plan to ensure property owners are paying any taxes due. Gathering information on who is renting certainly won’t be difficult because so much is available online. Sometimes with the owner’s names and the name of the property, definitely pictures to identify it, and often Google Maps showing the location of the property. From this, and the level of sophistication with regards to their information and investigation capabilities, tying it all together shouldn’t take to much to actually implement something.

So it is a waiting game. And in some respects, a gambling game.

Low unemployment rates have not just been good for Americans, but for Mexicans as well, on both sides of the border. Mexicans who immigrated to the United States, whether legally or not, have always been generous when it comes to sending money (remittances) to family members back home. The amount is significant, significant enough that with the price of oil down as low as it is, remittances now provide more revenues than oil, for the first time as a source of foreign income, Mexico’s central bank reports.

Low unemployment means for many of the 11 million Mexicans living in the U.S. that job opportunities are better so there is more money to share with those not as fortunate south of the border. 2015 remittances were up 4.75% to $24,8 billion from 2014 – never before surpassing petroleum since the Bank of Mexico began tracking them in 1995.

Previous to ’95 oil exports represented nearly 80% of the total dollar income for the Mexican economy, whereas today it is less than 20%. Remittances, and a more diversified manufacturing base–which is Mexico’s No. 1 source of foreign income–have allowed the country to substantially diversify its economy. Add to this Mexico’s surging tax revenue growth from a stronger position on collections and its ability to do so, shows that the country continues make strong gains regarding economic diversification and growth.

Today in the news we are hearing once again that Europe is facing terrorism attacks within its capital cities. And once again concerns regarding security are rippling across the Atlantic to the shores of North America. We all question if is the something we will soon see happening in the Americas. Fortunately for the residents of North America, it has a few geopolitical advantages over its neighbors to the east.

Recently George Friedman of Maudlin Economics posted that “North America is an island of tranquility and opportunity…” when compared to what is happening in other parts of the world. When it comes to security, and today that is on the minds of many, North America is much like a tranquil island, separated from regions of the world where there is the most unrest.

To the east and west the Pacific and Atlantic provide North America with thousand of miles of profound protection, with the arctic polar icecap playing a similar role to the north. it is made up of just three countries and has just one land border, shared with Latin America to the south and which is only 870 km long. Compare that with the European Union which consists of 28 countries, shares thousands of kilometers of land borders with 13 other non-E.U. countries, and, although it is surrounded by water, the Mediterranean is all that protects it from where most of the unrest is taking place and which is easily navigable by small boat into Greece or Lampedusa, Italy. Adding to that, the E.U. has to deal with multiple languages, multiple cultures, an out-of-control migrant problem and has seen the rise of terrorism threats in nearly every member country of the E.U.

North America is also an island of opportunity. The European Union’s GDP is greater than that of the U.S. at just over $18 trillion, but when the U.S., Mexico and Canada are combined it totals $21.8 trillion, making it the largest economic union in the world by 20%. Trade between Canada and the U.S. and Mexico and U.S., is, for the most part, balanced. NAFTA, although contentious, has helped bring the continent together economically and provided ample opportunity for all three countries.

Friedman continues, “First, the Eastern Hemisphere (Eurasia in particular) is moving toward systemic failure. The EU is struggling to manage a host of problems. Russia is contending with strategic and economic challenges, particularly the collapse in oil prices. China is trying to find a stable new normal and maintain social stability. As for the Middle East, no summary will suffice. The rest of the Eastern Hemisphere is experiencing what I might call “normal instability.” Compared to other parts of the world, North America is not only remarkably stable but is also doing well economically…with Mexico as the most promising region economically. While Eastern Hemisphere powers teeter on the edge of an economic volcano or tumble in, the United States finds itself relatively insulated from declines in global import demand, and the US insulates the countries on its northern and southern borders to a great extent.”

Friedman contends that Mexico, of the three countries that make up North America, may have the most to gain. “Mexico has the 11th-highest GDP in the world based on purchasing power parity, according to the International Monetary Fund. As Europe weakens, it will be in the top 10 in the not-too-distant future.” It currently sits between the U.K. and Italy. Not bad for a country that, unfortunately, is regarded by many Americans as a Third World nation, dominated by drug cartels and impoverished people desperate to get into the United States. Americans need to get over this and recognize that Mexico is a major world player and a great neighbor to have.

In this U.S. election year we are hearing too often that America isn’t great, but that’s what happens during an election as candidates battle for the presidency. However, when compared to what is going on in the rest of the world, and considering its geopolitical position, not only is America doing well, it probably is best situated, along with its neighbors Canada and Mexico to continue to outperform many parts of the rest of the world well into the foreseeable future.

There is talk once again in Mexico for removing the requirement for foreigners to buy real estate with a trust, a fideicomiso, which some say would drive demand for real estate touristic properties in the country. Two national newspapers, El Financiero and Mexico News Daily recently wrote that the real estate industry plans to lobby for a renewed discussion in Congress over the elimination of the bank trust foreigners must use to purchase property. The president of the Real Estate Confederation of Latin America, Antonio Hánna, recently said removing the requirement would drive up demand by 30% in the five years following the change. 

Currently only Mexicans by birth or naturalization, or Mexican companies, can directly own real estate within 50 kilometers of the ocean or 100 kilometers of international borders. Foreigners who wish to hold land within those areas, known as the restricted zone, must do so with a bank trust. The buyer, who must pay an annual fee to the bank, has the right to use the property but the bank holds the title. So removing this requirement would also reduce the cost of owning real estate in Mexico for foreigners.

Sales of vacation homes and apartments totaled 1,725 last year. Removing the bank trust requirement and the number could soar to 2,423 after five years, said the confederation.

The change would require an amendment to the constitution, which is what the Mexican Association of Real Estate Agents (AMPI) lobbied for a few years ago. The proposal got as far as Congress, but became bogged down in the Senate, said AMPI president Gustavo Solares. He, too, predicted that removing the fideicomiso requirement would detonate activity in the market.

Hat tip to David Connell.

During the American presidential election process, both Mexico and immigration issues have come into the spotlight a number of times, especially with Republican front runner Donald Trump who wants to build a wall between the two countries.

But is Mexican immigration really such a problem?

A new Pew Research Center analysis of government data from both countries shows that actually more Mexican immigrants have returned to Mexico from the U.S. than have migrated to the U.S. since the end of the Great Recession. The overall flow of Mexican immigrants between the two countries is at its smallest since the 1990s, mostly due to a drop in the number of Mexican immigrants coming to the U.S.

From 2009 to 2014, 1 million Mexicans and their families (including U.S.-born children), the majority leaving on their own accord, left the U.S. for Mexico, according to data from the 2014 Mexican National Survey of Demographic Dynamics (ENADID). U.S. census data for the same period show an estimated 870,000 Mexican nationals left Mexico to come to the U.S., a smaller number than the flow of families from the U.S. to Mexico.

Why?

• The slow recovery of the U.S. economy after the Great Recession may have made the U.S. less attractive to potential Mexican migrants and may have pushed out some Mexican immigrants as the U.S. job market deteriorated.
• Stricter enforcement of U.S. immigration laws, particularly at the U.S.-Mexico border may have contributed to the reduction of Mexican immigrants coming to the U.S. in recent years, although U.S. border apprehensions of Mexicans have fallen sharply, to just 230,000 in fiscal year 2014 – a level not seen since 1971.
• Only 14% of Mexico’s return migrants said the reason for their return was deportation from the U.S.

Mexican immigrants have been at the center of one of the largest mass migrations in modern history. Between 1965 and 2015 more than 16 million Mexican immigrants migrated to the United States – more than from any other country. In 1970, fewer than 1 million Mexican immigrants lived in the U.S. By 2000, that number had grown to 9.4 million, and by 2007 it reached a peak at 12.8 million. Since then, the Mexican-born population has declined, falling to 11.7 million in 2014, as the number of new arrivals to the U.S. from Mexico declined significantly. For a very interesting time-lapse graphic on this click on the title below:

From Ireland to Germany to Italy to Mexico: 

How America’s Source of Immigrants Has Changed in the States, 1850 – 2013