The Fall of An Empire


The Fall of An Empire

(9 votes)

Written by Ezra Paskus

Wednesday, August 29 2007

I've recently been hearing and reading a lot of noise about the imminent collapse of Panama's real estate boom. Everyone, and I mean everyone, is prophesizing the end is near. From our own esteemed Matt Landau, to the Miami Herald, to the guy beside me at the bar, everyone is waiting for the hammer to fall. So I thought I'd get in on the act.

I recently read an article on Yahoo! News that explained that mortgage foreclosures in the USA have risen 98% from a year ago. One in 600 mortgages there has been foreclosed on.

Will this affect Panama? Will people stop buying here because the American real estate market has crashed and properties are now cheap again? Or does Panama soldier on at exponentially rising prices not based one lick on the American market?

My old man seems to think that it will; that two things will happen. One: condos under the $100,000 mark will continue to sell like Seco at the Boquete Feria. Two: speculation investors will stop buying up real estate and second home buyer will disappear as well. The only ex-pats moving here will stay here.

I disagree. I don't have my father's time on this earth (experience?) or his penchant for nay saying (wisdom?). My wisdom and experience comes from Jerry Reed who says... when you're hot, you're hot, when you're not, you're not. And Panama is still very, very hot. American ex-pats still have that unfathomable and unbreakable connection to the USA, and sometimes cannot get beyond the idea that the world does not always revolve around those amber waves of grain.

Here in Boquete, prices continue to rise, in part thanks to those same speculators and second home buyers. If I did have to nay say, and sometimes it's just genetic, I would say that Panama is indeed the size of North (South? Man I have to do some research) Carolina and does not, in fact, have an unlimited amount of available lands for sale. Boquete seems to have simpler rules then Panama City. The laws of supply and demand apply to the real estate market here. Limited supply and high demand dictate higher prices.

Another factor that I am continued to be alarmed to see is the amount of lands for sale by owner and I call the listed number to talk to a guy in California who has no realistic connection to market prices and values in Chiriqui. He probably read somewhere that Boquete prices are in the $50 m/2 range and took it as fact. When in reality, he read it in an advertisement for some gated community that was trying to show why at $40 m/2, their option really was the best option. So... he thinks to himself, self, I will ask $30 m/2 and be just about right on. And so, his neighbor sees the price and thinks to himself, self, my property is just as good as his, I should sell for the same price.

But wait, I'm not done nay saying. People aren't really scared of a market bubble pop, because in the back of their mind, they are tired of being 4 years too late in picking up that hell of a deal. A market drop would allow them, if they've thought ahead and believe me, some do nothing but think of this, to turn the clock back and pick up those deals they just missed out on.

But let me illustrate, and here's the nay saying, how this lack of a busting bubble affects us. I used to live in a boom town of retirees and tourists, Lake Havasu City, Arizona. This little town on the shores of a man made lake had all the fixins to hit it big; water sports, MTV Spring Break, the London Bridge, two hours from Vegas, and four hours from LA. So who the hell cares that is in the middle of the Mojave Desert? It's got no winter, good medical facilities for the old folks, and CHEAP REAL ESTATE. Before you could say Mojave Indian Reservation, the place was blowing up. New roads, new sub-divisions, contractors everywhere, Wal-mart, Home Depot, In-and-Out Burger, anything you could imagine. The locals sold out when the price was still cheap, the service and tourist industries exploded, and when those locals tried to buy back in, they couldn't afford the now expensive real estate with their wages from Long John Silver's. When those retirees croaked off or went back north for summer, un-employment sky rocketed. Then the price of fuel doubled.

Those LA hipsters weren't willing to fill up the tank on the car, drive 4 hours, and fill up the tank on the boat just to fish, cruise, or look at tits on the lake. The city council got too many complaints from the old folks about the ruckus from MTV, so MTV didn't bring in the kids and cash flow anymore. The prices for commodities topped off too high (that law of supply and demand again) and the old folks just couldn't afford it anymore on their fixed retirement income. The real estate market stagnated and the town started to have that dead man stink. A town living off of restaurants and hardware stores just couldn't survive.

Well, I guess my view of the world still is a little based on the stars and stripes, but a lesson learned is a lesson learned no matter where. Boquete, Arizona?

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Last Updated ( Saturday, August 25 2007 )

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