PUERTO VALLARTA, MEXICO. Standing on our 10th-floor balcony at the Westin, my wife hands me her binoculars. “I think they added the verticals for another three floors while we were having lunch.” She points to the framework for yet another skyscraper along the Banderas Bay shoreline.

This is not the usual use of her binoculars. For much of the last week they have been focused on the pelicans and frigate birds that cruise the shoreline or have checked out the regular parade of sail and power yachts that emerge from nearby Marina Vallarta. But today she wants me to watch the high steel workers maneuver a girder into place as they stand precariously over about 13 stories of air. Beyond this building, three recently completed 20-story buildings stand, awaiting occupants. And up the beach a few steps in another direction there are still more condos with magical names--- Shangri-La, Grand Venetian, Portofino, and Bay Grand.

In fact, new construction goes far beyond the confines of Puerto Vallarta. It is everywhere along this beautiful coast. In the places where it is not yet completed, billboards (in English) announce the imminent arrival of another opportunity to live in unsurpassed luxury and elegance where you can view the world from a plethora of infinity pools. Even distant Sayulito, the charming, funky surfing town celebrated by Barry Golson in “Gringos in Paradise,” is booming with new construction. Here, in this part of Mexico, real estate is big business.

It’s good to know, of course, that if a shortage of condos develops in Miami, there is a backup supply in Puerto Vallarta.

What that means for anyone who has contemplated a second home in Mexico or retirement in Mexico is very simple: A buyer’s market is either here or on its way. The supply of condos and homes for sale exceeds demand.

But let’s put it another way. While the number of millionaire households in America has shown stunning growth in the last few years, millionaires are still in short supply relative to the number of luxury opportunities that have been created.

Does this mean a crash is coming to Puerto Vallarta? I wouldn’t bet on it. The market here isn’t likely to suffer the steep declines we’re seeing in places like San Diego, Las Vegas, and Miami. Here’s why.

According to Vallarta Lifestyles, whose current 265-page issue is bursting with real estate ads, the average condo resale price rose 79 percent from $196,000 to $351,000 between 2003 and 2007. That’s a hefty premium over the 32 percent increase in the OFHEO (Office of Housing Enterprise Oversight) index for the United States over the same period or even the 50 percent increase for the Pacific states. Sounds ripe for a fall, doesn’t it?

Not so fast.

The appreciation isn’t so stiff if you pay in euros. Remember, the euro has appreciated about 25 percent against the dollar over the same period. As a consequence, our real estate (and Mexican oceanfront real estate priced in dollars) looks a lot less expensive to Europeans than it does to us. Europeans, Asians, and Canadians could buy a lot of the inventory. Lots of Brits and Germans are here.

Another thing to remember is that Mexico isn’t blessed with our creative financing. Indeed, home mortgages barely exist. Most homes are purchased for cash. So if speculators have bought houses and condos in Mexico, they’re probably well financed speculators compared to the folks who used Liar Loans to borrow their way to bankruptcy in America. Here, property owners are likely to hang tough, waiting for a better market. There will be fewer distress sales.

Maybe.

But there is a reason all those billboards are in English. Americans are the primary buyers in Puerto Vallarta. And the majority of them are from California. I would not be surprised if many of the condos sold in the last few years were purchased with cash from refinancing a house in California. As a result, the supply of houses for sale in PV may increase significantly in the next year or so as Californians look for a source of cash and find it in Mexico.

Bottom line? It won’t have the stark drama of places like Fort Myers, Fla., or Stockton, Calif.  But Puerto Vallarta looks like a long term opportunity for buyers and renters alike

Sidebar: Yes, Real People Can Live in Mexico

Dreaming about living in a place like Puerto Vallarta but don’t have $3.5 million for a condo penthouse? Not to worry. Your dreams can still come true, even though you’ll need more than the $1,500 of monthly income required for the long-term visa. Within half a block of Marina Vallarta you can buy older two-bedroom, two-bath condos for $125,000 in a complex with gardens and a pool. You can also buy new homes for less than $200,000, some with golf course views. Yes, there are abundant opportunities to pay more. But it isn’t required.

The marina has ample restaurants and bars, laundries, dry cleaners, salons, and a café for exchanging books. Internet access is common and easy. There are also two supermarkets a few blocks away, not to mention a nearby Wal-Mart and a Costco. My wife and I figured the marina area offered enough that it would not be necessary to own a car if we were to live here or take a long winter rental. Cab rides into the downtown boardwalk area are only $5. Bus rides are only 50 cents. The airport is only a mile away, with plenty of nonstop flights to Phoenix, Denver and Dallas.

The biggest worry most retirees have about living in Mexico is the loss of Medicare coverage. Well, that isn’t entirely true. Medical services are available at the marina. On a visit to the AmeriMed clinic there, manager Antonio Arce told me that Americans with Medigap insurance from Blue Cross Blue Shield had no problem getting medical treatment, and AmeriMed had no problem getting paid. Treatment is not just for bruises and turista either--- those with clinical needs, such as Coumadin/warfarin patients in need of regular blood tests, can get them here.

Don’t want to live in sunny Mexico unless you have a water view? Then live on a boat. At a nearby boatyard, I inspected a well-equipped, 34-foot sloop. Maine-built in 1982, it was in primo condition, had a lovely all-teak interior, modern electronics, solar panels, etc. It had berths for 5, but two could use it as a full-time live-aboard boat. Offered at $50,000, the boat has been listed for sale since last summer, so it can probably be purchased for less. Then you can rent a slip at the Marina for about $500 a month.

Tire of sunshine? Then sail to Seattle.

No car. Water view every day. Magnificent water views every time you sail. And all the shopping you can stand within a half mile. Long happy hours. Two-for-one margaritas at the end of every dock. Sounds like a plan.

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