Americans look to the next Baja boom town

When David Butterfield and his wife, Norma, turned 50 a few years ago they started thinking about retirement: Florida - not their style; southern California - too many cars; Hawaii - too far from family.

And then they stumbled upon Loreto, a sleepy Mexican fishing village cradled between craggy mountain ridges that tumble into the Sea of Cortez. It was perfect.

The Butterfields, Canadian-Americans who live in Scottsdale, Ariz., are in many ways typical of the hundreds of thousands of Americans who have, in the past decade, chosen to buy homes, or second homes, south of the border.

The only difference is that Mr. Butterfield, a multimillionaire developer, became so keen, so sure, so excited about the region and the possibilities here - that he decided to build not only his personal dream home, but a $3 billion, 6,000-home resort development.

Baja has long been a haven for Americans looking for a lower cost of living, cheap healthcare, warm weather, and a more relaxed pace of life. The 20-mile stretch of coastline between the towns of Cabo San Lucas and San Jose del Cabo on the southernmost tip of Baja is bursting at the seams with gated residential communities, private clubs, and designer golf courses.

But the housing boom beyond Los Cabos started only about five years ago, spurred by skyrocketing US real estate prices, and amended Mexican laws in the wake of the 1994 North American Free Trade Agreement (NAFTA) that encourage foreign investment and made purchasing beachfront land easier.

The increased availability of title insurance here, a form of protection for buyers should problems arise over issues such as ownership or unpaid taxes, has also helped the trend, as has the reluctance among many US travelers and investors to venture far from home after the Sept. 11 attacks.

Within two years of Butterfield starting his development, 524 other buyers had already signed up to be his neighbors - putting down $200 million - and sales are going strong. "I think," says Butterfield, "...it's coming together beautifully."

The Villages of Loreto Bay is the largest real estate deal ever made by the Mexican government and Baja's most ambitious housing project to date. At the moment, the 8,000-acre site features mainly hundreds of construction workers banging, building, and painting away day and night - and a few would-be buyers meandering in and out of the just-finished model first neighborhood.

But, within 12 to 15 years, if all goes according to plan, the development will include two 18-hole championship golf courses, a 5,000 acre natural preserve, a beach club, tennis center, and marina, as well as restaurants, and galleries to go along with the American and Canadian homeowners. Loreto's population is expected to grow in this time from 15,000 to 120,000.

The faith that Butterfield; his partner, Arizona developer James Grogan; and the Mexican government have in the development is based on a clear trend - there is a fresh Baja housing rush on.

The US Department of State estimates that out of the approximately four million Americans living overseas, between 600,000 and one million are in Baja and elsewhere in Mexico - up from about 200,000 a decade ago.

Gustavo Torres, a real estate agent in Northern Baja's Rosarito Beach, a one hour drive from San Diego, says his firm, RE/MAX, sells 10 to 20 properties a week. "Sales here have quadrupled in the last two years," he says, with prices going up at a rate of 15 to 20 percent a year. About one-quarter of the 55,000 residents in Rosarito today are Americans.

"Rosarito beach is in the eye of the boom," says Mr. Torres, who estimates the next "hot area" will be Ensenada. And Loreto, he concludes, "is what the future is all about."

The Loreto Bay homes are priced between the mid-$200,000s for a 1,500-square-foot, single-family home to more than $2 million for a custom-designed, oceanfront house. "The days of finding a $30,000 beachfront property in Baja, are basically over," admits Torres. "But compare prices to the beach in California, and it's still a steal."

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