Why the Los Cabos Real Estate Market is different

January 4, 2025

Home Real Estate Markets are Primary Home Markets

Most ex-pat buyers and sellers are more familiar with real estate markets at home in the United States, Canada and other locations around the world. These markets are Primary Home Markets and the market focuses on properties bought for owner-occupancy where property owners live fulltime. As a personal residence, this property is where the owner(s) establish residency, votes, and receives mail. That real estate market is driven by local economics, job markets, school districts, and proximity to necessities (work, family, amenities). In these markets demand is generally more stable.

The Los Cabos Real Estate Market

The Real Estate Market in Los Cabos is largely a Secondary/Vacation Home Market and an Investment/Rental Market. Yes, there is a Primary Home Market here for Mexican nationals and ex-pats who make Los Cabos their full time residence, however the market is minimally driven by the behavior of fulltime residents. There are two distinct market types, though they are often grouped together: Second/Vacation Homes and Investment/Rental Properties.

Second/Vacation Home Property Market

Properties purchased in second/vacation home markets are for personal use for part of the year for personal enjoyment, as a retreat for the owner and to escape northern winters along with many other reasons. This part of the Los Cabos market is heavily influenced by seasonal demand, weather, tourism trends, and recreational appeal (e.g. amenities, beaches, off roading, fishing and luxury resort settings).

Investment/Rental Property Market

This part of the Los Cabos market centers on properties purchased primarily to generate income (rental income or appreciation). Properties are intended for income generation and not intended for full-time or primary personal use. This part of the Los Cabos market is driven by rental demand, ROI, (return on investment), vacancy rates, and the potential for appreciation. There is also substantial interest in vacation homes until retirement that an owner would rent out until they are ready to occupy more frequently or full-time upon retirement.

While there are many Investment/Rental Property options available, the Los Cabos Market broadly behaves the most like a Second/Vacation Home Market.

How the Los Cabos Market behaves vs Primary Home Markets

Seasonality

Seasonality is a huge factor in the Los Cabos market. Below are charts that demonstrate how seasonal our market is. High Season is typically November through May and Low Season is typically June through October. When seasonality is illustrated as a percentage of sales that year, we see a reliable trend over the past 5 years that 70% of annual sales occur in high season while 30% occur in low season. Both on a percentage of the annual unit volume and dollar volume.

Primary home markets are not affected by seasonality aside from minor spring/fall peaks. Annual sales will to occur throughout the year and will vary more on a year by year basis based on local economic activity. There is a bit more seasonality in colder climates in the US and Canada where buyers and sellers like to avoid moving in the winter.

Average Days on Market

This metric measures the average number of days a property stays on the market before going under contract.

In a Primary Home Market, Days on Market is generally lower with 30-60 days being common. Buyers are often driven by necessity (job relocation, school district, family size) and need to close quickly. Long DOM for a property can signal a problem. DOM will have lower volatility, and tends to stick closer to the local average.

In a Secondary Home Market, Days on Market is generally higher with 90-180+ days being common. Buyers are driven by discretionary income and lifestyle; they can afford to wait for the “perfect” property. A high DOM is more acceptable and common. Days on Market can also spike severely during economic downturns as discretionary items are cut first.

The Los Cabos market displays traits of the second home market with a reliance on the economies of the United States and Canada. DOM here is typically in the 90 to 180 day range and sometimes higher.

The chart below shows Average DOM for the Los Cabos market. Average DOM declined in 2021 to 2023 with low inventory and high sales volumes.

Sale to List Price Ratio

The Sale to List Price Ratio, expressed as a percentage is a metric that illustrates close properties are selling to their final asking price. If a property is listed for $1m USD and sells for $950k USD, the Sale to List Price Ratio is 95% ($950,000 ÷ $1,000,000 x 100 = 95%).

In a Primary Home Market, Price negotiation tends to be tighter, closer to 100%, due to urgency and financing as lenders appraise based on comps. Selling above the asking price – over 100% is a clear sign of a strong seller’s market (bidding wars) and is driven by competition.

In a Second/Vacation Home Market, there is greater negotiation room, leading to lower sale to list price ratios, often less than 95%, particularly in a Buyer’s Market. Vacation homes are often priced optimistically by sellers who don’t need to sell immediately and have time on their side.

The Los Cabos Market displays same traits of the second home market with pricing more on the optimistic side with sellers looking to fetch top dollar. Pricing in the Los Cabos market is challenging to get right for an expeditious sale because of the fear of leaving money on the table. While purchases here are largely discretionary, they tend to be buoyed by emotion and confidence in circumstances back home.

Historical Sale to List Price Ratios are illustrated in the chart below. Our market experienced some tightening from 2021 through 2023 with ratios rising above 95%. Recent years have seen ratios between 90% and 95%.

Sales to New Listing Ratio (SNLR)

This metric, expressed as a percentage, compares the number of properties sold during a period to the number of new listings that came onto the market during the same period measuring replenishment. For example in a market for a given period, 100 properties were sold and 200 new property listings were added the the SNLR would be 50% (Sold 100 ÷ New Listings 200 x 100 = 50%).

In a Primary Home Market, there is lower volatility in SNLR with demand (sales) being relatively constant. In a Primary Home market a 40%-60% rule for SNLR is standard to indicate neutral buyer/seller favor. Above 60% favors’ sellers as replenishment is less and buyer choices dwindle. Below 40% favors buyers as replenishment is much higher providing more choices to buyers.

In a Second/Vacation Home Market, there is higher volatility in SNLR where a seasonal rush of new listings can drastically drop the ratio if sales don’t keep up, or a spike in tourism can boost sales and artificially inflate the ratio. Due to seasonality, SNLR is often better analyzed using a 12-month moving average to smooth out the spikes and troughs common in resort areas.

The Los Cabos market displays same traits of the Second/Vacation Home market with a balanced market being between 40% and 60%.

Historical SNLR for the Los Cabos Market is illustrated in the chart below. The green solid line is the SNLR Overall 12 Month Rolling Average which smooths out seasonal variations between high and low season. SNLR was very high from 2021 through 2023 as inventory remained tight.

Months of Inventory (MOI)

This metric indicates how long it would take to sell all the current properties on the market if no new properties were listed, assuming the sales pace over the past 12 months. For Example a market that sold 1,000 properties in a 12 month period and has an inventory of 1,500 would have an MOI of 18 months (1,500 ÷ 1,000 x 12 = 18 Months).

In a Primary Home Market, MOI tends to be balanced at 4 to 6 months. Sales are consistently high, driven by the resident population activity, so supply is absorbed quickly. MOI in a seller’s market would be less than 4 months.

In a Second/Vacation Home Market, Sales are more seasonal and tied to tourism/vacation cycles, leading to slower overall turnover. The market can sustain a higher inventory level without crashing prices. MOI in a sellers market may be under 6 months with the threshold being higher because the market can tolerate more inventory before sellers lose leverage.

The Los Cabos Market displays similar traits of the Second/Vacation Home Market with higher MOI levels. Overall, our market, when balanced tends to range from MOI of 6 months to 12 months. As inventory has grown in the market, MOI has grown and we have pushed past 12 months.

Historical MOI for the Los Cabos market is illustrated in the chart below.

Note MOI noted below is an overall market indicator and there are price points and certain luxury segments that are closer to balanced or even in seller’s market range.

Market Trends

Within the Los Cabos Real Estate Market there are price points, segments and products that are exhibiting different dynamics and behaviors suggesting they may run against the grain or far beyond it. Noteworthy parts of are market are:

$2m to $5m USD Luxury Segment – the most active price point since 2021 with sales of $2.1 Billion USD. While occasionally long on inventory this segment remains strong with an MOI of 21 months for houses, 39 months for Condos in Q4 2025. SNLR of 29% for both houses and condos Q4 2025, showing a growth in inventory. This segment remains strong and defies overall Los Cabos market metrics.

Two bedroom condos – as a result of the boom in two bedroom condo sales in 2021 (737 units), developers responded with numerous condo developments and substantial pre-construction sales. Those developments have been delivering units in 2024, 2025 and more to come in 2026. The vast majority of these units were two bedroom units which were enthusiastically acquired as developer directs sales by second home buyers, investors in investment clubs and other investors. With delivery upon them, the pre-construction buyers are entering the resale market at a time when two bedroom condo sales have declined to levels below 400 units per year. Inventory levels for 2 bedroom condos have grown through 2025 to well over 700 units, never before seen heights in Los Cabos.