As Mexico’s housing market contracts and mortgage rates remain stubbornly high, demand for land acquisition is surging. Between January and April 2025, INFONAVIT reported a 46.8% spike in loans for land purchases, signaling a shift in homeownership strategies as buyers turn to long-term planning amid a stagnating supply of new housing and rising property prices.
Between January and April 2025, Mexico’s housing finance landscape experienced a significant transformation. While overall mortgage originations declined across the financial system, INFONAVIT reported a 46.8% annual increase in credit allocated for land acquisition, according to its latest performance indicators bulletin. This positions land acquisition as the second-fastest-growing use of financing from the institute, just behind debt repayment, which rose by 53.9%.
Land Acquisition Rises as Traditional Home Purchases Decline
In contrast, traditional housing finance showed notable declines. The number of mortgages used to purchase new homes fell by 7.3%, while those for existing homes dropped by 7.5%. Overall, credit originations across all categories dropped by 10.6%, from 172,900 formalized loans in the first four months of 2024 to 154,600 in the same period this year.
This shift occurs within a context of low housing production, which remained nearly stagnant. From January to April 2025, only 39,400 new homes were built, down 0.6% year-on-year, according to INFONAVIT’s Quarterly Economic Report.
Reallocation of Credit Use Reflects Changing Priorities
The surge in land-related financing reflects a broader reallocation in the use of INFONAVIT credit lines. While credit for land purchases rose from 1,300 contracts in early 2024 to 2,000 in the same period of 2025, other credit categories contracted sharply. Credit for home construction fell 41.6%, and improvement loans dropped 20.3%.
This change coincides with a challenging lending environment. According to INFONAVIT, despite three benchmark interest rate cuts by the Bank of Mexico, totaling 150 basis points, mortgage rates in the banking sector remained stubbornly high. As of March 2025, the average simple mortgage rate from banks stood at 11.65%, while the weighted average was 10.58%. In contrast, INFONAVIT’s simple average rate was 7.38%, and its weighted average 9.0%, both determined by borrower income.
Market Contraction and Rising Prices
Mexico’s broader mortgage market is also tightening. Between January and February of 2025, mortgage originations dropped by 22%, with only 143,200 loans issued. The total value of loans fell by 4.8% in real terms, reaching MX$76 billion (US$4.04 billion). INFONAVIT alone saw a 13.1% drop in credit volume and a 1.1% real decrease in disbursed amounts. Commercial banks reported a 9.3% decline in the number of mortgages and a 5.9% drop in value.
Despite the reduction in financing, housing prices continued to rise. The average price of a home purchased with a mortgage rose 8.2% in 1Q25 to MX$1.85 million (US$97,027), reports MBN. Used homes appreciated slightly more (8.3%) than new homes (8.0%), and economic-social housing led price increases with a 10.3% surge. Mid-residential housing saw more modest growth at 6.9%.
Cities like Tijuana and Leon topped price growth with increases of 11.1% and 10.9%, respectively. Other key metropolitan areas such as Guadalajara (9.8%), Puebla-Tlaxcala (9.6%), and Monterrey (9.1%) also exceeded the national average. Meanwhile, the Mexico City Metropolitan Area (ZMVM) and Toluca posted more subdued increases of 5.3% and 5.0%. SHF data shows that 62.5% of housing transactions during this period involved used homes. Despite rising prices, the number of appraisals decreased by 4.1%, suggesting growing caution or limited demand.
Federal Housing Program Expands Scope
In parallel with market shifts, the Mexican government is aggressively expanding its Housing for Well-Being Program (PVB), which aims to build 1.2 million new homes. On June 16, Edna Vega, Minister of Agrarian, Land, and Urban Development (SEDATU), confirmed that nearly 200,000 homes were under construction in 29 states, contributing to a 1.8% increase in construction employment as of April.
The program’s goals are distributed across key agencies:
To support these efforts, the government has already secured 222 plots of land (688ha) for over 90,000 homes. Construction is active or about to begin on 138,473 homes nationwide, with 62 plots designated for informal workers. In the coming months, 28,000 homes will break ground across 72 sites, with another 74,000 homes set for construction by fall, reports MBN.
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