Investors seeking a way out of the US sub-prime woe should consider Mexico…

Mexico now boasts a thriving housing sector whose record growth leads Latin America — a sign of increased economic stability and an outlet for investors looking to escape the U.S. downturn.

Juan P. De Mollein, Managing Director for Latin American structured finance at Standard & Poor's commented: "Mexico is in the early stages of expansion. There are still plenty of points for evolution because there's still plenty of demand. Mexico doesn't have a credit issue - we can still choose our borrowers because demand is so great.

In the U.S., lenders looking to expand their portfolios granted risky mortgages to borrowers with weak credit, but in Mexico, that "subprime" category doesn't exist, because lenders don't need it to grow. Also, few Mexicans flip homes or refinance mortgages, keeping the market more stable.

Recession could ‘choke’ Mexico

A recession north of the border could choke U.S. investment in Mexico, curbing job creation, discouraging new homebuyers and stalling housing growth.

Housing demand could swell more as migrants are pushed home by the souring U.S. economy and crackdown on illegal immigration — generating four new jobs for every home raised, said Carlos Gutierrez, Mexico's housing policy director.

All this represents a major change from 1994, when Mexico devalued the peso, sending inflation and interest rates soaring, forcing homeowners into default and pushing banks to the brink of collapse. Credit was so tight that most Mexicans paid cash upfront or constructed their own homes, often adding one room at a time.

Since then, Mexico has seen a housing recovery built on a mix of government initiatives, private investment and a winning gamble by a new group of entrepreneurs who took a local approach to mortgage lending, using knowledge of family and neighborhood connections to make sure loans got paid.