There are few market segments that I find as curious as Geneva National. Under no other particular context does one association make up its own market segment, but here we are, knocking at these gates. The fact that this large association functions as its own market is something that vexes those who live and play there. Why can’t a buyer just be on the hunt for a Lake Geneva area condominium priced under $500k? Why must a buyer seek out Geneva National specifically if they wish to buy one of those condominiums? Why does a homebuyer who purchases a vinyl corn-field tudor for $500k neglect to first consider his options inside Geneva National? Does that buyer know that Geneva National is nicer, and objectively better?
For the year just ended there were 81 total MLS sales. Those sales ranged from small condominiums priced under $100k, to beautiful newer homes priced over $1MM (two sold over $1MM last year). As we sit just inside the parameters of 2019, there are only 36 available homes and condominiums (ten more properties are under contract), including two properties listed incorrectly in the MLS as single family homes (these are technically all condominiums). The fact that an agent listed two homes as single family might be a sloppy mistake, or it might just drive home the point I made in the opening paragraph. If you want to sell Geneva National’s single family homes, are you better off pretending they’re not inside Geneva National?
I think the answer is no. Or at least it should be no. Geneva National is back, and it really is better than ever. Sure, there are still homeowners residing inside these brick and cedar behemoths that were built prior to 2006, those with dated finishes that the owners don’t think are dated. Sure, there are still lots that can be bought for the price of a high mileage used Corolla. But the market has mended, and the volume from 2018 is a sure sign that things are back to stable. While I enjoy seeing lots of sub-$200k volume, the true measure of Geneva National is in how it deals with its expensive inventory. Continued high volume years would be nice, but that’s not necessary to continue the momentum that GN has successfully built over recent years.
Over the last six years, Geneva National has averaged 2 sales over $700k each year. 2017 printed just one sale at that level. 2018 closed four sales over $700k, and that might be as good of a sign as any for this embattled association. Sell the higher end inventory and you’ll give buyers confidence to move up in price. You’ll give vacant land buyers confidence that their new build makes some market sense. And you’ll give current owners confidence to update those awful 2003 bathrooms. Broad market activity is terrific, but the real positive out of Geneva National in 2018 was an increase in upper bracket liquidity.
To understand how far Geneva National has come, you need only look back to 2012. That year was likely the bottom of the last market cycle, and during that dark year Geneva National closed just 35 single family and condominium properties. For each of the last two years, GN has closed over 80 such properties. Current inventory is low, but there are several high dollar properties on the market today that will test the continued momentum of this large association. Will buyers at the high end appreciate the country club atmosphere, complete with new pools and tennis, to such a degree that they’ll provide liquidity over $1MM? Or will those higher value buyers continue to opt for the lakeside lifestyle that the Lake Geneva lakefront and lake access market provides? Only time will tell, but if I was a betting man, I wouldn’t bet against Geneva National in 2019.
When we entered 2018, we knew we had some inventory problems. This was widespread throughout the vacation home market, from entry level cottages to lakefront estates. What we also knew was that buyers rarely find the patience to stand back and wait for the perfect piece of inventory, instead they tend to wait for a bit, and then default to the next best thing. If you were looking for a lake access home with boat slip last year, you know how difficult the hunt was. The good news is that we can now test our theories: If there weren’t ample offerings with slips, then the market should have shifted towards condominiums as buyers looked for similar attributes and price points in a different ownership model.
The good thing for 2018 is that our model held up. Low inventory in the single family lake access market propelled sales of lakefront condominiums to a multi-year high. During 2018 we closed 15 total lakefront condominiums, up from 12 in 2017 and eight in 2016. If we look deeper into the trend, we know that buyers have shown an increased desire to be walking distance to downtown Lake Geneva. If they want a slip and want to be close to downtown and they have a typical condominium budget of less than $800k, then Vista Del Lago should have had a stellar year. Guess what? It did.
There were seven sales in Vista for 2018, priced from $355k to $580k. I personally sold two four bedroom units (the largest in the complex) for $520k and $515k, respectively. Those sales were off-market, as buyers looked for inventory that didn’t exist, and their smart agents contacted me to find out what might have been available privately (you should do the same). Vista has had some tumult over the past decade, but the best possible thing for any association that’s on the rebound is volume. Vista, congratulations on 2018.
Around the lake we had two sales at Geneva Towers, both lower priced sales sub-$400k. There were no sales at Somerset, Harbor Watch or East Bank, those three higher value condominiums on the eastern shore. Working around towards Williams Bay, Bay Colony closed two units at $565k and $530k, and there weren’t any sales at Bay Shore or Bay Colony South. Fontana Shores, that brick condo north of Gordy’s, closed two units. A two bedroom for $494k and a one bedroom for $405k. At the Fontana Club, over in Glenwood Springs, there were two sales, though the sales were of the same double unit. The combined unit (that I had sold previously) sold in early 2018 for $685k. Then the owners renovated it, and put it back for sale in the fall. It closed late in the year for $835k, likely representing a meaningful loss for the seller.
It’s fun when a market allows you to prove a theory, and in 2018, the mid-range vacation home market did just that. Some buyers, if faced with a lack of inventory in their target segment, will reach up. That’s common here. In fact, I can’t tell you how many buyers I’ve worked with started with a a target of $500k and ended up spending $900k. Lake Geneva can do that to a person. But what’s more likely, is for a buyer to look around at his desired price range, and in the absence of inventory, she’ll look away from single family homes and to the lakefront condominium. Prices have lagged in the lakefront condo market even as the single family homes have appreciated. That creates some value, and when you combine value with inventory, you have the makings of a terrific year.
We know the trend. It’s not just here, but it sure is pronounced here. It’s not just a trend on Geneva, it’s a trend on our other, secondary lakes as well. Construction. It’s everywhere you look. Delavan is full of construction, Lauderdale, too. Heck, even Lake Como has a strong movement of new construction. Gentrification, is good, everyone except the hipsters say. Out with the old and in with the new, this is our progress. This is what we were made for. To improve, to manipulate, to grow. Geneva is certainly taking that mantra to heart, and we’ve been building and building, and in fact, we just might build until we can build no more.
I left my office this week in the rain and drove around the lake. Down the roads that lead to nowhere, around the corners where the summer lives. In Williams Bay, there’s a large scale lakefront remodel that’s been in process for well over a year, and there are two spec homes that have recently been completed. Further south, there’s a rumored new project underway, that where two lakefront homes will replace one lakefront home. More on this trend later, but overall it’s a negative trend for our lake. If you care about this scene, fight against density.
In the Elgin Club, there’s a new build that’s just about done. There’s one nice sign in the Elgin Club- a neighbor purchased a home and knocked it down, perhaps to create a peaceful side yard. That’s the sort of trend I wholeheartedly endorse, and I do hope that more lakefront owners take advantage of purchasing neighboring properties when they come to market. Fewer homes, that’s what we need.
In Geneva Bay Estates there’s a new foundation where a modest ranch once grew. There’s a patch of dirt in Geneva Manor where a home recently stood. That wasn’t a lakefront home, but it was sort of like lakefront, so it matters. $900k or so for a tear down here isn’t something I’d sign up for, perhaps chiefly because of the tax bill that the City Of Lake Geneva likes to gift to new owners. Speaking of, did you know that the combined Stone Manor tax bill for the majority owner there is now nearly $300k? And the city hassles over permit applications, for shame.
Around that corner of the lake there’s a new build just finished on LaGrange, and a new complicated build underway on Marianne Terrace. That’s a project led by Lowell Management, and that’s a good thing. This site is unique, more like Malibu than Lake Geneva, and I have no doubt that the finished product will be beautiful and well executed. The lakefront in Loramoor is humming along, looking sharp as it has since it first rose from that dirt (that I sold) in late 2017. At the bottom of Sidney Smith, there’s still the home that’s been under construction for years, looking, well, still unfinished.
On Maple Lane, two new homes were just built, and there’s a new spec home taking shape there along that stretch. Those are easy, deep, 100′ level lots, so it makes sense (in one way) why people are drawn to that spot on the water. In Fontana, there’s a new build on the hill above the lake, but it isn’t lakefront, so it shouldn’t count. No matter, you’ll still see it from your boat this coming summer.
The lakefront has plenty of new construction, this you can see. But I’m not thrilled with much of it. There are large, awkward houses being planted on lots that just can’t support that sort of heft. We don’t have any architectural approval committee for the lakefront, and in some ways, that’s a positive. But in other ways, it sure would be nice to have a panel to look over these builds before they rise. I dislike the trend of splitting lots, perhaps unless those lots are at least 200′ in width. The issue I have is when smaller lots are created out of old plat standards. The houses that tend to be built on the smaller lots rarely fit the neighborhoods. They aren’t cottages. They’re monstrosities looking to maximize living space and minimize neighborhood charm.
Even so, Lake Geneva is continually improving itself, and one day, we’ll look around and have nothing left to improve. If you’re a fan of this lake and wish for it to remain intact long after we’re all gone, you have but one aim. Root for less density. Root for fewer associations. Fight against keyhole developments (much like the one proposed for Basswood last year). It’s easier to knock down charm and replace it with mass efficiency, but is that what’s best? I don’t think so.
The year just ended was, by most accounts, a good year. But that’s a silly way to describe something as diverse and unique as a year. That’s like booking a table at Alinea and after four hours and 20 courses you take to your social media account to describe the meal as “good”. That wouldn’t happen, and that’s just a meal. How much more deserving of proper critique and detail is an entire year of our lives? Now that I’ve built this thing up, let’s dumb it back down and talk about the lakefront market in 2018. The year? It was pretty good.
We started 2018 with light inventory, just ten lakefront homes were available at the onset of 2018, and that limited inventory forced me to worry about what the year was going to look like. I knew there were buyers, plenty. I knew we had pending sales to give us a nice start to the new year. And I knew the stock market looked stable on the heals of a Federal tax cut. But what I didn’t know was how much more inventory we’d add, and how firm the buyer’s resilience would be if we didn’t add enough inventory.
That’s what matters, after all. The buyers. See, a Lake Geneva lakefront buyer is generally only a Lake Geneva lakefront buyer. But that motivated dedication only lasts for so long. If you have a buyer and they can’t find what they’re looking for, they’ll wait, for a while. They’ll come up to look at a lame new listing, and then they’ll come up again to look at another lame new listing. They’ll stay engaged, because the lakefront life is the life they want to live. But after time, that passion erodes into frustration, and frustrated buyers have a tendency to wander. Why spend so much effort waiting for a perfect lakefront on Geneva when Michigan has a whole state full of average vacation homes?
I know, and you know, and that buyer used to know, that a Lake Geneva lakefront is not like any other lakefront. But desperate times call for desperate measures, and I worried that the desperation of 2018 would lead some buyers astray, and no doubt it did. But the year just ended with 23 lakefront sales (24 with the vacant lot included), including two in the South Shore Club and one in Buena Vista (technically not private frontage). That number is down from the 2017 total, but considering the limited inventory, that number is a terrific total.
In all, we printed 2536 feet of lakefront shoreline, up from the 2017 total, but less than the 2016 total of 2882. That includes one lakefront vacant lot on the North Shore. We sold just over two million square feet of lakefront land mass, and more than 115,000 square feet worth of living space. Prices ranged from $11,250,000 for a North Shore estate, to just over $1.1MM for a Walworth Avenue cottage. For my involvement, I ended 2018 as the number one individual agent in Walworth County yet again (per MLS), with more than $35,000,000 in closed transactions, so that’s nice.
The lakefront loves its price per foot (PPF) measurement, that is, the total value of lakefront sales divided by the total amount of lakefront feet sold, this we all know. You should also know that I don’t love this measurement, as it really only seems to apply to lakefront homes in the 100′ range. 200′ lakefront lots experience compression of the number, in the same way that lots under 100′ tend to overachieve. We ended 2016 with a PPF of $27,193. We ended 2017 at $27,578. And after the activity and bustle of 2018, we finished the year at $27,684. For the buyers who think this market has spiraled upward and out of control, consider those numbers. Does that seem like unsustainable, unwarranted price growth?
For 2018, we’re going to look a bit deeper at the numbers. We know our market was skewed by the $11,250,000 lakefront sale, that of 415 feet of frontage and almost 20 acres. We had an average number of entry level lakefront sales last year, closing four lakefronts under $1.7MM. The remainder of the lakefronts fell into somewhat familiar price categories. Let’s throw out our outliers at the high and low of the market, and pull our 2018 numbers from the remainder of the lakefront transactions.
With that in mind, our PPF figure for 2018 actually goes up, to $27,994. If you look at the purest way to measure the accuracy of that number, you needn’t look further than the 100′ vacant lot that sold on North Shore Drive last summer. That 100′ sold for $2,750,000. That’s easy justification of the average. But there’s more to the lakefront than a basic price per foot tally, there’s also the average price per square foot of the structures themselves, as well as the price per square foot of total land mass. For these two figures, we’re going to keep with our habit of throwing out the high and low 2018 outliers, as well as the South Shore Club sales and the Buena Vista sale, as these are not true lakefront sales (even though the market treats them as though they are).
2017 registered an average housing price per square foot of $560. 2018 pushed that average up to $625. For the overall land mass statistic, we had a 2017 average of $58.09, whereas 2018 just printed a $51.66 average. Does that mean the value of lakefront land actually decreased in 2018? Of course not. None of these metrics individually tell the story, which is why to judge the performance of our lakefront market you need to figure and consider all of them.
Today, there are just nine lakefront homes for sale on Geneva. If you remove the Fontana home that has shared frontage and a shared pier, and you remove the Trinke property that has a lagoon between the home and the lake, then you’re stuck with just seven true lakefront homes on the market. Of those, the least expensive is listed over three million dollars. Not cool if you’re a buyer. But if you’re a buyer, I have some good news for you in 2019.
The recent tumult of the stock market is a difficult situation for the lakefront market. Rising interest rates don’t bother us very much, but a decline in invested assets does. With this in mind, our stable of confident lakefront owners will find a few who dislike what they see, and those few might offer up some inventory that will appeal to the 2019 buyers. To be certain, there are plenty of buyers still. The low inventory of 2018 didn’t scare away everyone, though I’m sure there’s some guy sitting at his Michigan vacation home this morning what it is that he’s done. Pray for this man, and his family.
I’m anticipating inventory will increase in January, and you’ll see reduced prices in a few of the 2018 carry-overs. Most sellers don’t care if the market slows, but again, if you’re a buyer, you’re not concerned about most sellers. You’re concerned only about the position of the seller who owns the home you’d like to buy. 2019 is going to provide inventory, and for the buyers who have been waiting, the question will be how the seller prices line up with buyer expectations.
I think buyers will be a bit more shrewd in this new year than they were last year, but I have a bold prediction to make: 2019 is going to be just fine. We’re going to sell lakefront homes. The market is going to provide inventory. We’re going to end 2019 somewhat flat in terms of valuations and volume, but flat is just fine with me. Flat, in fact, is good.
The stock market is going to either go up or go down, but one thing will remain. People want something more. They want a place that means something to them, and to their families. They want to enjoy their wealth. We can’t buy more time, and while I’m also sad that my Apple stock has cratered, that isn’t going to keep me from wanting to enjoy my family and enjoy this place. And I’m betting I’m not alone, because what you see below isn’t something you can replicate in the city or the suburbs.
The problem with this tradition is that it’s based, at least somewhat, on emotion. On feelings. Which is why I told my daughter on Friday morning that we would not be cutting down our tree that day. Who could think about cutting a tree down under that blistering sun? Only a fool would cut down a winter tree on such a warm day. My daughter was distraught by the news, even as we spent some of that morning skiing the melting slush at Alpine Valley. Saturday was colder, but still warm. Sunday was chilly in the morning, and knowing I was running out of time to continue this tradition, we loaded up the Gator and drove down the road to pick, cut, and haul the tree that would become our 2017 Christmas Tree.
Fast forward. I sawed the tree down, we hauled it back on the roof of our UTV, my daughter beamed. I trimmed the trunk, crammed it into the heavy iron base, and in spite of five watchful eyes, the final adjustments to plumb and level left us with a tilting fir. The tote of 2016 lights was pulled from the corner of the basement, and the light checking process began. First strand. Works! At least a few of them did. The first half didn’t, the second half did. The next strand, nothing. And the third and fourth, nothing. A few more half strands, a few more duds. When the lights were all checked there were three sections in the working pile and ten in the garbage pile. The lights that I bought last year, carefully unwound and stored in my lidded tote, were duds.
Walmart could save us from the darkness, but when I stood in the light aisle, jostling for position and staring at the bounty of different lighting options, I felt uneasy. I know not to buy colored lights. I know not to buy flashing lights. The strobe effect is dizzying. There were LED and green wires and white wires, and larger bulbs and smaller bulbs. Bulbs shaped like teardrops and others shaped like gum balls. Some smooth and others rough like a cheese grater. I’ve erred before while buying lights, falling victim to the white wire strand when I clearly wanted the green wire. I surveyed the wall of lights. My daughter stood back, silent, knowing this was a decision for a father. For a man.
My wife had mentioned some lights she liked in the RH catalog. But this was Walmart, and so I’d have to match the fancy style with whatever lights were available in Delavan on that day. I settled on some LED lights that promised 25,000 hours of lighting. The bulbs were shaped, the glass etched, they were fancy. Expensive, considering the other lights on those shelves. I felt like I was doing the right thing, right by my daughter, right by my wife, right by the planet, on account of the LED.
I’m a big fan of the big reveal, which meant I wouldn’t turn on one section of lights before the entire tree was lit. The six boxes were enough, if a bit light, as I should have bought seven. Maybe eight. But the tree was lit and the ladder was needed to get close enough to the top of the 15′ Fir. Now all we needed was an extension cord. After scouring the Christmas Totes, we had none, but we did have those left over strands of lights from last year, so we used that twinkly section to connect the outlet to our new, beautiful LED lights. There was no hurrah, no particular fanfare. No Griswold moment of delayed satisfaction. But when I plugged in those lights something awful happened. The LED bulbs turned on. Their eery, cold light pushed through the pine needles, barely. The late afternoon sun was fading by then, but the now lit tree somehow made the room darker. The lights weren’t white, not really. They looked white on the box. They looked white when we put them up. But now electrified, they were blue. I checked the remnant boxes that were scattered on the floor. Cool White. I bought Cool White LEDs, which are cleverly named because no one in their right mind would buy blue Christmas lights.
The greatest trick the devil ever played was not making people believe he doesn’t exist. No, his greatest trick was labeling blue lights Cool White. Tonight, there’s no need to ask me what I’ll be doing. I’ll be taking down Christmas lights and replacing them with ultra cheap, warm, glowing, green wired Christmas lights. And next year, I’ll throw those new lights into the garbage, because that’s our tradition.
In real estate, you either win sometimes or you lose sometimes. There is no such thing as winning or losing. You’re winning, a bit. Losing, a bit. Both, often, at the same time. That’s because you don’t have one boss, or two, you have dozens. Or more. They come and they go, they’re not your boss forever, usually. This is why I can be both hero and villain on the same day. In successive phone calls. Winning and losing, in the same breath. The goal of the real estate agent is to win a couple more times than you lose. To chalk up a few on the good side, to offset all of the ones on the bad. In 2018, I won quite a few, and it’ll mark my ninth straight year of winning more than I’ve lost. But don’t be confused, I’ve definitely lost.
In my case, those losses look like the homes that I haven’t been able to sell-yet. They’re the inventory pieces that didn’t quite work out- yet. They’re the sellers who have likely grown tired of me, but not quite completely tired of me- yet. With that in mind, here’s a run down on the scant few pieces of personal inventory that I haven’t been able to sell-yet.
If you’re looking for a condo on the lake, there’s really no better idea than this Bay Colony unit. It’s on the ground floor, which matters, a lot. You have a private outside entrance, so you don’t need to schlep your groceries through a common entrance and down a common hallway that may or may not smell like re-heated brats and mustard. The unit is fabulous. Obviously, tremendously, unavoidably fabulous. It’s easy to own, easy to use, and as luxurious as any hotel suite, assuming you’re staying at the suite with two bedrooms, two baths, a boat slip, lake views. Reduced to $799k, far below replacement cost.
If you’re searching for a lake house, but need a bit more flexibility than the condo can offer, then this property in Glenwood Springs is for you. This isn’t just some cottage by the lake. It’s the nicest cottage by the lake you’ve ever seen. Fully and outstandingly dialed, this Fontana retreat is finished to the highest standard. Four bedrooms, four baths, private pier (with shore station), lake views, and appointments that you just can’t find in this market in this price range. $1.295MM and your weekends will never, ever, be the same.
You won’t be surprised to learn that horses aren’t really my thing. And equestrian properties West of Walworth aren’t usually my thing, either. But this property was too interesting for me to turn down. 250+ acres. Woods, prairie, pasture, crops, river and hills. Swimming pool, tennis court, two guest houses. Stables and indoor riding arena, offices and more. This is a world class equestrian facility, yes, but you needn’t be a horse lover to find interest in this property. It’s a sportsman’s paradise, and it offers a rare assortment of features that you’d be hard pressed to find anywhere else in this market. $2.499MM
My newest listing, 389 North Lakeshore Drive in Fontana, hasn’t sold yet, either. But it will sell. Why is that? Well, because it sits on a most lovely piece of lakefront right in the heart of Fontana, and the house itself is one that you’d be hard pressed to replicate for the sales price. The lake loves new construction. It craves new construction. And it also features a host of owners who have spent fortunes in the hunt of that new construction. Why would you entertain the aggravation and time-drain of a new build when you can buy this nearly-new home and move right in? That’s right, you wouldn’t. $7.895MM
Speaking of new construction, my magnificent estate on Basswood is still, as of this moment, unsold. That’s a shame, really. We’ve done the hard work of reducing this price to the point where it now makes sense for an upper bracket buyer. 214′ of level Basswood frontage. Swimming pool, guest house, immaculate grounds. This home was built in the early 1990s and could be used immediately by a new family, much in the way that the current family has used, and loved, this unique property. Or you could buy it and renovate and when the last window treatment has been hung you could be all in for far less than it would have cost to build new, and in far less time. $8.495MM.
Tis the season for dreading the mail. There’s something nice about the season, relating to the mail, I suppose. Each day, my mailbox is full to overflowing. Will there be Christmas cards? Or will there only be pamphlets and magazines, newsletters and postcards, each hailing from a company that I’ve likely never heard of, telling me how their luggage, their sweater, their ski jacket, their fly rod, is indeed the thing that I never knew I needed. There’s more junk mail than ever, and it doesn’t bother me. But weed through that mail carefully because there’s a special Christmas surprise waiting for you: Your property tax bill.
If you’re lucky enough to own property in the Village of Williams Bay you’ll be happy to see a 6.5% average increase in that property tax bill. That, in an of itself, isn’t a tremendously difficult situation. It’s just some money, really. On average, I’d guess houses in the village have appreciated similar to that rate over the past year, which makes the tax increase easier to swallow. Plus, the state just voted for Tony Evers to be Governor, so obviously low-ish property taxes are not something that people really care about. Add to that the fact that any municipal spending bill on the November ballot passed, and you’ve got a populace that has sent one clear message to their town boards and capital building: Tax Us, Please.
Contrary to what you’re thinking, this isn’t a post about politics. It’s a post about taxes, and about a specific lie that municipalities repeatedly tell their citizens. Recently, the lie was told to get spending referendums across the state passed. It’s a lie told whenever a developer sets up an easel and turns the page to the first colorized map of a new, shiny development. It’s the lie the aldermen and trustees tell each other when they huddle in secret, or when they debate a proposed development with their community. The lie is complex but so very simple. If we add more residents, we’ll add more people to help pay for the burden of local government, and our taxes will go down.
If you’ve driven around Williams Bay lately, you’ve noticed a construction boom, of sorts. Along our lakefront, at least four new homes were added, with presumably, fat tax bills. But that growth pales when compared to the growth along the Theatre Road corridor. This is where the growth has been, and this is where the growth makes some sense. These are primary homes, close to the fancy-paints new school, in neighborhoods where kids can ride their bikes and parents can enjoy their own version of small-town living. These neighborhoods sat relatively dormant over the past decade, but have been firing on all cylinders over the past 18-24 months. I confirmed with the village that there were 31 new home permits issued in 2018, with perhaps two more to be issued between now and January 1st. That’s 31 new homes, paying an average of $4000+ in property taxes each. In an area where growth was once nonexistent. The village coffers should be overflowing with revenue.
But show me what that does for the town. Show me a tangible difference in a town that has growth and a town that doesn’t. In our downtown, we still have a vacant lot rotting on the marquee corner. We have For Rent signs keeping pace with Open signs. We have the same crappy Christmas decorations strung from our telephone poles. Tell me, exactly, what this growth has done to benefit the community? Along those lines, with this growth, shouldn’t our property taxes be kept in check? Isn’t that the sales pitch? Grow or die, they say. We need more tax-payers to shoulder the municipal burden. This is the pitch you’ve been led to believe, but the results are in. Growth doesn’t mean your taxes go down, it just means your expenses go up. Merry Christmas from the Village of Williams Bay. Now don’t forget to check your mail.
I’m sitting here again. Like Groundhog Day, without the square. Just me and this computer, this desk. This street. A few snow flurries outside, just a dusting I’m guessing. It’s just a guess, because I haven’t heard. If there was a storm brewing, I’d have heard. You’d have heard. Everyone would have heard. It’s impossible to escape the coming storm, or at least it’s impossible to escape the knowledge of it. It’s coming, alright. But not today, because these are just flurries. It’s a morning like that. Not too much to discuss, really.
That’s because it’s early December in a resort town. It isn’t really winter, yet. It might feel like winter for a while, but this isn’t really winter. This is just the start. The rain from the weekend ruined the ski hill for a while, at least until they can cover up all of that ice with some smaller pellets of ice. The ice rink in Lake Geneva isn’t opened yet, big surprise. I haven’t driven past the Ice Castles to see what all of that rain did to them. I’m guessing they’re in a state of ruin, but no one is going to admit that. Not now. Not before the season starts.
My wife’s car battery died again. The car isn’t old enough to deal with that fate. The other car battery died a few weeks ago, after I asked my son to move the car from the top of the driveway to the bottom of it. He left the key on and the battery drained. I replaced the battery with a new one, but the idle isn’t right and the car tends to stall, which is why I have to have one foot on the gas and another on the brake when approaching an intersection. It takes some getting used to, but it’s not so hard. I vaguely remember my brother making fun of my mom for driving with one foot for the gas and the other for the brake, so perhaps all we’re doing now is what she’s always done. It can’t be that hard.
I’d like to write about the market, about the season, about the sales, but I can’t. It’s December, and any year to date statistics are ridiculous when viewed so close to the year end. There’s no point in writing a market review now when I have a big year end review to write soon. What if I wrote a nice report only to have something sell in the next four weeks and ruin all of my morning effort? What would I do then? Would I write the same review but change a few of the numbers, maybe adding a paragraph at the end, or at least changing a few of the words so the post looked like its own, new, thing? What would be the sense in that? Am I so desperate for content? No, I’m not.
I think I’ll go check on those Ice Castles, and maybe take a swing past my stream to see if the trout are running. That’ll give me something to do until it’s time to write these reviews. What else can I do? The season hasn’t even started and it’s barely even snowing.
It’s that time of year again. The time of year when the piers are unceremoniously disassembled and stacked along our shorelines. That happened in October, sure, but this morning there are still piers in the water, plenty of them. Covered in snow, surrounded by 38 degree water, still there. Soon enough, they’ll all be out, all stacked in some haphazard pile, lined up along the shore to remind us why we wait. There’s more to this time of year than just waiting, mind you. It’s not just the Holiday season, it’s more than that. It’s the time of year when buyers buy houses with bad boat slips.
Is there such a thing? You bet there is. A boat slip is not a boat slip, is not a boat slip. These things appear the same, especially when the components that make up the slip are stacked in a snowy pile along the shore. But they are not the same. If you’re new to the market, or perhaps working with an agent who might be new to the market, you wouldn’t necessarily know the difference. After all, the MLS distinction for “boat slip” doesn’t specify what sort of slip you’re buying. You want to see homes with boat slips, you look at homes with boat slips, you buy a home with a boat slip. Cool, right?
That depends. A boat slip diagram on a listing sheet might look simple enough. There’s a pier, some slips, a line to depict the shore. Everything is awesome. Except that you, the winter buyer, can’t quite tell how much water is in that shoreward slip. Is it enough? Well, that depends on what you’re looking to put there. Is there enough water for your 25′ Cobalt that you desperately want to gift yourself for Christmas, under the guise of it being a present for the entire family? Or is there enough for a 16′ Lund? Maybe a waverunner or two, or a scow, so long as the center board is out? Boat slips can be deceiving.
There are homes in this market that fail to sell simply because of their assigned slips. There are homes with terrific slips that have been bought by neighboring owners only to have the slip switched with their poor slip. That just-bought home goes back on the market sometime later, but instead of being sold with its terrific slip, it now has the miserable, shallow slip. Later, you peruse the online listings… Oh look, a home with a boat slip!
There are associations with assigned boat slips. There are associations with boat slips that can only be attained after decades on a waiting list. Other associations have other rules. The off-water market functions largely on the availability of a slip. What’s a slip worth these days? Call it $200k and you’ll be safe. Sometimes a slip ads even more value, and sometimes it’s less. Sometimes a slip is good and sometimes it’s bad. Sometimes it looks good but it’s still bad. Whatever the association, wherever the slip, winter buyers should beware. ‘Tis the season where the bad slips are nearly indistinguishable from the good ones.
If you’d like to know the difference, it’s actually rather easy. Just ask me, and I’ll tell you.
I think it’s cute that the city of Lake Geneva is installing an ice rink this winter. The ice rink will complement the ice castles that are currently being built on the beach. When Winterfest rolls around, the city will be bustling with every sort of wintery thing imaginable. I’m glad for the city that they’ve decided to use some of their enormous budget on things that actually improve the experience that is Lake Geneva. But with that acknowledgement comes criticism, which will be something that they write on my tombstone, assuming I’ve prepaid for the inscription. In the City of Lake Geneva, it’s amateur hour.
Or amateur season, to be more exact. We know we do summer well. We have no choice. Well, we do it mostly well. The ridiculous boat parade that accompanies the Venetian Fireworks might be one of the most absurd things I’ve ever seen. It only seems ok if you squint and imagine you’re at Lake of the Ozarks, or the Dells, or some damned up river in Texas. But aside from that, we do summer well. Fall is also handled with care, and handled rather well. The leaves will turn whether we wish them to or not.
But in the winter, this is when the wheels fall off. We’re making strides, don’t be confused. The ice rink is a nice idea. It is. It reminds me of the good times I had on the Williams Bay ice rink back in the early 1990s. What fun was had down there. We’d play hockey and lose the puck in the snowy walls that made up the edges of the rink. We’d skate and catch a rogue stone with our blades and crash into the ice. Once, I checked my friend Eric so hard that he walked home and didn’t talk to me for a couple of days. It was a lot of fun, during a simpler time.
This isn’t that time. This isn’t a simple time, not by any stretch. It’s a complicated time with complicated problems that call for complicated solutions. The city is building an ice rink. The rink will have a floor of some sort, some short walls. I’ll bet they’ll string up some lights to make it look pretty, for the two or three days that the ice will be smooth. Once they open up the fire hydrant and flood the rink, they’ll hope the water freezes and cross their fingers that it stays frozen. This is what we did in Williams Bay when we were kids. We had no other choice. The city of Lake Geneva has another choice.
If you want to know where winter is done well, look to the mountains. I’m tired of the mountains, personally, but they know how to capitalize on their seasons. They also know that when you build an ice rink in your resort town, you build a permanent rink and you refrigerate it. Further, you run the zamboni over it once or twice a day. Yes, this sounds like more cost. It sounds like more effort. But what are we if not a destination worthy of some effort? If we’re going to try to make improvements, shouldn’t we really, actually try? How can you effectively market an attribute if the attribute is only going to function on the whim of the weather?
I’m glad there’s an ice rink coming. I’m glad there are ice castles crowing. I’m just not sure that any of it is going to work, assuming we’ll have a normal winter that features a pattern of freeze and thaw, of snow and rain, of clouds and sun. I’ve learned some things in my life, and those things have cost me on every level. Don’t try to save money on everything. If you’re building a house, don’t try to do the painting yourself. If you’re remodeling your kitchen, don’t skimp on the appliances. And if you’re building an ice rink, build an ice rink.
There’s nothing more to write. It’s just Thanksgiving. We should be thankful. I am thankful. We should also be aware that on our list of things that matter, real estate should barely scratch the first page. It’s unimportant, really. Sell this house. Buy that one. Rent another one. More money. Less money. More angst, more pressure, more worry. Whatever the real estate crisis of the day, of your season, it really doesn’t matter. My life is one crisis after another, but at the end of it, none of these will matter. Not. One. Bit. Have a terrific Thanksgiving weekend with your family, and I’ll do the same.
Bluff Lane is a nice little dead end street on the south shore of the lake. In spite of its small nature, this street has been a near constant source of inventory for our market over the last several years. My listing at N1939 Bluff has been for sale since the middle of 2017, first with another broker and then with me. It was a nice house, offering the sorts of things that most similarly priced houses in the 2018 market just can’t offer. In that, the house was complete. Five bedrooms, three finished levels, 70+ feet of frontage, a huge pier, perfectly landscaped grounds and a two car garage. I closed this listing last Friday for $1,950,000, but like all sales, there’s a bit of a lesson here.
When the property was first introduced to the market in the spring of 2017, the price was $2,295,000. That seemed a fair target for a house that offers so much by way of living space and amenities. The market was interested, but after several months the property failed to sell. There was at least one offer during that listing, maybe more. Then, I took over for the prior broker and put my angle on the listing. Another offer, but no dice. The price was adjusted downward in small increments. Then, this fall, another offer. A contract. But that deal failed to close. Finally, a new offer from a new buyer who saw the value in this property, but only at a price that made sense to him.
After 16 months of marketing effort, the property sold for $1.95MM. That’s no unique surprise, since several of the other offers that were received settled in a similar range. Try as we did, we weren’t able to get that sales price to $2MM. That was the goal, after all, to make or beat that benchmark. In spite of this goal, the property just wasn’t able to push a sales price to that $2MM level. Was it the house? Was it the interest rates? Was it the stock market? Was it the street?
Nope. It wasn’t any of those things. It was simply the reality of a property seeking to sell for $2.195MM. To understand why this property struggled, you must understand the typical buyer and the different price levels that separate groups of buyers. There are buyers that will pay $1.9MM for a house. Lots of those sorts of buyers, actually, each one successful enough in their regular life to pursue this vacation life. But a $1.9MM buyer is often a buyer who would love to spend $1.7MM or less. A $1.9MM buyer is often a $1.5MM buyer who found a bit more motivation to take on a bit more risk.
On the north side of $2MM, there are very few $2.1MM buyers. There are upper $2s buyers, those who might feel comfortable at $2.4MM but would reach to $2.9MM for the right house at the right time in the right location. But there are very rarely buyers who place a hard cap on their search at $2.1MM. In understanding the demographics and the price categories that most buyers align within, we can make more sense of the Bluff Lane sale.
Was it worth $2.2MM? Sure it was. But a $2.2MM buyer is often a $2.5MM buyer, and if they spend a little more they often find a property that more closely resembles their weekend dream. When the dust settled and the property closed, it closed as it likely should have. For $1.95MM, to a buyer who found his way to the lakefront at a price that made market sense for both buyer and seller. To the seller who allowed me to represent this fine lakefront home, I’m grateful.
The lake access market at Lake Geneva is not difficult to understand. In order to find this understanding, one simply needs to be open to the facts. In the instance of real estate, the facts are limited to sold comps. This is the only fact that exists in this business. Current value? Opinion. Future value? Opinion. Sold listings? Fact. If you’re open to the facts, then you must embrace the sold comps. If we’re looking at lake access markets, then the first comps to look at are inside of the association itself. If the immediate association cannot provide us those comps, then we’ll have to look at the broad market. In that there is an issue, because comparing associations? Opinion.
Last week, there were two lake access sales that caught my attention. One was important because I represented the buyer. The other was important because it just so happened to close for the same price, on the same side of the lake, during the same week. If there were ever two comps to be examined, these are those. The sale that I closed was in Shore Haven, this of a home that I have sold in the past. In fact, I sold it just last year for $675k when that seller was in the process of upgrading to lakefront. The home is nice, with some meaningful upgrades, a very desirable, large transferable boat slip, and terrific proximity to the water. This time around, I brought in the buyer, and the home was listed on a Friday and by Sunday we had it under contract. Did I enjoy negotiating only $5k off of a $720k list? No I did not. But the market, man. The market.
The other sale was in The Highlands, or the Lake Geneva Highlands, that association just to the East of Black Point. The Highlands has been gentrifying quickly over the past decade, and more so over the past few years. It’s a nice enough association and one of the few remaining on the lakefront where a lakefront home can reasonably be expected to trade under $1.5MM. The home in the Highlands was a cottage style home with limited parking, a scattered tree lake view, and a transferable boat slip. It was updated, quite cute, and in that desirable location just one home from the lake. In this description, you can tell that the Highlands home was closer to the lake than the Shore Haven home, and the view was much better. The homes were both of average size, though Shore Haven had a garage and parking while the Highlands home was more challenged on this front.
That’s the background, and here is how the market works in each association. In the Highlands, there have been five MLS sales per MLS of off-water, non-lakefront homes that have closed over $470k and under $587,500. Per the MLS, the highest sale for a home not located on the lake or on the lakefront parkway, was $587,500. The fact that five homes have all sold in this tight window proves the primary market range for a Highlands home located off-water. The home that just sold closed for $715k, and now that it’s sold we can all agree that it was worth exactly what someone paid for it. But in the context of the market, that sale price set a new upper end in the Highlands.
Looking back to Shore Haven, we see in the MLS has printed 10 off-water sales priced over $500k. Of those, all but one was over $624k, with the most expensive sale being at $1MM, and five over $800k. The sale that I just closed for $715k, looks to fit right into the middle of the Shore Haven range, especially when considering proximity to the lake and size/location of the boat slip. Was I deeply in love with $715k for this Shore Haven home? Not really. But did it make a load of market sense, particularly during this period of tight inventory and high buyer demand? You bet it did.
Both sales were fine for our market, but now you have a slightly opened window into the way that I view these lake access associations. Every association is unique, every association is nuanced. Some are capable of printing high numbers that make little sense, and others are range bound, now and perhaps forever. These two sales showcase the fall 2018 lake access market, and I think they both prove something important. Our market loves boat slips. It loves proximity. It loves a view. And sometimes it looks at historical sales patterns and determines they don’t matter very much. To the buyer who just allowed me to represent his family in their Shore Haven purchase, a sincere thank you.
I write with disappointment today. Today is opening day at Alpine Valley, the ski hill near Lake Geneva where my family spends considerable time during these coming winter months. Last week Monday was the day that I braved the cold, eschewed the wetsuit, and rode my Superjet from pier to pier and onto that winter trailer. The time lapsed from that day to this day exceeds one week. For the prior two years, the span was one week, no more. Last year it was three days. If you don’t believe me, check my Instagram. Everyone knows Instagram doesn’t lie. This year I have failed. But I can’t run from it, because it’s something I cannot change. I can look to next year and seek redemption, but for 2018, the dye has been cast.
Alas, in spite of these failings, I know what must be done. I must ski. My son must ski and my wife must ski, and my daughter must board. She’s more of a falling leaf, but she has some terrific stickers on her board, which, as far as I can tell, makes up a significant part of the snowboarding culture. We weren’t always this way, in fact, this ski thing is remarkably new to us. It was born of winter boredom. One winter not too many ago, my son was whining about there being nothing to do. This was before he had a phone, back when he still wanted to do something other than engage that mind numbing screen. Nothing to do, he’d say. So I forced him to do something, and we went to the Grand Geneva to ski. He was awful, as was I. But something took and tens of thousands of dollars later, here we are. Skiers.
Those early days at the Grand Geneva were fine, but they weren’t great. The Grand Geneva is a complete resort, perhaps the most complete in the entirety of the Midwest, no matter how the boundary lines are drawn. But the ski hill isn’t much. It’s Wimot Northwest, which isn’t an enviable monicker. Finding the Grand Geneva to be too small, even for our modest skill set, we were drawn to Alpine Valley. Alpine isn’t much either, but in local context, it’s as good as we can expect, and so that’s where we went. Several years later, that’s our hill, and while it doesn’t compare to any ski experience out west it is still a hill and the snow is still white and the skis still slide.
There are those among us who won’t stoop to the level of skiing our small Midwestern hills. Breck or bust, say the annoying people. But these are the sorts of people who might as well never swim in a pool ever again, assuming they’ve once floated in pastel caribbean waters. These are the sorts who won’t eat a sloppy joe, made with Open Pit and relish, because they’ve eaten at Alinea. These are the sorts that won’t ride in a Ford because they’ll only ride in a Porsche. Yes, the mountains offer better skiing. But can you drive to a Vail on a Saturday morning, ski for a bit, and return to your lake house for lunch and the afternoon football game? In this, we are the kings, and the west seethes with jealousy at our easy proximity.
Skiing makes the winter more meaningful, and I can confidently tell you this because it has changed the way I view winter. Winter is no longer to be abided as if we are long suffering prisoners, held against our will and in a place we dislike. Winter can be this way, and is this way for many. I find this to be a terrible shame. Winter isn’t for existing, winter is for thriving, and skiing, no matter if the hill is only 400′ tall and the cafeteria is maddeningly cash only, is an activity worth pursuing. It’s one of the things that makes your Lake Geneva house worth visiting in all seasons. You can’t ski in the city. But you can spend the weekend at your lake house and toss in a bit of skiing to help make the weekend that much better. If you’re going to ski this winter, ski here, ski Alpine Valley, and don’t forget my advice: If you’re skiing on the weekend, get there in time for first chair. The midday skiing on a Saturday will make you long for the solitude of a boat cruise on Geneva Lake. At 2 pm on the Fourth of July.
The full title of this restaurant might be “Ivan’s On The Square Unique Dining”, but there’s a similar chance that it’s actually “Ivan’s On The Square, East Troy House Tavern”. I can’t be sure. No one can be sure. Ivan, he’d be sure. But I didn’t see him there, and I don’t know if he’s the owner. Ivan’s is dog friendly, according to the internet, so the odds that Ivan is a dog and that this place is his are strong to quite strong. Still, it was a Friday and a friend said Ivan’s was worth a shot, so I drove myself to East Troy’s small square and settled into a four top near the old-timey bar that guards the north wall of this in-town establishment.
If you’re a snob, then odds are you won’t admit to liking the smell of Burger King. If you look yourself in the mirror and allow your honesty to prevail, you’ll confess to being enthusiastic about that smell. Those smoky plumes rising from the roof of that greasy establishment, carrying with them the smell of grilled burgers–there’s very little that I find objectionable to that pronounced smell. I would subscribe to the theory that they do this on purpose. They do it to draw your attention. The other day I drove by Burger King in Elkhorn, and the smoke was billowing from the rooftop. There were no patrons inside, no cars in the drive-thru, perhaps two cars in the entire parking lot. Someone had to be working there. Yet the smoke was rising, signaling to passersby that the new burger had indeed been chosen, and it was flame broiled. The smell, man. The smell.
With that in mind, the smell in Ivan’s was of a particular cleaning agent. It might have been straight bleach, mixed with a bit of water and used to wash the tables and chairs, the bar and the windows. It was aggressively sterile, and the smell didn’t help develop my hunger, and my hunger needs so very little prodding to develop. The smell would bother me throughout lunch, and I thought that a terrible shame since the remainder of the lunch experience was delightful. A note to Ivan’s, stop using the cleaning agent, and if you ignore my request, then at least don’t use it shortly before lunch service begins.
Once I forced myself past the abrasive smell, I was onto the menu. It looked good. It looked like it should. The restaurant promises a bistro dining experience, and as far as I can tell the only thing that differentiates a bistro experience from a diner experience is nothing. The menu was full of sandwiches and assorted, proper offerings, each of which looked tempting in their own way. But it was Friday, and I am born of Wisconsin, which meant it was a day for fish, and I am a man made for fish. The fish here would be cod or perch, handed breaded and baked or battered and fried. The perch was only available hand breaded and baked. That’s a common theme for perch offerings in this region, perhaps owing to the more delicate nature of perch and its unwillingness to stand up for itself in a fryer. We hacked the menu with my friend ordering the breaded and I the battered, so we could exchange a piece and sample one of each when the time came.
There would be little time to consider the wait. The fish was out in short order, perhaps less than ten minutes, which I can always appreciate. The plate looked nice, with two pieces of a rye bread, a lemon wedge, small tubs of applesauce, tartar sauce, and coleslaw, along with two potato pancakes and the aforementioned fish. The bread was placed on top of the fish, which warmed the bread nicely. There was no butter here, no foil wrapped rectangles, no generous bowl of soft, beckoning butter. But the two slices were pre-buttered, which is the first time I’ve encountered this method. I can’t say that I didn’t like it.
After swapping fish, I tried the battered first. It was crunchy and well salted. The fish was flaky and moist. The batter may have been beer based, but the beer flavor was muted, which is preferred, and I enjoyed this fish very much. It was also the first fish fry I’ve eaten in several months, so perhaps my bar had reset lower over the summer, and Ivan’s fish easily cleared it. The next piece was the hand-breaded. It was like a shake and bake breading, but it was quite well seasoned, perhaps even salty. The fish was similarly tender, which I thought to be a feat, considering the two fish were treated and prepared differently.
The potato pancakes were smaller and thinner than is my lasting preference. They were crunchy, which was nice, and they weren’t saw-dusty like some of the pancakes I’ve choked down on this tour. But there was something slightly odd in that I detected the slightest hint of ginger in the cake. I have a distrust of ginger, so the ginger bothered me, if only slightly. I was in the company of one of these apple-sauce spreaders, but I did a fine job ignoring him as he slathered his applesauce on top of his potato pancake, like some sort of masochist.
The waitress was pleasant, if not overly so. My water went dry at some point during lunch, and as I write this morning I cannot recall if it was ever refilled. But Ivan’s does not disappoint, and the issues I had with the lunch, the bleach smell aside, were nuanced. The fish was excellent, the scene fitting, the little square in East Troy on a November afternoon, charming. A big thank you to my friend for the invite, and if two kids from Williams Bay can find their way to East Troy for some Friday fish, then perhaps you should, too.
Over the past few years, there have been some Bonnie Brae sales. Priced between $1.6MM and $3.8MM, these sales have all made market sense. The street is nice, the North Shore location desirable, the approach along idyllic Snake Road hard to beat. Of these sales, three in total, each property that sold has since been transformed by the new owner. One of the homes that sold was torn down to make way for a splendid new lakefront retreat. Another was significantly renovated and expanded, so much so that you’d be forgiven if you thought the current structure was built recently from scratch. The other home that sold has been improved, updated, cleaned and polished. Lakefront owners like to improve their homes, this much we know.
This week I closed my newest lakefront sale on Bonnie Brae, for $3,800,000. This one of wide frontage and delicious, dark, deciduous depth. The home was the renovated and remade Ryerson boathouse, one of the last few remaining on this lake, and likely the only one that stands on a large estate sized parcel of land. You can read about it here, and watch the video below. It was a great house, and it was no wonder that it sold shortly after coming to market in late September. Certain sales befuddle and certain sales confirm what it is that we already understand. This sale was obvious. Beautiful dirt with a charming, historical home, all at the end of Bonnie Brae, which finds its way along Snake Road. What’s not to like?
For me, I remain appreciative and grateful to those clients and customers who choose me to represent their fine vacation homes. This market is loaded with competition. Every agent is the best, the newest, the most amazing. I’m just here in Williams Bay, sitting at this desk that’s really just a few long oak boards bound together by glue and screws. I’m thankful for the chance to assist all of my clients, and this seller was no exception. To the seller, a sincere and lasting thank you. To the buyer, who now gets to experience this place from the front row, congratulations.
There’s a thing about my dad that you wouldn’t otherwise know. He’s a quitter. Sure, he’s been married for a long time to my mother, and yes, he taught school in the same building for several decades, but don’t let that deceive you into thinking there’s some steadfastness here. He quits. He starts something and then when it’s started he’s worried about the ending. He leaves for vacation thinking about the drive home. He naps on a Tuesday because he’s worried about having to stay up until 8:30 pm four days later. He starts things and then he stops them. He’s worried, alright.
But none of these worries, and none of this quitting are quite as pronounced in July as they are in October. He will enjoy certain things, for certain periods of time. He’ll enjoy a swim now and then, though this is less than it once was and less than it should be. He’ll enjoy a boat ride, every great once in a while, which is also less than it once was and less than it should be. But mostly, he’ll enjoy July just fine. It’s Labor Day when things change, or the week before that holiday weekend starts. September, the month we know to be one the finest months ever included in a calendar, this is not a month for him. Anticipation builds to a crushing weight, and while the rest of us are frolicking in the midst of a late summer glow, my dad is worried.
September fades to October, and the colors dim before they force out one last dying display. We like it when this happens. But my dad doesn’t. This display is a head fake, and he knows it. He’s in this for the long haul, and he’s been here before. It’ll be winter soon. He can smell it in the air and feel it on his old skin. October is nothing but warm, colorful winter. While others think of a trip to the lake or a trip to the cabin, he thinks only of that pier and those boats and why hasn’t the pier guy come yet? It’s October 10th, it’s 70 degrees, and winter is coming soon. There’s nothing else to worry about. Nothing else to think about. Winter. Soon. Repeat. Gaze at the fall colors all you want, youngsters.
When October ends, things get serious. Real serious. The boats the pier, the buoys and the ramp. The things that he worried about in July and thought about in August, and stressed over in September and nearly died over in October, some of them are still there. Still in view. Still in the water. That water that somehow hasn’t turned to ice yet. But it will, soon. Water always turns to ice here, and he knows it. He can sense it. You know what happens when you don’t get your pier out in time? The ice comes and takes your pier away to the depths. He saw it happen once. Never again. Not on his watch. Winter is coming and he needs to get ready.
But he can control the boats, and so they’re already out. Tucked away in their barns where they spend most of their days. The pier, that’s still there. Still bothering his view and interrupting his winter thoughts with a stubborn summery holdover. But the one thing that really drives him to insanity is my little jetski. Yamaha’s Superjet, to be precise. It’s his white whale. The thorn in his side. His nemesis. And I know this. Which is why I leave it in the water as long as humanly possible. Long after he thinks it should have been out. Long after everyone else thinks it should have been out. Long after the water has chilled to a level that humans should never experience against their skin. That’s why I wait, and that’s why this week I was left with no choice. I pulled the superjet.
I don’t pull it like you pull yours. I don’t call the company and have then deliver it to a heated storage unit. I wait until it’s November and my dad has nearly lost what’s left of his mind, and then I put on my swim shorts and I strap on the life vest and I coax that cold little engine to life. Then I drive it, near the piers and close to shore, inside the summertime buoys that have no control over my November path. And to the launch. The ride is cold. The ride is wet. To fall is to die, because this isn’t some sit down waverunner with seating for four. This is a water jet, built for those of us who were kids in the 1980s. My feet lost feeling, allowing me to only notice the cuts left by the mussels and the rocks once I returned to the heated indoors. The ride is difficult, but I wouldn’t have it any other way. It’s the last piece of summer, and I hang onto it as long as anyone ever has. Sure, it’s only to bother my dad, but it’s worth it.
There are things that I dislike about this business. You know this. I dislike the lack of respect that plagues this career, even while I understand it. I dislike the compensation model, as surprising as that might seem since that model continually supplies softened butter for my warmed bread. But mostly I dislike the markets themselves. I dislike the cycles, the ups and downs, the product that ebbs and flows, and the traps that it all creates. The problem with these traps is that they always exist, in the good times and in bad. They exist here, there, and in every market in the world. I dislike these traps, and while I understand them I find extreme frustration in my inability to warn everyone against them. Perhaps when I do quit this job I’ll just write a blog wherein I identify market traps, because that would be fun. It would be like a devastating Zestimate, but instead of pushing a secret algorithm I’d actually explain the market and why that particular house, or condominium, or piece of dirt is nothing but a market trap.
Alas, I can’t do that now but I can do some further explaining of how to avoid these traps. I’ve written about this before, but after a couple of million words, at some point everything will be redundant. This morning I perused the new MLS listings and didn’t think much of them. A new ranch here, another condo there. But in the middle of it all, sticking out like a painfully sore thumb, there it was. The trap. Do I possess some otherworldly knowledge of the real estate market? Of course I do, but that knowledge isn’t important when determining the location and description of these traps.
These traps exist on the lake, just as they exist in the country, but they are difficult to identify in those markets. Why? Because those are nuanced markets that fluctuate based on the whim of the wealthy. This is why you can see a lakefront house listed for a price that doesn’t make any sense, then a few months later you can watch it close. Then, while still in your befuddled state, you can see that house meet the wrecking ball. Lakefront markets often won’t make sense, just as high end off-water vacation home markets won’t. In the same way, is a house in West Palm Beach worth $135,000,000? Is a spec house in Beverly Hills worth $200,000,000? The answer is not really, until someone buys it.
That’s why we’re ignoring the vacation home or otherwise wealth influenced markets and we’re focusing on neighborhoods where primary homeowners live. These neighborhoods can be in Williams Bay or Wheaton, Elkhorn or Elk Grove Village. For that matter they can be in Toledo or Topeka. A primary home market that operates without the influence of extreme wealth typically follows the same rules, no matter the geography. The housing traps exist in hot and stagnant markets alike, but they’re far more likely in hot markets. There’s a simple reason for this.
Developers, be they professional or hobbyists, are increasingly challenged to find adequate inventory inside an accelerating market. Knowing this, they look to fringe locations, fringe neighborhoods, areas that aren’t quite there, but certainly might be next. In larger cities, this sort of thing does exist, it’s called gentrification. But in primary markets that are existing without the promise of Google or Amazon moving in down the road, these fringe areas are likely to remain fringe areas for lengthy periods of time. Developers know this, but they’re counting on low inventory to trick you into not knowing it.
There’s a neighborhood you like. There’s even a house you like. But after you looked at the house and before you could get your offer in, that house sold. You made the decision to move, to upgrade. Your loan approval was in place, and you started the mental exercise of moving, but then your house was no longer available. No worries, you’ll look around a bit more and find something else. After some time, there isn’t anything else. Nothing in that neighborhood, nothing nearby. But Zillow showed you a new idea, this one of a similar home in a different neighborhood. Sure, that neighborhood typically sells for $250k and this house is $450k, but in the good neighborhood that house would be $500k. You like the “discount”, and you pursue the new home. Congratulations, you’ve just fallen into a trap that is going to bury you when the markets calm, or worse, reverse.
Today in Walworth County, with limited inventory and a still-vibrant primary housing market, these traps exist in every single municipality. Want to walk into a huge mistake in Williams Bay? That’s possible. Want to bury yourself in a terrible and lasting mistake in Linn Township? Welcome Home! I’m guessing the situation is the same in your town, no matter where it might be. What to do to avoid these mistakes? First off, work with an agent that wants you to find the right house more than he/she wants to make a sale. Once that’s done, question everything. Why should I pay $300k for this vinyl ranch when the three vinyl ranches down the road are $225k? Most importantly, if you’re in the market for a primary home and you’ve been noticing a tempting home that appears to be overpriced for the neighborhood, just settle down and watch it. If it sells, congratulate the sucker who bought it. If it doesn’t sell, congratulate yourself for avoiding the trap.
After some good old fashioned pot stirring on Monday, it’s time to get back to the business at hand. Specifically, the business of the lakefront market. A few weeks ago I listed a home on Cedar Point, right up next to the tippy top. Like all listings, the work to secure and bring that property to market had been done over the prior six or more months. Now, at this date in late September or early October, the work would show its result. A new listing, $2,595,000 on the outward facing corner of Cedar Point. Photos were scheduled for this property, but the weather was dark and dour and I am not one to impose a false blue sky above one of my listings. Nor am I the sort that would paint our Midwestern water with a Caribbean brush. Because of the weather and my photographer’s schedule, the listing would be held back for a couple of days. Just a couple.
When you’re dealing with lakefront homes, a couple days is often the difference between an available home and a sold home. In the case of 254 Circle Parkway, I ended up selling the home on the very day I brought it to market. A showing, an offer, a contract. A closing at full price less than a month later. That’s how this business works every once in a while, and in the case of this Cedar Point home, the right buyer was made aware of the property and that buyer didn’t hesitate. Many buyers view this market as one homogenous mass. A home over here is the same as a home over there. A view to the South is just like a view to the North. These buyers have it easy, because geographic preference is meaningless. If you can choose to be a sort of buyer, choose to be this sort of buyer.
But for others, location is everything. It’s the neighborhood they grew up in. It’s the neighborhood they admired, always from afar. It’s the street where grandpa had his cottage, the basic one without fancy that meant everything to that family so many years ago. When you’re a buyer in this market and you are face to face with a buyer who has geographic bias, you should admit your defeat and move towards the next listing. The one that might be here or it might be over there, but it doesn’t matter to you, remember?
With my recent lakefront sale, I’m happy for the seller whom I represented and the buyer I assisted in accomplishing what I believe was a lifelong goal. In the end, a Cedar Point home with five bedrooms and a dynamite boathouse sold to a family with Cedar Point ambitions. In the world of real estate, where much of it is cutthroat, this was a sale that should have happened, and I’m appreciative to the buyer and seller for letting me connect the dots.
I went to high school in the basement of a church. To be fair, not all classes were in the basement. Our homeroom was in the kitchen of Calvary Community Church, which was on the ground level. Even still, there were no windows. I’d like to think the lack of windows helped me focus on my studies, but it didn’t. Our gym was carpeted, and while that may seem like a disadvantage, can you imagine the superior grip? Even though I later learned that wood gym floors have some bounce to them that purportedly help an athlete jump higher, I never jumped as high as I did off of that carpeted concrete.
That little gym wasn’t much to talk about. But a kid from our little school would later go on to become the all time collegiate scoring leader for the state of Michigan. It seemed that practice was indeed the key to this whole sportsing thing, and that if you shot free throws every day for an hour after school while your school teacher parents were finishing up their days, you’d get pretty good at them. I’m reminded of the scene when little Hickory High walks into the state championship game. Coach Dale AKA Hackman instructs his players to measure the length of the court and the height of the basketball rim. Basketball, it seems, is the same sport whether played on a carpeted gym inside a high school or a massive arena.
With this in mind, you should understand why I have a hard time swallowing a $7.8MM athletic field for the Big Foot School District. Currently, the fields look pretty nice to me. My kids attend Faith Christian School, which is the same school I attended. Today they have a fancier gym than we once had, but their soccer fields are still pitched awkwardly and the weeds maintain an easy advantage over the grass. In spite of this, every once in a while our little school puts together some mighty fine sports teams. The facilities currently enjoyed by Big Foot are leaps and bounds better than anything little FCS could ever hope for. Yet, the cry for bigger and better remains.
It’s easy for a plan like this to gain momentum. Coaches and teachers build up the improvements as though they are indeed necessary. Parents love the idea of their kids being part of such a superlative scene. People in town buy into the ignorant pitch that if you love the kids, you’ll love spending money to improve their education. But it’s easy for me to wish for these children to receive a fine education and at the same time realize that a $7.8MM sports facility is not crucial to that goal. But what is the goal? Is the goal to turn out well-rounded children who will one day become well-adjusted, productive adults? Or is the goal to build a sports facility that the parents and coaches will feel tremendous pride over? These two goals are not the same.
That’s why I’ll be voting no next Tuesday. The referendum isn’t required, and I hope it fails. If Big Foot wants to attract more students, it should work on its academics first, and everything else a very distant second. The pitch from the school district is that taxes will go down no matter if you vote for this referendum or not. Ah, but there’s a trick in that math. Yes, they’ll go down either way, but do you know how much more they’ll go down if the referendum fails? The answer is: More. Let’s stop abusing tax payer dollars on vanity projects, and let’s vote to keep our district fiscally responsible.
When you’re part of an industry that puts significant focus on calendar year performance, you tend to look up in late October and realize you’ve run out of time. In the same way, I have a theory that I gladly share with dinner guests and random acquaintances, but this theory has to do with life and not real estate. The two, no matter what your agent says, are not the same. My theory supposes that when a man, or a woman, is in their late 30s, they are no longer about to be something. They are no longer going to do something. They are no longer on their way to some different goal. In your late 30s, when you look in the mirror, you likely are what you are. Some people find this depressing. I find it oddly comforting. When the 2018 real estate market looked itself in the mirror this morning it wasn’t about to be something different. At this late date, 2018 is what it’s going to be.
But what has 2018 been, exactly? When the year began, I was worried. Worried about the stability of the stock market, worried about inventory, and slightly worried about interest rates. If the first two caused were gaping knife wounds of worry, the last one was a paper cut, and not one of those finger tip ones, either. If sellers wouldn’t sell into this market, then buyers would slowly lose patience, and they’d either jump ship and run with their tail between their legs to Michigan or some other terrible place, or they’d just hunker down in whatever it was that they already owned and wait for the inventory to arrive. At this point in 2018, the inventory did arrive, but it didn’t exactly satisfy the masses of buyers.
Still, inventory presented and then inventory sold. Some aged inventory sold as well, and it this late date in 2018 we’ve closed 20 lakefront homes with three more under contract as of this morning. The only three lakefront homes under contract (per MLS) are all my listings, which is nice. For context on that lakefront performance, consider YTD 2017 we had closed 24 lakefront homes. Does that mean the market has slipped? Of course not. It just means 2017 offered more inventory to choose from. The better context is to look back to 2012, the year that marked the low point in our recent cycle. YTD 2012 we had closed just 16 lakefront homes, and that had little to do with inventory and everything to do with worry.
The broad vacation home market, those homes with lake access with typical pricing between $200k and $1.7MM, has had itself a solid year as well. Inventory deficiencies plague this segment as well, but in spite of that concern we’ve managed to close 58 lake access homes in 2018. An additional 12 are under contract as of this morning per MLS. The condo market is fairly similarly well, with 31 YTD sales of condominiums possessing lake access to Geneva. This is a vague measurement, as it includes some bits of inventory that I wouldn’t normally consider when adding up these totals (like dockominiums, etc), but it matters if we’re just assessing the overall volume performance of the segment. YTD 2017 printed 34 sales, and YTD 2012 had closed 30. Keep in mind, this is including Abbey Springs and others, so it isn’t a pure measure of the lakefront condo market performance.
Speaking of that lakefront condo market, it’s moving quite nicely at the moment. There are two lakefront condominiums under contract as of this morning, leaving just 8 true lakefront condo units on market. As we steam towards the end of 2018, expect to see some sellers following the move of my Bay Colony seller, as price reductions hope to tempt buyers towards a few pieces of overlooked inventory. My Bay Colony listing, by the way, is now $799k, with a slip and likely the most high end interior space of any condominium on Geneva lake, excepting Stone Manor, of course.
Expect inventory to remain low through the end of the year, but don’t be surprised to see some new bits and pieces come to market over the next 30 days. Price reductions should increase over the coming two or three weeks, and the market will wind down by printing much of the remaining pending sales. 2018 has been a good year, and looks to leave us staring at 2019 with an eye on the stock market, and the hope for new inventory.
Above, my Bay Colony offering. $799k for so much lakeside luxury.
What a mundane life it would be if we missed mornings like these. Mornings like this. The cold morning where you’re not really cold. The foggy morning where nothing is obscured, but everything is hidden behind the thinnest of veils. To think that people miss these days on purpose. What a mistake. What a tremendous and enduring mistake. There’s nothing like these days. The heat and warmth of an early southern morning feels wrong to me. Why wouldn’t I want to be here, to see this, to feel the way a morning like this feels? If I were captured and hauled away, I’d forever miss this sort of morning. This distinctly Wisconsin morning, where the sun will come soon enough, but not before the fog has its say. This is one of those things that we do better than anyone else, and to miss it would be an eternal shame.
I suppose it’s just another cold and frosty morning, and there’s not a lot to say.
After a market downturn occurs, we must set our aim towards the goal of complete and thorough recovery. If that goal is to return a specific market segment to full health, then there are several steps that must be followed. There is no shortcut to this health, and you cannot out-volume a market issue any more effectively than I can out-lift my horrible, no good diet. If the market was bad and we wish the market to be good, then the steps must be followed.
The first step is to weed out any weak hands. Financially troubled owners have a tendency to drag on a market, negating any market gains with the constant, worrisome threat of foreclosure. If volume is printing but prices are still falling, this is generally acceptable, and will, over some period of time, work out in favor of the ownership. But if there are pieces of weak ownership that have the ongoing possibility of some form of distressed sale, this creates market drag that volume alone cannot overcome. This scenario occurred in the South Shore Club in the early years of this current decade, and the only way the SSC moved forward was by eliminating those trouble spots, which unfortunately only occurs after an owner has lost their home to the bank.
With the weak spots identified and fixed, then we need volume. Plenty of volume. We need sales in all price sectors within that segment. Some prices will be low, and we cannot be too concerned about this. If an average price in the segment is $500k, and over a particular duration there are two sales around $400k for every sale around $500k, that’s not a big deal. It’ll feel awful, but remember, the goal is not immediate health but rather a path towards it. It’s painful to watch low sales print when you know they’re creating an issue for those who wish for higher sales, but I never said this path was going to be fun.
With the weak owners flushed and the volume on the rise, the third step is bright spots of higher valuations. A sale here and there over the expected average of the segment. If we’re in this $500k range, then we’ll need to see some sales print higher- $525k, $550k. There will still be lower sales, sure, but the momentum is achieved by raising the expected ceiling. Higher sales beget higher sales, and all it takes is one or two of these sales to move a market higher.
Step four is the strengthening of volume. We need more sales. More and more sales. New listings, shorter Days On Market. Movement, that’s what we need now. Liquidity is important to both establish the market pattern and introduce new, energized ownership to a segment. The reason new owners matter is because they tend to make improvements. Remodel the kitchen, update the bathrooms. New appliances, new tile, new paint. This shows a potential buyer that they’re surrounded by neighbors who value what it is that they own. Increased volume is vital to return a market to health.
The last step is a tightening of inventory. True price gains cannot be realized if there is ample, sufficient inventory. We need limited inventory, tight conditions. We need buyers asking about product in that particular segment, be it a specific association, condominium, or price range. Without this last, crucial step, a market cannot return to full health. If you doubt these steps, consider each and every step has occurred in sequence within the South Shore Club over the past eight years. The good news for the local condominium market is that Vista Del Lago appears to be following the same, successful path.
Last week, I closed on another four bedroom unit at Vista Del Lago. I sold one in May for $520k, and I sold this recent one for $515k. Both sales represent meaningful volume for this association, and both sales prove that Vista is on the path towards full health. If you’re a condo buyer on Geneva, you generally have options with two bedrooms. Some association have three bedroom units, and some have four bedrooms. But the four bedroom condominiums tend to be pricey, located in higher-end associations like East Bank. Vista offers four bedroom units for $520k, and as long as families want a view of the lake, a slip, and a place to sleep, Vista will have a market. Speaking of the market, there are only three available units at Vista this morning, and none of those are four bedroom units. Vista isn’t yet finished with this plan, but as you can see, it’s well on its way.
On a day last week, in the afternoon of that day, there was a choice to be made. The sky opened after a period of rain and a period of warmth. The day had been hot. Hot for October but hot for any month, really. Only the most ardent admirers of heat could pretend that it wasn’t. It was humid, too, and revelers took to the water and captioned their posts something about this being the last. This is it. This, this span of a few days during this month, this was all that we had left.
That afternoon, after the sun warmed and the southwestern winds pushed in the summertime air, there was something of a choice in that sky. To the south, towards Fontana and beyond, the sky was dark. Not formidable, not stormy, but darker than pale. It looked like it might rain. Like the it might spread over the lake and then the houses and the corn and bean fields. To the East, to Williams Bay and then Lake Geneva, the sun was still shining, the sky still blue. The brightness was a stark contrast to the darkness, the separation jarring. A decision would need to be made.
In Williams Bay, the sun. The warmth. A chance at some warm fall, or some slightly cooler summer. The leaves were just beginning to change, and if you squinted and looked away from the maples you might be forgiven if you thought August had somehow returned. There was a chance to live out another day, or another afternoon, or at least another moment, under that sun and in that place. A warm place. Summer, extended. To sit on a bench on that northern shore and be cleansed by the pleasant southern wind. To crunch over shore path leaves with t-shirts on, to take the boat for another ride on top of those blue, excited waves. To embrace what is almost over.
To the south, to Fontana, the clouds. Ominous, but not really. The temperature was the same, but it looked colder. It had to be colder. The gray sky hanging low over the field that was, just a week prior, standing tall and upright. Now the field was reduced to stalks, and the leaves on the trees looked frail. They were fluttering from view, ripped by that wind, matting on the ground under the tires and boots. Boats were being hurried into their winter caves, hatches were being battened. Winter was coming, but first a blustery and cold fall. The colors failing, the wood stacking, the fireplaces lit.
Two options, one choice. I could live out the summer into October, or I could move to fall, to the colorless gray that I know so well. I chose the latter, because I’m ready for this new season. And I was heading to Fontana anyway.
There are three things that attract people to houses. Yes, there are renters who rent based on price and convenience, those who say they won’t be pinned down, won’t be tamed. But for the rest of us, the regular people, houses simply attract us. The reasons are many, sometimes bold reasons like colors and sometimes nuanced reasons like the way a front door beckons when you first pull into the drive. But really, there are three main reasons that houses either attract us or repel us.
First things first, there’s the approach. Curb appeal, some would say, but that’s assuming you can see the house from the curb. The approach itself matters to homes, which is why homes have gates. It’s not to keep people out so much as it is to provide a visual enticement that something important lies beyond. If I had a gate on my house, no one would stand out front and wonder who lives inside, but they might stop and think there must be something slightly interesting back there.
The lot itself, that property beyond that gate, the trees and the grass and so many boxwoods. How is that lot? Is it wide enough, deep enough? Is it hilly or flat? Does it catch my interest. And if I’m looking towards something, what is it, exactly? Just more trees? Too much grass? Basic landscaping, or elevated landscaping? A path to the lake that feels right, or a path that feels like the owner gave up on the project long before every making her way to the shore?
That lot, where is it, exactly? Is it on the side of a busy road? I was driving with my kids last week and reminded them that under no circumstance shall they ever purchase a home adjacent a busy road, to say nothing of an actual highway. The reasons are obvious, but mostly because there is never an actual reason to do so. The nuance of the front door positioning on the house and the quality of the backyard is meaningless if the house faces that busy road. The lot, the thing that we need as much as a leak-free roof and some hardwood floors, is the single most important part of home.
Lastly, it’s the style of the home itself. Tudor or Cape Cod, Colonial or Mid-Century? What suits your style? Moreover, what suits the style of your market? A recent plague on construction in this immediate area has no real symptoms except a general lack of consistent style. If the home is to be traditional with a twist towards modern, like Michael Abraham might encourage, that’s terrific. If the home is traditional to the core, with bold, classic finishes, that’s fine as well. There is no error in design as long as the design is consistent. But whether or not that design attracts the interest of buyers and passersby alike depends on the style itself.
With those aspects of desirability understood, I introduce 389 North Lakeshore Drive in Fontana. Where is it? Along the curvy, wooded road that bends and whispers from Fontana to Williams Bay. What’s there? Only some of the most beautiful newer homes on the lake, mixed with some of the traditional homes that effortlessly anchor our scenery to the past. The approach is as it should be: A simple gate with no pretension. The entrance drive turns through the trees, past a fitting four car detached garage because who would want a lakefront estate without room for a few extra toys?
The home itself is more than 10,000 square feet of turn key efficiency. There’s a main floor master suite, dressed in marble. Upstairs you’ll find five more bedroom suites including a bunk room that’ll hold nearly everyone you know. On the lower level that walks out to the water, there are two more suites, a theatre room and a screened porch that does double duty as a summertime gym. What’s more, this home is nearly new. Finished in 2013 by Orren Pickell, this shingle style home doesn’t waiver from what it is.
What is it? It’s a shingle style home on 2.4 lakefront acres built recently to exacting standards and elevated for a hassle free lakefront experience by the current owners. Where is it? It’s on the North Shore of Fontana, with views long and wide, a short stroll to Gordy’s and Chuck’s even while the home and property feel tucked away and secluded. What does it look like? It looks like the sort of house you’d build if you were in the market to build a new house here. But why would you do that when this home is here, now, available and practically perfect? $7,895,000
I’m not sure if there’s a more interesting segment in our market than the entry level lake access market. While other segments exist because particular homes move in and out of that defined value range, the entry level market is truly the only range for which their is no defined price structure. When times are good, entry level might mean $1.5-2MM. When times were bad, we learned that entry level meant $800k-$1.2MM. If we look over any particular decade in our past, there’s nothing consistent about the pricing of this segment. In that, it’s a curious segment, but beyond that, it’s also our most important lakefront segment.
Yes, yes, we know liquidity at the top end is the most unique attribute of our market. We know our liquidity makes every other vacation market in the Midwest look like a low quality timeshare rental. But still, in spite of that robust upper bracket strength, the entry level market is the market that matters to more people. The goal of vacation home buyers, if the budget affords, is to find lakefront. Knowing that the entry level market is directly connected to the upper-end off water market, we know that if the entry level market struggles then the off-water market struggles. If the off-water market is strong, then that must mean that not only is the entry level market strong, but it’s light on inventory. These two markets are connected, and 2018 has proved that once again.
This isn’t about the off-water market, even though it is remarkably strong and liquid as a direct result of the low inventory and sales patterns of that entry level lakefront market. This is about the entry level market itself, and what 2018 has done to it, and for it. This year, there have been four lakefront homes sold between $1.1MM and $1.25MM. All four of those properties had around 50′ of frontage, and three of the four were on Walworth Avenue in Williams Bay. If you’re familiar, Walworth Avenue is the road to the North of Pier 290. The other sale was in the Elgin Club.
The fact that there have been four sales in this segment isn’t surprising. It is somewhat surprising that the prices, in spite of the spectacular market activity of 2018, have been somewhat stagnant in that tight, low buck range. While the homes that sold were certainly habitable, it wouldn’t be a stretch to suggest that they are all in need of some additional attention. Whether that comes in the from of wide-scale renovations or surface improvements, that is up to the new owners. Will any of these four be scraped to make way for a new home? No one, except the owners, can answer that question.
Walworth Avenue hasn’t shown any real strength over the mid-million dollar market. There’s a giant newer home on that road, one that represents a significant investment, but is that an individual pursuing what is best for that individual, or is that a market market-minded play? Will Walworth Avenue soon be home to more tear downs, to more new construction? And if so, will that new construction find favor in the market? I honestly don’t know the answer to my own questions. I’m inclined to suggest that new construction in that location wouldn’t be a wise play. But I know the tight inventory markets on the lakefront between $1.8MM and $2.5MM, so it wouldn’t be crazy to suggest an owner could pursue new construction here, even though the neighborhood hasn’t shown the ability to support it.
There have been a few other happenings in the entry level market this year, notably a pending foreclosure in the Lake Geneva Highlands and a private lakefront sale on Outing Drive. You’ll remember the Outing house, as I had it for sale earlier this year, and another agent had it for sale for a spell as well. The home sold in what appears to be a private sale for a price (as shown in the transfer rolls) of $1,525,000. That’s a reasonable price for that house. The Highlands lakefront is one that was on market last year and under contract (per MLS), but failed to close. That home is likely valued in the mid $1s, and I’ll be curious to discover if it comes back to market as REO, or if someone takes a stab at it through the sheriff’s sale.
Today, the entry level market is once again void of inventory. The lowest priced home with frontage is over in Trinke’s, a property with the lagoon in front of it, priced at $1.85MM. The next available lakefront is to the East of there, priced just over $2.2MM. This is a tight market, and a difficult one for would-be lakefront buyers. What’s interesting here is that the lack of inventory and consistent sales really hasn’t translated into valuation gains in this segment. I’d expect that’ll change if the market stays tight for too much longer. Maybe it won’t change at all until someone breaks the pattern on these entry level streets and builds something new. Something that seems out of place, something that doesn’t make sense. Or at least it’ll feel that way until everyone else does it, too.
A couple of weeks ago, I started working on a new listing. This lakefront house was in Cedar Point, on the very top of the point, where the view is as wide as it is long, where days last and last, where sunsets, no matter the season, cannot hide from view. The house was to be listed at $2,595,000, and I was ready to work on the sale. Photos were scheduled, details were arranged.
But then it rained. And it rained some more, and when it wasn’t rainy it was misty, which would be a terrific name for a horse. Photos were scheduled and the schedule changed. The weather didn’t cooperate. But in the mean time I told a couple of buyers about this house, and before the photos could take place, before the MLS listing could be set to ACTIVE, before all of those visible sales efforts could commence and before most agents knew about the property, the new listing on the hill went under contract to a buyer who knew he needed to be in the know. It’s in the MLS now, but it’s already sold.
It should come as no surprise that there’s a competition to be what’s next. In this context, we should capitalize What’s Next. If you own a business that makes money, or you own a business that has a lot of customers but fails to make money, you know about private equity. You know they want to buy your business, to pay you a multiple that makes your head spin. Should you sell? Probably. Those in this investment world that are tasked with finding the next big thing. Recently, everyone has collectively decided that real estate is that thing.
There’s no debate that the business of real estate is big. The debate is over what that business is going to look like in the future. Will traditional brokerages and their traditional models continue to dominate the national landscape? Or will there be something new, something else, something more. SoftBank’s Vision Fund recently invested $400MM each in two real estate “tech” companies. One is Opendoor, one is Compass. If you haven’t heard of these two companies, don’t feel bad about it. In time, no one will remember either of their names.
But I jest. Compass is a rapidly growing real estate business. The founder was on CNBC last week and talked about his “platform”. There’s all sorts of “tech”, apparently. But what is Compass? Well, it’s a real estate company. What do they do? They list your home for a fee and then they try to sell it. What’s their secret? Nothing, really. They have signs that light up at night, which is cutting edge, or so someone thought. They also have proprietary technology that enables their agents to better serve their customers, and to provide AI insights into markets. This sounds nice, and the fine folks at SoftBank really bought it, but is Compass revolutionizing the real estate business?
Headlines out of Chicago will claim it is. That’s why top teams of agents are leaving @Properties and Sotheby’s and the like to join this new, exciting, dynamic company with the signs that have lights on them. You know, so people can see them at night. Consumers might assume there’s something here. Something unique, something rare. Something New. But what they don’t know is that agents are being bought. Brokerages are being paid handsome amounts of money to sell to Compass. Agents are typically happy with some free calendars from the title company. Heck, I don’t even get those anymore. Compass is paying them real money to join their company, and in the case of top agents and teams, that might mean signing bonuses of a million dollars or more.
Compass doesn’t want to talk about this, because they want the consumers and their target audience, the agents, to think there’s something here. @properties did the same thing over the past decade as they grew a real estate behemoth. They told the market that they’re something better. Something rare. Something unique. But really they were a traditional real estate model banking on a consumer who was looking for whatever was next. Something New, that’s all this game is about.
Compass is growing, Compass is moving into your neighborhood, but why? The answer, as with all answers relating to the growth of real estate companies, is that they’re simply poaching agents. There’s nothing new under the sun, especially in a business where the entire business lives and dies on one simple thing: a real estate agent. Every real estate company that grows only does so by taking agents from other companies. These agents flee what’s old, and move to what’s next. They send out postcards. They issue a press release. I’m What’s Next!
OpenDoor wants to buy your home, I think. They also just bought a traditional brokerage in California, or maybe Arizona, so they want to be in the regular business of real estate as well. Maybe they’re hedging their own business model, assuming not everyone will want to sell their home for cash at a market discount. This model has been around for ions, or at least a few years, and it’s working. Opendoor is reinventing the business of real estate, or so they think. They’re just like Amazon and Uber, the CEO says. They’ve raised fortunes, led by a who’s who in the world of investing, including a big fat investment of $400MM by SoftBank. SoftBank knows one thing, they want in on whatever is next. Is it Opendoor?
Opendoor has a current valuation over $2B, yet they only operate in 19 cities more than five years after their launch. Why aren’t they in more cities? Why aren’t they everywhere? Well, because the model relies on algorithms to determine the current value of your home, as well as the value of your home in the coming weeks and months. Opendoor will buy your home, without a pesky agent, and without that pesky market exposure, and then, once you’ve moved out and closed your deal with them, they’ll resell your house for a profit. That’s it. They’re the modern day tech company that has replaced the yellow signs on the side of the interstate that promise “I BUY HOUSES CASH”.
The model works as long as the market is appreciating. It also works as long as the market has a very tight pattern of sales. Would Opendoor work in Lake Geneva? Not in a million years. Will it work in Winnetka? Nope. Will it work when the market falters? No. The reason is simple. When a market stalls, consumers generally fail to recognize the slowdown for a reasonably long period of time. They are defiant. They are insistent. They are stubborn. If OpenDoor needs to buy your home for a 5% discount to actual value today (in an escalating market), what will they offer you in a declining market? 90% of the value? 80% of the value? Will consumers be willing to sign on for this initial, deep cut, without finding out if the market is indeed as poor as OpenDoor is telling them? No, they won’t.
Compass closed their last round at a $4.4B valuation. In 2017, Compass closed $17B in sales. There’s another real estate company in these United States, one called Realogy. Realogy owns some brokerages that you may have heard of. Some small companies like Century 21, Caldwell Banker, Sotheby’s, ERA, Better Homes and Gardens, among others. Realogy is a publicly traded company with total 2017 sales over $500B. Realogy’s market cap? $2.5B. The world, it seems, has gone mad.
As a small independent broker in a small Wisconsin town, I’m not immune to the changes in the real estate business. Competition increases every year, and much of that competition comes to my office to beg me to work with them. They want me to be part of What’s Next. But in that, there’s an admission, and I can already see What’s Next. They don’t believe in their own models. They don’t think they have anything proprietary. Not Compass, not @properties, not OpenDoor, not Realogy. The real estate business, at the end of every long day, is only about one thing: A Real Estate Agent. No matter the broker names, no matter the affiliation, the agents will remain. They’ll just change their name tags and wear a different color jacket, but if you think they’re somehow different because their sign has a nightlight on it, then you haven’t been paying attention.
There’s a reason you read this blog. That, of course, was a lie. In actuality, there are many reasons you read this blog, but perhaps there are are only two or three really good reasons. The market commentary might be the most valuable asset of this site, but that’s followed very closely by the fact that I like to leak new listings on this blog well ahead of the time the rest of the agents and the MLS learns about them. Today, there is no commentary, which means there’s a new listing to discuss.
This new listing is one that you may be familiar with. I sold it two years ago to the current owner, who is now looking on to what’s next. The property, 434 Oakwood in Fontana, is likely the most dialed lake cottage I’ve ever sold. Correction: it’s the most dialed lake cottage I’ve ever seen. In spite of my propensity for hyperbole, I assure you there is no exaggeration here. This property has it all, and it’s perfect.
There’s a view, a private pier with shore station for a 25 foot boat. There’s proximity. In that, we have completed the trifecta of Lake Geneva off-water value. Pier, View, Proximity. Collect your winnings at the counter. But beyond that, there’s something more here. The house itself is filled with high end luxuries that leave even lakefront homes unwell with envy. It’s so perfect that I’m not even going to describe it. I’m just going to leave those pictures there, and leave this video here. $1,295,000. If you want to transform your weekends, please let me know.