…we’ll see increased volume from 2008, and I think pricing will stabilize in all segments of this market. Foreclosures will rise in a few select developments, but foreclosures as a whole will decline quarter over quarter after the first quarter of 2009. If interest rates hold in the 5% range for most of the year, I see no reason we can’t push a volume increase in 2009. Stable valuations will continue, though there will be a few more fire sales out there in 2009 as some owners will undoubtedly suffer job losses and relocations.”
Yes, that was something I wrote. I wrote it on the first day of 2009, when the year appeared much more venomous than it looks now. My forecast wasn’t dead on, but I did anticipate a couple of things right, including the handful of fire sales that we saw, most notably the couples of terrific deals that the lakefront gave up this fall. Courtesy of plenty of government intervention, interest rates did stay falsely low throughout the year, but that didn’t seem to motive buyers in the way it used to. We’ve been spoiled with an entire decade of low interest rates, and I think most in the market were either too young to remember what inflation does to interest rates, or they’re old enough now to have blocked Jimmy Carter out of their minds. Interest rates will play a big role in 2010, as if the economy continues to slowly improve, interest rates will undoubtedly push higher. Don’t be surprised to see 6% by the end of 2010, even though they’re still around 5% now.
My foreclosure prediction may have been accurate, but until I do some checking on that, (2009 Lake Geneva foreclosure update next week) I won’t know for sure. I made mention in that post of an expected increase in foreclosures in “select developments”, and if you read “select developments” as “Geneva National and Abbey Springs”, bravo for reading between the lines. I, however, was dead wrong on my foreclosure predictions for those markets (GN and AS market review and forecasts will follow this week or next). Geneva National did have a handful of foreclosures, but not nearly as many as I would have expected, and Abbey Springs suffered only a couple foreclosure casualties during 2009.
The mood of the market in 2009 was quite gloomy throughout the first five months of the year, and if I’m being entirely honest (which I always am), by the time early May rolled around, I thought we were going to be in for a really tough summer. When Memorial Day came, the market dramatically shifted, and we saw plenty of buyers on the scene during June, July, and August, even though the latter two months are typically fairly slow in terms of sales. Nevertheless, the market pushed on, and bolstered primarily by a dramatic increase in sales at Abbey Springs, we had a pretty solid summer. I anticipated fall would be similarly strong, but the only market that proved resilient during the last quarter of the year was the lakefront market. The properties that sold during the fall months represented some tremendous values, but those properties were generally properties in need of significant renovation or reconstruction.
Inventory in the vacation home market here was remarkably stable throughout the year, and heading into the winter months, we experienced the typical, precipitous decline in available housing stock. I think the fall months of 2009 were really hurt by a lack of quality inventory, and most new inventory in the marketplace over the last quarter was either over priced, or consisting of properties in need of renovation. The renovation-needing properties have not been selling well this year, or the last, but the inventory that exists (including my Lower Loch Vista and Cedar Point cottages), represent fine value for a discerning buyer who chooses function over form.
I was anticipating a volume recover in 2009, and looking back at that prediction from last year, I’m not entirely sure what I was thinking. The first four months of 2009 were horrible, and only an eternal optimist would see opportunity in the miserable, and uncertain, economic environment we were shrouded in during the first half of last year. The year ended with 97 public MLS sales in what I define as the vacation home market here- that being, Geneva National, Abbey Springs, lakefront condominiums on Geneva, and the lakefront and lake access market surround Geneva Lake. I’m not factoring in Delavan, Lauderdale, or the myriad other vacation desinations within Walworth County, primarily because this is called the “Lake Geneva Real Estate” blog, not the “Walworth County Real Estate” blog. Lake Geneva is the king of Walworth County, and I, its’ humble, dedicated, brilliant, servant.
The 97 public sales affecting the Lake Geneva vacation home market last year were nice, but they didn’t represent a volume recovery as I had hoped. 2008 saw a total of 111 sales in those same markets, and if we cast our eyes to the past horizon and look at the 2006 sales figure of 201, well then, that’s just downright depressing. If volume is off a little more than 50% from 2006 (roughly our market high here, although 2005 was probably better due to a high number of GN sales), what’s happening with pricing? Price declines are difficult to review, since averages won’t really apply in this case, even though The Tribune and others love to put green and red arrows on markets to tell you how they’re performing. In small markets, averaging sales totals to come up with median pricing isn’t really accurate, given the small sample size. I’d estimate that pricing as a whole in our Lake Geneva vacation home market is off around 20% from the market highs, the caveat to that estimate being an enormous range of price changes within individual markets. Abbey Springs, for instance, might only be off around 10%, while a property like Abbey Hill may be off on average 35%. The lakefront market here is the same way. While some properties that sold this year did so at prices roughly 30% off their individual market highs, a couple of the homes that sold this year ($3.7MM in Lake Geneva and $3MM in Fontana), probably sold with no discount at all from the previous market highs.
Much of the work in deciphering this market falls at the feet of your Realtor. You don’t just need a capable Realtor, you need a great Realtor (ahem). Someone capable of looking at this market with the sort of penetrating stare that can only be achieved after nearly 14 years in the business. What do these eagle eyes see for us in 2010? Well, I think it’s another mixed bag. I think the foreclosures that are looming (Cedar Point, Country Club, Buena Vista, Abbey Ridge) will provide almost instant volume for us, while at the same time serving to temper any potential price increased this year. I think much of the year will look like 2009, but if we can avoid any catastrophic political and economic events, we should be able to see that volume increase that I’ve been looking for. I don’t think prices are going to rebound much, and think that ultimately, a certain percentage of the stale inventory currently weighing on the market will be sold at fairly significant reductions.
In Lake Geneva, 2010 will boil down to inventory. We’re going to see a rush of inventory in February and March, but much of that inventory will be old listings coming back on the market. If those old listings come to market at lower prices, that will be a boon for our volume. On the contrary, if that stale inventory comes to market at the same, played prices, then the market will not be pleased. If we can add some quality new inventory, particularly on the lakefront and the entry level lake access markets, then I think we’ll be pleased with our 2010 year end figures. I think Geneva National may see some form of a volume rebound this year, and if Abbey Springs can add some quality, well priced inventory, perhaps Abbey Springs will have another banner year. All in all, it’s looking up at Lake Geneva, and here’s to hoping this is the year that you finally find your Lake Geneva dream home. Or find it again, if you were hear once, and are dying to come back.