During the summer of 1990, a buyer would have been of sound mind had they embraced the then reasonable expectation of purchasing a lakefront home on Geneva for $400,000. Perhaps less, and obviously more. Lakefront homes had been selling for more than one million dollars since the 1970s, and several more estates sold for amounts that exceeded one million dollars in the early 1980s. In 1990, entry level lakefront homes were priced in the $500k range, as they would be through 1997 or 1998, at which time the price structures began to change rather dramatically. My condolences to anyone reading this morning who passed on a $400k lakefront in 1990, your loss is saddening, and to you, possibly maddening.
But in 1990 not all buyers were seeking out still affordable lakefront homes. Many buyers, hundreds and hundreds of them were traipsing into sales offices and model homes and scaling freshly paved roads in a new development on the north side of Lake Como that was called Geneva National. In the early 1990s, when Geneva National was getting off the ground in remarkable fashion, golf course developments were not yet the norm. They were not ubiquitous as they are now, and as such Geneva National found itself as the sole player in the Lake Geneva market, and for miles around. Geneva National was new, it was fresh, it was exciting, and it was successful. But did I mention how expensive it was?
The market prices set at the time were, in hindsight, outrageous. Vacant lots were selling for as much as $140k, perhaps more. Condominiums were trading at levels that made lakefront condominiums on Geneva look downright cheap at the time. Quality lake access homes and condominiums were being overlooked for this new and improved style of vacation home, one where views of blue were turned to green. Geneva National was an unmitigated success. Lots were selling, condominiums were selling, homes were being built, and Lee Trevino showed up to explain why all of his holes fade right. 1990 was a good time for Geneva National, but the impending fall was befitting a stark HBO documentary.
By 1995 foreclosures were everywhere. Geneva National was sputtering. Having spread the initial inventory through a masterful sales job, there were no margins to be made for those first eager buyers, as no buyers were stacked behind them willing to pay increases in the already elevated prices. By 1997, lots that had been sold for $135k were selling for a third of that. Those were troubled times, and equity that was imagined as compounding in 1990 was no where to be found just a few short years later. The market was destroyed by speculation, and owners who bought in 1990 had no way to get out as negative equity crushed any chance at a break even sales price, let alone a profit. Geneva National, as it appeared in 1990, so shiny and new and chock full of optimism, was barely recognizable as the greens remained finely curried, but the market was an unkempt catastrophe.
This is a story that most of you may know. The trials and tribulations of this massive development are well documented, but I doubt some know the true story of the value curve over the past 20 years at Geneva National. The ups and downs are understood, but not on a property specific level. To paint a clearer picture, consider the fate of one particular lot on Geneva Club Drive. To drive by the lot would be to understand its appeal, but you’d miss the sordid tale of the past 20 years. In 1990, some “lucky” buyer paid $135k for it. In 1995, it was foreclosed on. In 1997 the bank sold that lot for $32,500. In 1999 it sold again for $30,000. This is important to note, as the remainder of the lake access and lakefront market was rapidly appreciating towards the end of the 1990s, Geneva National was heading the opposite direction.
In 2002, as Geneva National began to rebound and builders found ample opportunities in the vacant land here, the lot sold for $66,000. Two short years later, in 2004, the lot nearly doubled to $110,000, and sold again. In 2005, another builder bought it, this time paying $145,000. When the market started to soften in 2007, lots like this were piling up on the asset sheets of speculative builders, and with no where to turn and no buyer to bail out their misguided position, foreclosures started again and prices dropped. Today, this lot is offered at $119k, or $16k less than it sold for 21 years ago.
This lot is not unique to Geneva National. Most of the vacant parcels are currently offered for less than they originally garnered in 1990 and 1991. Condominiums have fared better, but not by much. The question today is, how low will these prices go? I’ve been watching one parcel in GN for a year or more. This golf course lot was listed for $159k in 2004, and what was the near-peak of the GN market. This lot is now offered for sale at $59k, which is less than it first sold for in 1990. The problem I have with the vacant property at Geneva National is that without builder engagement, there is no stop-gap for these prices, and they will continue to fall. There are 53 vacant parcels on the market within GN. The MLS doesn’t show a single pending sale among vacant land here, yet the land is some of the cheapest improved land in our broader market. Geneva National has a perception problem, and as long as builders stay away, as they rightly should, prices of this already cheap vacant land will continue to sink below 1990 levels. My wife still wants me to buy in Geneva National. She likes the winding roads and the security and the lush lawns. She likes these things, but I keep telling her what I just told you.