Blog : 2018

Entry Level Lakefront Market Update

Entry Level Lakefront Market Update

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.

 

Discernment

Discernment

A few weeks ago, I wrote an offer on a property on behalf of a buyer. This is no feat. There is no trick to this. It’s just a form written by a gaggle of attorneys and I’ll I’m charged with is the ability to fill in a few blanks. My son, at age 15, if given a few practice runs, could handle the document just fine. This buyer had looked at a few houses, decided he liked one of them, and we made the bid. Then we waited.

Sellers in 2018 are not uniquely motivated,  so this property that had sat on the market through the season now ended.  Our bid came in low, relative to the asking price, but high, relative to the actual lasting value of the house. We bid, we negotiated, the seller stalled, and in the midst of this another buyer materialized and purchased the home. My buyer was left out, in the cold. Disappointed, sure, but aware that other properties will, and must, exist.

There are brokers today feasting on the new market attitude. Many of these brokers are newly initiated, fresh to this game and racing to gobble any scraps that they find.  Some have held “clinics”, or so they’re called, to advise buyers on how to craft the winning bid. Others take the social media to explain how they maneuvered to get their buyer’s offer to be the one that the seller accepted. They are the victors, the capable and skilled sherpas who have led their buyers to the top of the heap and who will now rightly claim their commission based prize. All of this is fine, but it’s exactly what’s wrong with the business of real estate and the market of 2018.

We are programmed to want to win. My daughter wants to win her volleyball games. My son wants to be the valedictorian. I want to lead in the year end volume tallies (spoiler alert, I won’t win this year).  Buyers, well, they want to win, too. They want to win that house with the imperfect floor plan and the leaky basement. They want to win because they think the house will work for them, sort of. But mostly they want to win for the sake of winning.  Their agents prod them on, pushing them to bid higher, cleaner, quicker. The goal is the house, after all.

What house? Well, that doesn’t matter. Any house.  It’s just the pursuit that we find motivating. That brings us back to my failed bid and my buyer who very well might have felt great disappointment over not buying a house that they indeed liked.  Was it a big deal that we didn’t get this particular house? Not really. Would I have liked them to buy the house? Sure. But the market today isn’t separated by those agents who succeed in securing the house and by those who fall short, it’s separated by the agents who know the difference between a house worth pursuing and one worth leaving for the uninformed, undiscerning masses.

When the market was soft, discernment was key. Negotiating tactics were key. Timing was key. Today, with a heated market and throngs of buyers clamoring for lake homes, these prior skills are brushed aside in favor of urgency.  A few weeks ago, I wrote a contract on behalf of a different buyer and we were met once again with a stubborn, inflexible seller. We pushed forward and bought the house anyway. Why?  Because the house was worth the pursuit. The house will have lasting value in the market because it is unique, rare, both in setting and in style. Is it nice to win every bid? Of course it is. But there is contentment in knowing when to walk away and let someone else buy an overpriced house.

Summery

Summery

My calendar said spring turned to summer last week. The first day of summer, it said, capitalized with an exclamation point. The hardware stores had an ad in the paper, every paper, telling us that it’s summer time and because of this we need things. Grills! Plants! Bee Killer! I was in a hardware store over the weekend when a man walked in with a bee problem. He told the store worker that his bees were out of control. They were in the rocks and around his waterfall.  They were a problem and his children wouldn’t be happy if they were stung, even though no one had been stung just yet.  I kept quiet for a while but ultimately decided to ask if he was certain these were not honey bees, because honey bees are valuable and shouldn’t be choked by a foaming pesticide. He didn’t know. They’re all bees he said. And they’re all going to die. Welcome to Summer.

A woman drove a convertible down the road and across the intersection where I was stopped. There was something going on around the corner, a race maybe. Some bikes zipped past. Numbers painted onto the participants’ arms. So much determination, so much haste. The woman in the convertible didn’t care, she had on her big hat, and I wondered how it stayed attached to her head without blowing away in the open-top-breeze. Pins, maybe. I figured there was a trick, something women know that I don’t. She turned the corner too tight and her wheel clipped the curb, causing the car to bounce and her hat to flop and her neck to whip back like something happened that she couldn’t control. Later, when she’s home she’ll tell her husband that she just can’t understand what happened to that wheel. By then the scrape on her shiny rim will be smudged dark by summer dirt that washed from the spring fields during the last storm.

No one knows when it’s summer more than boaters. You can see the boats now, sitting on trailers and in slips, full of gas and ready. There’s no time like now to boat, at least now that it’s summer. If you have a boat and you own it during summer, what a thrill. Boats in the winter aren’t nearly as much fun. That’s when the bills come due. Winter service, winter storage, winter protection from the winter: $2650. Last year it was $2250, but the economy is better and the labor is tighter so the price has to go up. Boats are like that, a good measure of inflation and of the economy. Need your boat waxed? It’ll cost you $550 during a recession and $825 during a boom. It’s booming now, and the bill was $900. The extra is the Geneva fee. It would have still been $825 in the Chain, but no $75 has been better spent.

It’s raining again. It’s not a spring rain, it’s a summer rain. I’m sure because the weatherwoman said it would be a passing shower, like how it rains at Disney every afternoon. It always amazes me how much rain we can get in the summer and yet when I want precipitation in January so my kids can ski, it’s as dry as the driest of deserts.  It’s dry in the Southwest, and they have purple mountain sunsets there. Come to the Southwest and see our cacti and our purple mountains and our sunsets! There’s nothing like a sunset over a purple mountain with some cacti in the foreground. That’s what they say, but I don’t believe them. Because it’s summer here and our sunsets are better. Once this rain passes I’m sure there will be a better sunset tonight. A summer sunset. The humidity will make the sky dazzle.

The calendar told people it’s summer, and they’re reacting. Boats are boating, sunsets are filling up Instagram. #summervibes, someone writes. Others Like. It’s that time, when summer comes to those who otherwise wouldn’t know. But I know. You know. We know summer has nothing to do with the calendar. Summer arrives when we first feel it on our skin. When the first pier is in, white and sturdy. The first boat pushes through the water from West to East and back again. When that first sunset is no longer visible through the bare branches of winter, but instead hides behind a deep, dark canopy of Oak and Maple. Summer doesn’t start at the end of June unless you’re not paying attention. Summer for me started sometime in May, whether the calendar watchers knew it or not.