Blog : Condominiums

Geneva National Market Update

Geneva National Market Update

I decided this morning that some market behavior has no choice but to flood over into different market segments. If, as we discussed last Friday, the primary home market is on fire below $350k, then the lake access and vacation home segment should be similarly torrid under that same mark. There’s no greater concentration of sub-$350k properties in the vacation home segment than in Geneva National, and so, as the theory goes, we should assume the market there is performing quiet well. Guess what? It is.

In Geneva National today, there are 80 MLS offerings of condominiums and single family homes (zoned condo). Of those 80, 12 are pending sale. Looking deeper, of those 12 pending properties, 10 are priced under $350k. This is a positive for Geneva National as much as it is a glaring negative. The condo market is doing just fine under that benchmark price, even though the prices are stagnant, but above that price Geneva National continues its decades long falter.

Of the 80 total homes and condos on the market, 39 of those are priced at or above $400k. Of those 39, just one is under contract today per the MLS. I’m not really worried about the homes in the $400-700k range within GN, as I think they will always have some relative liquidity in the market. The drag on those homes, as we’ve discussed, is the availability of loads of vacant lots and the incredibly low prices of many of those available lots. Why buy someone’s old house for $600k when you can build a new one for $575k?

On that subject, Geneva National would be wise to consider a revision of their condo declaration. I’m not attorney, so I’m not advocating as one, but I think GN could solve some of its vacant land inventory glut if they amended their declaration to allow property owners to purchase adjacent vacant lots and not pay the monthly assessment on those lots until they are sold by that owner or until a home is built. If I’m an owner in GN I might consider buying the lot next to me if it’s $25k, just because I’d like the privacy. But if I do that today I’m going to pay $300 or so per month in association dues, on top of the same amount I pay for my built house.  Because of this, I might shy away, but if I didn’t have the pay those additional dues, I might consider it. Eliminating the vacant lot inventory should be the goal of Geneva National, and this is one way to help accomplish that.

The biggest question for GN today awaits it at the top of the market. There are seven homes offered today priced over $1MM. These are nice homes, to be sure, and they likely couldn’t be built (at least some of them) for what they could be bought for, but there’s a problem here. The market in GN has closed three homes over $1MM since 2010.  That’s one home every two years, rounding down out of kindness.  Today GN has 14 years worth of $1MM+ inventory on its books. This is a bad thing, and I’m not sure how the market ever catches up to these heavier offerings if the housing market between $500k-$999k is still suffering as well.

So what do I like in Geneva National? I like the condos priced under $250k. I think they’re cheap, I think they can’t easily be replicated at those prices, and I like them for a vacation home seeker who doesn’t want to break the bank.  In spite of the unique difficulties facing Geneva National, I continue to think there’s nothing quite like it in our market, heck, in the Midwest, and for that reason it deserves consideration.

Geneva National Value

Geneva National Value

I’ve spent a fair amount of time this year in Geneva National. I’ve shown most of the houses that are on the market inside those gates. I’ve generally been underwhelmed.  Many of the houses are older now, in need of kitchens or baths, paint and trim. They have bright shiny brass this and oak that. They’re just not right anymore. Sellers have been a problem, too. They’ve been stubborn, acting like they haven’t a care in the world and that if this buyer fails to come up the minuscule 1.5% to match the seller’s number, well then the seller stands his ground and lets the deal fold. This has happened twice this year, and in both instances the offending seller is still offering his home for sale. Sellers are being foolish in GN, but this is mostly the situation for sellers of the single family homes. They’re unwilling to recognize that their 2006 valuations still have nothing to do with their 2016 valuations. But alas, Geneva National offers redemption.

And it isn’t found by way of the single family homes, it’s found in the lower priced condominiums. Those units at the Lakelands, the Woodlands, the Highlands, yes, the names are repitious and boring, painfully so, but there is value to be found. Consider the broad Lake Geneva vacation home market is, by my keen eye, still between 10-20% off the prior cycle highs. This number is the broad measure, as certain homes have appreciated beyond their highs, and other homes are still off as much as 30%.  Markets are unfair, and a rising tide might life all ships but the truth is that some ships are more buoyant than others. Some have leaks.  In Geneva National, the market has rebounded nicely, and 2015 booked a huge number of transactions, but still, value abounds.

A nice enough Woodland unit sold in 1992 for $119,900. That unit is available today for $136,900. It isn’t a stretch to assume the seller will lose net money on that sale, even after 24 years of ownership. Another Woodland unit sold for $219,900 in 2006, at what would have likely represent the peak for GN in the last cycle. The market in GN started fading before the rest of our market did, with a strange feeling starting in 2007. That same unit is offered today for $149k. Lest you think I’m a Woodland abuser, a Lakeland unit currently listed for $175k first sold for $200k. In 1992. That’s 24 years, a span where something on the lake might have appreciated 400%, and in GN, this unit is losing significant money after such a long period of ownership.

Why does this look bullish to me? Why would I not take the opposite approach and say that GN just can’t hold it together over a long period of time and as such should be avoided? Because of the market conditions that show us which sort of properties are being replaced. See, the reason I’m anti-development is because of what mass development does to the existing housing stock. If you own a $199k vinyl ranch in Elkhorn, congratulations. Your $199k vinyl ranch was likely $199k in 2000 and it’ll probably be $199k in 2020. That’s because they can keep building small $199k vinyl ranches on cheap farm land until the end of time. In Geneva National, they’re no longer building 3 bedroom 2 bath condominiums for $149k. The newer stock, excepting the complicated Cobblestone Court, is generally $250k and up. That’s because it doesn’t make much economic sense to try to flood the market with $169k brand new condominiums. And because of that, your $130-240k condo purchase in GN is likely a very good, rather safe, idea.

Yes, some of the older buildings are GN are subject to special assessments as they repair and replace the cedar siding that has given out over time. This is unfortunate, but it’s a fact of condominium life everywhere. The pure condo model wherein the owner pays a little bit of money each month into a collective fund so that when the roof needs to be replaced they have money; that’s a sweet, tender concept. But what actually happens in most cases is the owner pays in every month and then when  major capital project needs to be completed, the owner is special assessed to pay for it. In that, the condo model is dead. But as long as the condo buyer knows this in advance, it’s not the worst thing in the world. Most specials are amortized conveniently and will not represent too much hardship for the assessed owner.

So today, consider Geneva National. If you like the houses there, terrific, so do I. Except the brass and oak ones, most are offered at or below replacement value, giving little reason to consider a new build there as long as this overhang of housing stock exists. Look to the older condominiums, the ones that need some paint and trim work, and maybe some new counters and appliances. Those are the units that can be bought right, and those are the units that represent value even in this well performing market.

Abbey Springs Market Update

Abbey Springs Market Update

I don’t think I ever had cause to enter Abbey Springs before I was 18, maybe 19. As a kid, I surely knew Abbey Springs was there, over on that south shore that we didn’t dare take the Boston Whaler to, for fear that it was too far, too rough, to unknown. I didn’t have any friends who lived in Abbey Springs, so I would have never been to a birthday party or a sleepover inside those gates. I didn’t mow any lawns in Abbey Springs, mostly because the lawns there are primarily wood chips and an unkempt mix of poison ivy and buckthorn. And so it must have been, an entire childhood spent outside of Abbey Springs. Only when I started to play tennis was I attracted to this place, and I learned to play under my own tutelage inside that giant winter-time bubble they’d inflate over the courts. It was a treat to play, some phenomenon to know you were playing indoors in the winter, with just that thin bubble wall protecting you from the elements. What a thrill it was to shout out the score and have your opponent rarely hear it, the giant fan blowing and roaring to keep the tent warmish.

But that has nothing to do with this. Abbey Springs looks, from my eye, to be ready to yield value next month. The inventory is high, with forty available homes and condominiums, though far more of the latter. In fact, there are just eight single family homes available today. The market for single family homes in Abbey Springs was pretty slow over the spring and summer months, but late summer and fall proved active, and several homes, lead by my $746k sale on Saint Andrews, sold. Another listing on Saint Andrews was listed as pending, then listed as active, now showing as price reduced, so we’ll assume that either the listing office is dazzling us with their technology or the deal fell through and the home is now looking for a new buyer. Either way, the single family market is vibrant, and any buyer looking to steal a home in Abbey Springs will likely find themselves out of luck. Small condo buyers on the other hand have a distinct buying opportunity forming.

That’s because there’s a glut of condo inventory in Abbey Springs right now. Traditional inventory isn’t nearly this high, and because we’re the smart ones we know that ample inventory in a very specific segment can lead to falling prices. As of this writing, there are 25 condominiums listed in Abbey Springs under $300k. That’s a lot of inventory, and buyers can tactfully pit those owners against each other. Many of those sellers won’t be in a huge rush to sell. They’ll just sit until they sell, because that’s how real estate works. But if we have 25 sellers, we must have 5 of them that really would like to sell before the snow flies. That’s why a smart buyer in search of an entry level lake access condo would do very well to weed through the inventory and find those sellers that truly want to sell.

That’s really all I have to say about Abbey Springs this morning. The bubble bit and the fact that you could come up and steal a small condo with me next month. The other interesting market news of the week is a major price shift at Lakewood Estates Golf Club. This is the development that I wrote about on these pages earlier this year. It’s a small, gated enclave of higher end homes that ring a private lake and share access to a private, member’s only golf club. It’s an extremely unique property, and as with most extremely unique properties in Lake Geneva, it didn’t capture the attention of the market, even after my glowing review. With that market reaction in mind, the seller of these properties just dramatically reduced the asking prices, lopping $200k or so off of every available parcel. A development that was originally priced in the mid $400s and up can now be had from the mid $200s. This matters, and this should make a huge difference to anyone looking for a second home in the country. As with every property I represent, if you’d like more details and a private tour, all you have to do is ask.

The news last night said that Lake Geneva is now past our peak fall colors. I say bunk. That’s not the case at all, it’s just that there are equal amounts of fall colors in the trees as on the ground. Take a drive up to the lake this weekend, crunch some leaves. Walk the path. Enjoy fall because October has been an incredible month but it’s just about over.