Just sold. $4,950,000. I was pleased to represent the seller of this fine lakefront home.
Several of our vacation home segments finished 2017 without a particular narrative. They were nice markets that had a nice year. Nothing more, nothing less. No major breakthroughs, no particular oddities. The other markets have been on a roll, and we have no choice but to pat them on the back and tell them they did well. The lakefront market, too, had a nice year. It built on volume and built on price as inventory disappeared. But this is where the lakefront market says goodbye to the other markets and wishes them well. The lakefront market is on to bigger and better things. The lakefront market has a different story to tell.
That story, in case you’re new to this blog or new to the Lake Geneva media mentions, is a dramatic increase in upper bracket sales activity. This is the story that needs to be told. This is the difference between Lake Geneva and all other Midwestern vacation home markets. If this sounds like a common refrain coming from this site, that’s because the refrain is historically rare and is worthy of this praise. Consider the prior market peak. That peak was between January of 2007 and January of 2009. During those months the lakefront market on Geneva printed three sales in excess of $4MM. The top sale for that period closed for $4.95MM. Now consider the current market cycle and the sales that have occurred between January 2016 and January 2018. For those 24 months, the lakefront market printed 10 sales in excess of $4MM and three sales over $7MM. The top sale was $9.95MM. For my part, I represented either the buyer or seller in seven of those ten sales, and each of the top three sales.
Currently we have five more properties pending sale over $4MM and one pending sale over $12MM. This is no longer a market that struggles to provide one or two sales over $4MM annually. That’s the old Lake Geneva, and this is the new Lake Geneva. Increased upper bracket activity, a stronger overall buyer, and a top end that has been completely and thoroughly redefined. While there are questions about the long term strength of this particular segment, I think there is one nagging question that has been answered. Can Lake Geneva provide liquidity to owners who have homes justifiably valued in the $10-15MM range? Yes. A follow up question with more devastating results: Are buyers buying lakefront houses for too much money, in part because they don’t seek qualified counsel in the decision? Also yes.
For the year just ended the lakefront market closed 26 single family properties (MLS). These sales registered $27,578 per front foot, up a bit from the $27, 193 from 2016. In total we sold 2455 front feet on Geneva, down from the 2882 front feet sold in 2016. I’m finding the traditional price per front foot metric to be increasingly antiquated, even though the market still likes to point to that number as the best and easiest way to identify value. I’ve started to add in a price per square foot of structure ($560.96) and price per square foot of land ($58.09) so that buyers have additional means by which to understand the value of a particular property. There is no particular means to measure value, but these three metrics combined with nuanced understanding of desirable locations and attributes can help narrow down the valuation range.
Entry level lakefront traded with some vigor in 2017, and I did find it curious that this segment offered strong value even as the broad market accelerated. Five lakefronts traded under $1.325MM last year, including two under $926k. Those sales represented a nice entry point into this lakefront scene, and I continue to believe that we will find ourselves in a position where the market runs out of sub $1MM homes. These sort of basic cottages only exist on the lake is certain areas, and with each sale these are properties that are typically transformed via renovation or reconstruction. If you’re an entry level lakefront buyer, you’d be wise to move on properties and not miss out on purchases over small negotiation points and percentages.
The story for 2018 will be inventory. Today, there are just ten Geneva lakefront homes available (private frontage, without offer). If the stock market maintains this incredible level (note, it doesn’t need to keep moving higher, just not correct significantly), Geneva will see another terrific year. Heck, the way buyers are buying in January, maybe we don’t even care about the stock market anymore. New construction is rampant at the moment, and while the upper end values currently support these builds, it’ll be interesting to see if this upper bracket market hits resistance in the coming years.
For now, expect inventory to remain low, and cary-over sales from 2017 to close during the first quarter 2018. The market is clamoring for inventory in each segment, including that lofty $6MM+ range. New construction in any price segment will be of interest to current buyers, so long as the parcels match up with the price. That’s a key. I’m expecting inventory to build over the coming months, as opportunistic sellers see a market rife with activity. Some brokers are telling sellers to name their price, but that’s ridiculous. The market is hot, but buyers and sellers still need to understand basic fundamentals of market valuations. If you want an agent to tell you every house is the right house, then I’m not your guy. If you want an agent to help guide you through this increasingly active and competitive market, I’m here to help.
Above, the lakefront at my Loramoor listing. Pending sale at $5,950,000
Do people still golf? It seems to me that they do, even though I don’t. Previously, I enjoyed golf. I enjoyed getting to the course a bit early and hitting some range balls. I enjoyed a sandwich on the patio. I enjoyed the scramble for par, the thrill of a birdie. I once almost had a hole-in-one and that was almost super fun. But the game of golf no longer fits into my ideal day. I enjoy it still, if the course is green and the company prime, it’s a nice way to spend a morning, or an afternoon, or an entire day. But increasingly, my schedule doesn’t allow for a long round on the links, and when time does allow my distractions have taken other forms. Still, I used to like golf and I understand why other people still do. Geneva National has some incredible golf courses, but you needn’t love golf to consider ownership there.
This has come up often in my long history of Geneva National sales. New buyer asks for nice vacation condo at the lake. New buyer doesn’t want to spend lakefront money, and new buyer doesn’t want to buy one of our standard issue two or three bedroom, 1200-1500 square foot off-water condo units. I suggest Geneva National, knowing that there’s tremendous bang for the buck inside those gates. Buyer says she doesn’t golf. This is the Geneva National flaw, the common refrain, the reason some people dismiss this place without ever considering it. News Flash: You needn’t have a desire to golf in order to live in Geneva National. If you hate manicured lawns and rolling, forested terrain, then you should hate Geneva National. But if you like those things and you hate golf, then you should like GN. It’s really that simple.
Geneva National is huge. It’s a monstrosity in our small overall market. That size is what makes it so susceptible to momentum swings. Those market swings have occurred with some frequency since GN first bulldozed their first roadway sometime around 1990. The good news is that the last several years have featured a solid combination of strong sales and diminishing inventory, and that recent trend continued throughout 2017. For the year just ended, GN closed 84 single family and condominium units. More likely sold- private sales, direct from builder sales, and new construction. But the MLS number is 84. There were 71 sales in 2016 and 82 in 2015. The market strength today is obvious, and the trend supportive of a strong market. But GN isn’t without an issue.
The top end in Geneva National is remarkably weak. Consider in 2017 just two homes sold for more than $560k, and the top sale registered $750k. In 2016, there were four sales over $560k, and the top end printed $795k. 2015 closed six over $560k, with the top at $1.050MM. Now that you understand the pricing history, look to the active inventory. While there are just 43 active homes and condominiums (four more pending), there are five properties priced over $1MM. Given the last three years of history produced just one sale over the million dollar mark, Geneva National currently has 15 years of upper bracket inventory on its books. If I’m a seller in GN and I’m looking for a number north of one million dollars, I’m not pleased.
The issues that plague the housing stock in GN are varied, but all come down to dollars and cents. GN still has ample vacant parcel inventory. Currently, 44 vacant parcels are listed for sale. Many more exist off-market. Last year, 10 vacant lots sold. Of those 10, six sold for $13k or less. For all of 2016, the MLS registered two vacant lot sales in GN. Geneva National has lots of vacant inventory, and a housing stock that is aging. It might come as a surprise to some owners, but a house built 15 years ago needs to be remodeled already. A 20 year old house definitely needs to be remodeled. And sadly, your eight year old house likely needs some refreshing. The problem with existing inventory in GN is that it cannot compete with the availability of easily sourced vacant parcels. If you’re a buyer in GN seeking single family and you like a vacant lot listed at $50k, are you going to hire a builder to construct a $650k home for you (one where you get to pick the colors and materials and design), or are you going to go shopping for a 15 year old house that looks like it needs a new roof?
That’s why the single family market in GN is difficult and may remain difficult for a while. The association should do everything in its power to eliminate vacant inventory, and the easiest, most simple way to encourage that absorption is by allowing existing homes to buy vacant, neighboring parcels and be allowed to own those without incurring another monthly association fee. If the association enacted this policy, perhaps more vacant inventory would be removed from the market, and that would be the start of price appreciation for the single family homes. Until then, or until the market slowly absorbs this inventory, expect stagnation.
The condominium market in GN is much healthier at the moment, and I’d expect the low inventory to benefit this segment especially. If you’re a buyer looking to spend $150-350k on a vacation home in the Lake Geneva market, I cannot see a better option for large square footage at a discounted price. While the property feels like a country club, you can either enjoy it as such or just enjoy it for the natural beauty it so easily displays. Just remember, if you hate golf, Geneva National might be perfect for you.
It’s well known and generally accepted that anyone with a lakefront budget will wish for lakefront. There were some people who lived up the road from my parents’ lakefront house in Williams Bay. Those people would tell me how they were glad they didn’t live on the lake. Too much noise from the boats, the waves, the sound of all that enjoyment. They preferred, they said, to live away from the lake, where it’s quiet. Where the lapping or crashing of the waves cannot find them. I remember that even as a young child I knew those people were lying. No one would prefer to be off the lake, and if a budget allows and the aim is true, then lakefront is the result. Or is it?
The upper end of our lake access market is unique in the flexibility such a budget might afford. A lakefront buyer with a budget up to $2MM might very well, and usually will, choose lakefront. But what will that lakefront be? Will it usually be nice? Will it be large? Will it afford privacy? Well, no, not usually. The concept applies to those with lower lake home budgets as well. If you’re a $1.2MM buyer, I can typically find you lakefront. But will that lakefront be a beautiful house with two car garage and a pool? Of course it won’t. It’ll be a cottage, with some questionable structural supports and tight neighbors. But for $1.2MM an off-water buyer can find something quite unique. They can find a boatslip, maybe a view, maybe privacy, maybe a pool, maybe five bedrooms. This is why even when market segments overlap within the same price boundaries, many buyers will opt off water in order to gain something the on-water home cannot offer.
In 2017, the upper bracket lake access market experienced a strong influx of buyer traffic and closed the year with a significant volume total. 2017 closed 27 off-water homes priced over $500,000. That’s a huge number, but what’s most remarkable is the presence of liquidity in the $900k and above segment. This lofty segment closed nine homes, including two in the $1.5MM range. During 2016, the same segment closed 22 properties, with just five selling for more than $900k.
Thirteen of those 27 homes sold with transferable boat slips. Two of the sales were in our co-op communities, one in the Congress Club for $1.53MM and one in Belvedere Park for $564k. There were no public sales in the Harvard Club for 2017. Associations with volume in this segment included Geneva Oaks, Cedar Point Park, Country Club Estates, Indian Hills, Oakwood Estates, Black Point, The Lindens, Knollwood, The Loch Vista Club, Sybil Lane, Oak Shores, The Lake Geneva Club, Forest Rest, Maytag and Sylvan Trail Estates. That’s some widespread activity, and the market should be pleased for producing such strong volume. Oddly, there wasn’t a single residential MLS sale in this segment in Glenwood Springs last year.
Most of these sales made good sense to me. I was involved in six of these 27 sales, which means that at least six of the sales made perfect sense to me. Of the other sales, I was surprised at a few of them, including an off-water home with no slip that sold north of $1MM. Another shocker, at least to me, was the sale of a hilltop home in Fontana that closed over $1.5MM and was subsequently torn down. That property lacked a slip, but the lake view is, as a point of fact, one of the best off-water views I’ve ever seen.
I was asked this week what I thought would be the better buy with a $1MM budget: an on-water cottage or an off-water home. I admitted I’d always look lakefront first, but I would consider a larger lot off-water, so long as I had a boat slip and was located in a high quality neighborhood (think Black Point, Lindens, Glen Fern, Loramoor, 700 Club). In those settings, I would happily consider off-water to be a near equal trade off. This segment today is light on inventory, as is the rest of the vacation home market. Just 16 off-water homes are available priced in excess of $500k. Of these available properties, my favorite is the modern home (my listing) on South Lakeshore Drive that’s been reduced to $1.095MM. This is a lot of house in a rare location, and while it’s off-water it feels like a private lakefront home. It’s unique, but it’s a winner.
This particular segment is heavily influenced by overlapping lakefront inventory, which is, at the moment, similarly low in inventory. If entry level lakefront properties continue to be difficult to source, and the off-water market in the $900k-$1.8MM range provides some nice options, expect this market to benefit. If you’re a buyer in search of a lake house around the million dollar mark, I’m here to help.
Above, an idyllic cottage I sold this summer in the Lake Geneva Club.
I owe Abbey Springs something. Not money, I don’t think. It’s never paid me very much, so I shouldn’t feel obligated to pay it back. In the mid 1990s, I was a kid with a new, disastrous real estate career, and a desire to play tennis. I don’t know why I wanted to play tennis. I had never played when I was a kid. We’d sneak down to hit a few balls at Conference Point Camp, on their cracked and heaved courts, but that wasn’t really playing tennis. I couldn’t afford the Grand Geneva, with their shiny courts and wood lockers. So I played at Abbey Springs, under the tent they’d blow up over their outdoor courts in the winter. It was cold in there, dimly lit, and loud. The inability to properly relay the score, on account of the noisy blower fan, suited me just fine. Thanks, Abbey Springs.
But that’s the end of the thanking. Abbey Springs the real estate market is really quite a spectacle. It’s a machine, finely tuned, running without a miss, or a knock, or a sputter. The market is perhaps the most unique and widely varied here, with vacation condominiums starting in the high $100s and single family homes reaching or exceeding a million bucks. Remember that sentence.
For the year just ended, Abbey Springs closed 28 built properties including condominiums and single family homes. For all of 2016, there were 40 prints. Now, if I were were a headline writer for AP, I’d right this in a way that would appear negative: SALES DROP 30% AMID MARKET TURMOIL. But I’m not AP, I’m just a kid from Williams Bay, and even I know that shrinking sales totals are natural and normal in a market with shrinking inventory. We cannot sell what isn’t for sale. The sales total for 2017 is fine, the inventory today, at just 19 active properties (four of those under contract) is low. The market at Abbey Springs is in fantastic, healthy condition.
But that’s not really the whole story here, as much as Abbey Springs wishes it were. Consider the upper bracket sales from last year. There were four sales over $800k in Abbey Springs, with the highest sale reaching $885k. That’s nice. For the last five years, the two top sales in the market registered the same amount: $885k. Nothing higher, and over those five years just five sales over $800k. Seems fine, right?
The prior market top was mid 2007 to mid 2008. We know this. Abbey Springs, from 2005-2008 sold a lot of product, but where was the top end back then? For those years, Abbey Springs closed four sales over $900k, with the top sale at $1.3MM. If the markets today are as strong as they were then, why can’t Abbey Springs push over $900k anymore? Where did the $1.3MM sales go?
There’s no particular mystery in this. The market is strong today, yes. But the top end has obviously been redefined, and that new definition falls short of $900k. There has been some inventory over $900k to press that theory, but those homes have failed to sell. The prior market peak found buyers in this range with relative ease. It’s apparent to me that this higher level buyer is still in the market, but has found his or her way outside of Abbey Springs and instead wants a traditional lake home experience. That buyer wants a slip. Maybe some privacy. A smaller association where the beach isn’t so crowded. The buyer who once purchased $950k homes in Abbey Springs has proven elusive in this current cycle.
But maybe that doesn’t really matter. Abbey Springs might not be a million dollar market anymore. Or perhaps there just haven’t been any million dollar homes listed for sale. Either way, expect Abbey Springs to push forward yet again in 2018, and expect inventory to stay low. If you’re a buyer in search of a lake house experience with added country club style amenities, Abbey Springs is likely your best bet. Condominiums from the $200k range and single family from $500k. Beach, pool, golf, clubhouse, and tennis courts, though the bubble is no more.
That’s a mouthful. I’m sure there’s a better way to say it for search engine optimization, but the market is best defined in that way. The market isn’t particularly flashy. It won’t make any headlines. It won’t be in Crain’s or in Architectural Digest. But the entry level lake access market is the market that’s as important as any other here. These are the homes available to people who have enough fiscal power to make a vacation home a reality, but don’t have lakefront budgets. For the purposes of this post, this segment remains at $500,000 and under.
All of these 2017 market reviews are going to tell similar stories. It’s all about inventory. About volume. And about how the inventory is either going to build and feed the market or shrivel and starve it. Today, there are just 12 homes priced under $500k with access to Geneva Lake. Remember, these are not municipal access homes- these are private, club style access points. These are the associations you know, the associations that can offer a path to the lake, a park, a pier, a diving board, maybe some summertime geraniums in pots.
Those 12 homes vary wildly, just as this market varies. A $200k cottage in Country Club Estates is not at all like a $500k home in Country Club Estates. A small cottage in Oak Shores with a slip for $450k isn’t much dissimilar to a small cottage without a slip in Cedar Point Park, except that the Cedar Point cottage will be 50% cheaper. This is a market that I’ve gladly served for two decades, and it’s a market that hinges on a very important question: Do you want a nice house or do you want to be close to the lake? You cannot choose both.
For the year just ended, we sold 61 lake access homes of all makes and models, priced under $500k. The 2016 total was 56, so we’re heading in the right direction. Just three of those homes had transferable boat slips, proving how hard it is to find a slip in this segment. Perhaps best of all, I personally sold all three of those homes. Why did I sell those homes? Well, because I know how valuable a boat slip is. I know owning a home here is wonderful, but if all you really want is to hang out on a pier and boat, then you’re going to be miserable in your off-water slip-less home, even if it has some stone counters and a master bathroom.
The key to understanding this segment comes back to that bold question about proximity. That drives this particular market more than anything. You can buy a nice house in Country Club Estates for $500k. It won’t be remarkably close to the lake. Or you could buy a small cottage in Knollwood for $500k that might be 900′ from the water. Which do you value? Do you want to walk down to the pier in the morning to cast your line a few times, motivated by the hope that something might bight? Or would you rather sit on your screened porch, reading a book thinking about where fish fry will be on Friday night? Answer those questions, and you’ll have a clear direction for your pursuit.
2018 should be just like 2017. Inventory is terrible now, yes, but it won’t be that way forever. This market might be more sensitive to the new tax law, but if inventory builds there’s nothing stopping 2018 from falling in the 2016/2017 volume range. Prices are increasing, albeit modestly. Value still exists here, and I’ll be here to help you find it.
By now, everyone knows the Stone Manor story. Not the Otto Young story, mind you, because he’s old news. The new news is the news we like, because we’re Americans. The news is, as you know, that a buyer has bought up Stone Manor, that famed limestone manse on our eastern shore. The building has been lots of things since it was first built some 120 years ago, but most of us know it either as an old French restaurant or as the condominiums that it has most recently been. Today, it’s still a condominium, but not really. There are seven units in the building, and all but one are under the same ownership. The volume created by those 2017 condo sales is not something we’ll count in our year end figures, because the sales were direct, and the circumstance obviously unique. Stone Manor, we hardly knew you.
Now that the Stone Manor bit is out of the way, let’s consider the real lakefront condo market. That is, those two and three bedroom condominiums that measure between 1200 and 1500 square feet. Those are the meat and potatoes of this market, and really of every condo market everywhere. Vacation condos follow similar designs- two bedrooms, maybe three, a small kitchen and open living room. Maybe a balcony, or a deck, which are the same thing except one feels like it has to be made out of wood, the other out of stone, concrete or steel. Still, condominiums are similar here and they’re similar there, and in fact they’re similar everywhere.
Lake Geneva condominiums have, as you well know, been lagging the overall vacation home market. I’ve suggested many theories as to why this may be, but I admit I’m not particularly sold on any of them. The lakefront condo is simply not as prized as it once was. But that’s not to say it doesn’t matter. For 2017, we sold 12 lakefront condominiums ranging in price from $302,500 for a Geneva Towers two bedroom, to a four bedroom at Eastbank for $1,212,500. I should add that I blew that Eastbank sale by sending the prospective seller emails to the wrong email address. This is my shame. Of these 12 condominiums, I sold just one of them- the two bedroom at the Fontana Club that printed $390k.
The 12 sales are fine. There’s nothing fancy about these sales. But there’s nothing lacking, either. They’re just sales. The prices have stalled, this is undebatable. Consider the Fontana Club unit that I sold for $390k was originally sold (by this kid) for $393k back in 2001. I was so young then, so healthy, so full of optimism. So was the Fontana Club. Then, at the height of the condo market a mere five years later, this two bedroom unit was likely valued around $600k. Fast forward to December when the unit sold again for a price below that of its original sale in 2001. That’s awful, but it’s a sign of the times for the lakefront condo market.
In all, five units sold at Geneva Towers, one in the Old Boatyard Condominiums ($689k- behind Harbor Watch in Lake Geneva), one in Vista Del Lago ($350k), one in Fontana Shores ($510k), one in Fontana Club ($390k), and two in Bay Colony ($550k/$476k). That’s a fine sales tally, ahead of the eight sales of 2016, and ahead of the 2014 and 2015 totals as well, if only modestly so. And that brings us to the current state of the market, and what’s next.
Inventory is low in the lakefront condo complexes, and this is a good thing. While I worry that the single family market won’t have enough inventory to spur activity, I’d prefer to see limited inventory in the lakefront condo market. That’s because the prices have sagged, and the only way to pull those priced upward is to limit supply. The best possible scenario for the lakefront condo market is that 2018 features a handful of sales- no need to match or beat the 2017 sales total. Sell a few condos, keep inventory scarce, and see if demand increases. If the $500k-1.5MM single family vacation home market stays light on inventory, this will likely drive some buyer traffic to the condo market. And if that condo market is even lighter on inventory, this very well may help increase valuations. That’s exactly what I think will happen this year, and that’s exactly what the doctor ordered for our slowly improving lakefront condo market.
Above, my delightfully stylish lakefront condo at Bay Colony, listed for $899k.
One year ago, I wrote my year end market reviews and worried about 2017 inventory. 2016 had been a terrific year, but without inventory there was no way that 2017 could match that success. For the year 2016, we sold 103 lakefront and lake access homes on and near Geneva Lake. That was a solid tally. With the inventory concerns heading into 2017, I was uncertain we could come anywhere near that figure, but here we are. 2017 wrapped with 119 such sales, beating the prior year even though the outlook, at least based on inventory, was bleak. So what happened? Was there some rush of new inventory? Was there some development that came online and offered up a large chunk of ready-made sales? Neither event happened. Instead, Geneva was Geneva. We sold new inventory relatively quickly, and the market turned to the aged inventory and decided maybe it wasn’t so bad after all.
Today there are just 35 lakefront and lake access homes available on and near Geneva Lake. That number is a bit artificial as it doesn’t take into account properties that recently expired and have not yet been brought back to market, but the number is still startling. Making matters worse, there are only 11 lakefront homes available for sale. That number is just awful, but I suppose that depends on your perspective. If you’re an agent, like, say, me, then this is simply horrendous. If you’re a buyer, you feel the same. But if you’re a seller, especially a seller of a property that has experienced a length time on market, then this news couldn’t be better. Our market, like any market, lives and dies on inventory. Today, there isn’t any. It’s Ground Hog Day in January.
It’s safe to say that the Lake Geneva vacation home market has been on a solid bull-run since the end of 2013. The market recovered volume in 2011 and 2012, but prices didn’t stabilize and find some margin until that later date. That means we’re entering year five of a rather remarkable run. The market has made price gains, eliminated aged inventory, cleansed a few weak owners from the scene, and generally, completely, forged ahead. The lake is abuzz with new construction, leaving a market that finds a $4MM price tag to be somewhat median. The market is starved for inventory, each of decent land in the $2-3.5MM range, of entry level offerings sub $1.5MM, and of newer construction in the $4-10MM range. For the first time ever, I believe there’s a market for homes in the $10-15MM range, even though this market has never been properly tested.
While this run has featured buyers of every sort and wealth finding their way to the lakefront, it can most easily be recognized as being the run that delivered higher end buyers to these shores. $4MM is the new $3MM. $7MM is the new $5MM. The stakes have been raised, and Geneva continues to be set apart not only by the quality of our water and the vibrancy of our scene, but by our ability to produce upper bracket liquidity. I’ve said it often, and it continues to be more true each time I do, but Geneva is alone at the top of the Midwest vacation home segment. There is no market that comes close. Michigan, for all its effort, cannot hold a candle to our inland lake. Door County’s real estate market should be renamed Bore County. The Northwoods? Is that even a market? Geneva is the king, and with each passing year we become more worthy and the title becomes more and more permanent.
I’m looking forward to providing you with 2017 market reviews, and will do so on the typical breaks in our vacation home market. This year, each market has had plenty of success, leaving the recovery no longer spotty, no longer skewed in favor of one segment over another. As with last year, my primary concern for the new year has to do with inventory. If we feed the market, it will continue to grow. In spite of tax changes that take away some advantages of second home ownership and limit SALT deductions, I do not believe these will significantly or adversely affect our market. Why? Because there’s no other market like it, and there’s no better place to spend your weekends. Staying home on a Saturday just so you can have a few extra bucks in your robust bank account doesn’t make much sense to me. I don’t see the new legislation hurting our market, even if it likely will keep a buyer or two on the sidelines. If late December/early January activity is a harbinger of things to come, 2018 looks like it will be our fifth straight solid year.
Above, sunset at 700 South Lakeshore Drive, sold by this guy for $5,900,000 in May of 2017.
In the South Shore Club, there are 40 total lots. Most are built on, a few are not. At present, there is one new construction underway. To date, there had been one sale, that of an aged inventory home near the back of the lakeside circle. While there are 40 total, there are only four built homes that play as true lakefront homes. Those are the front homes, the homes you walk into and see the water, unavoidably. Those are the homes that function as their own market, and the home I sold this week is part of that elite group.
There is some confusion over the South Shore Club, and how to come to a valuation. Will the market pay lakefront prices for these lakefront homes? The answer is yes, and no. The yes part is obvious, because there’s a sales pattern now that didn’t exist prior to 2012. The no part is less obvious, and it might not be a negative in the way you’re suspecting. The market won’t pay true lakefront prices for these homes because the prices paid for them represent a discount to what those homes would trade for if they were on their own private lakefront parcels. So the market respects the South Shore Club, but buyers still expect a slight reduction over private frontage valuations. This is all good news.
Consider one way to look at this closing at $4,175,000. The last front house sold in 2014 for $3,591,000. For 2014, the average price paid per lakefront foot was $21,144. 2017 YTD through October 10th, 2017, the average price paid is $27,743. That represents a 31% increase in valuation. If we apply the same appreciation increase to the South Shore Club lakefront four, we’d see a valuation $4,704,210. Is this the only way to compute value? Of course not. A lakefront in Fontana sold in the high fours this fall, and that home, with a very small lot, sold for $713 per square foot. The South Shore Club home was 8736 square feet, which comes to a $477 per square foot.
A sincere thank you to the buyer and seller who let me help with this transaction. It was not the easiest deal I’ve ever worked on, and that comment may win Understatement Of The Year. That’ll put a wrap on my 2017 sales production, unless someone needs to close on a new house by the end of the year. Put a big red bow on it, like a Lexus. The year ends for me with $44MM in sales, which makes me the #1 individual Walworth County agent for 2017, and in that top slot for the third year in the past four. Combined with the 2016 volume that’s $106MM in the past 24 months. And that isn’t so bad. The address being written wrong on the property below that just sold, now that’s bad.
The month of November came in like a lion, or so I remember, and then it went out like a lamb. A tender, delicious lamb. Those early quitters found themselves baking in southern Florida, or dodging scorpions in Arizona. Others went on vacations to tropical locales, to avoid the dull of November. These people missed out. November wasn’t terrible. November wasn’t awful. November wasn’t even tolerable. November was incredible. A perfect blend of fall and winter, a bit of cold here and some cold there, followed by sunshine and sunsets that would make July blush. November was quite a month at the lake, and like every month, there were sales that we should review.
The most expensive closing last month wasn’t really so expensive. $1.7MM for the house in the Elgin Club. This was my listing, as you’ll recall, but a buyer from a prior listing came back and bought it, so even though it closed my children still need new shoes. The sale when viewed through a price per front foot prism is high ($34,000), but that’s because smaller properties always look high when judged by this blended average. The sale at $1.7MM was a terrific value. The seller decided it was time to move on, and the buyer took a flyer. The Elgin Club is an ideal spot on the water, and if you’re a buyer under $2MM and can find your way into the Elgin Club, you’re doing very well for yourself.
Next up is a dated modern house on a hill overlooking, at least from the top floor, Fontana Bay. The house on North Lakeshore Drive closed for $1.575MM, and the rumor around town is that this home will be torn down. If that’s the case, I will refrain from comment. No matter how hard it is for me to keep quiet, I won’t say a word. No, in spite of having so many things to say, so many cutting, terrible things to say, I won’t say a word. Not a peep from me, about this sale for $1.575MM. No boatslip here, by the way. But that’s all I’m going to say. Nothing more.
A home in Academy Estates closed for $950k, this one possessing a slip, and a pool, and some deferred maintenance. The price is okay, not great, not the worst thing I’ve ever seen. The house was one of those homes that couldn’t aspire to more than this price, so in that, I’d say the market provided a price that the seller felt acceptable, and that, is that. Academy Estates is a nice association to the East of the South Shore Club. If you’re an off-water buyer, there are far worse places you could end up.
The most interesting sale of the month was in the Lake Geneva Highlands. Earlier this year, I sold a small lakefront house for $925k. That was, at the time, the lowest price lakefront sale of the year. The house next door to that one just sold for $850k. That’s a nice price, no matter how difficult the house. I say it often, and I’m not wrong: the lake is running out of sub-million dollar homes. That’s because when one of these homes sells (perhaps one lakefront every other year sells below $1MM), the new owner rarely stands pat. Instead, they undertake some form of renovation. Perhaps a huge renovation, maybe an addition, maybe they tear it down. No matter the course, a $900k lakefront home is rarely the same home a year or two after that low print. When that home comes back to market improved, it now commands a $1.5MM asking price, which removes one more sub-million dollar home from our lakefront. That’s why these low priced lakefronts are almost always a good idea.
Rounding out the activity that matters, I sold two smaller properties last month. In October I listed a ranch with a boatslip and dynamite proximity to the water in Oak Shores. Last month I sold that home for $610k. The home needs a bit of cosmetic updating, but it was a nice house in a wonderful location, and it made complete market sense. Last week I sold a large townhouse in Abbey Ridge, near the Abbey Harbor, for $555k. That was a beautiful condominium, offering loads of square footage and upgraded finishes. Abbey Ridge is a unique creation in our market, as it offers two, three, and four bedroom condominiums in a resort setting for a reasonable price.
I was pleased that both of these sellers chose to list with me this fall. In doing so, they made the smart decision to not wait until Spring to list. That’s the common refrain at this time of year. Wait ’till spring. That refrain sounds nice only because it sounds familiar. Sell to your competition, not to the season. This isn’t Door County. This isn’t Harbor Country. Lake Geneva doesn’t close just because the temperatures drop. We just put on some sweet boots and play in the snow.
In the news this week, more of the continuing saga surrounding Stone Manor. I suppose most of this story is my fault, so I should take some time to explain myself. Several years ago I was hired to represent the marquee unit at Stone Manor. The first floor residence is as marquee as marquee gets, and since I’m the agent with the most success in that particular segment (no matter what the stapled letter you received in the mail from some other agent says), I was chosen to sell this space. After some market time, I sold it for just under $6MM to a strong buyer. As a point of fact, you won’t ever see me drop my client or customer names in this blog. That’s low-class and I’ll leave it for the online gossip pages to fill in the gaps that I intentionally leave empty.
After all, that’s what this story is all about. That’s why it has legs. The story has personalities involved, and media types love a personality. But again, here I am getting ahead of myself. The first floor unit sold in late 2016, and I was pleased to represent the seller. Stone Manor, for those who are unaware, features(d) several condominium units. There is a double unit and a single unit on the top floor, the same configuration on the second floor, and the large single floor unit that I sold on the first floor. Shortly after the first floor unit sold to this buyer, a double on the top floor sold. Then, some fancy deed work between two owners, and ultimately the second floor double unit sold. In November, the single unit on the second floor sold. That unit, by the way, was the unit owned by Tony Rezko, infamous associate of a prior president.
Even though the sales prices have been poorly or inaccurately reported, the transfer returns point to sales prices as follows: First Floor: $5,995,000. Top Floor Double: $1,899,667. Second Floor Double: $3,400,000. Second Floor Single: $2,250,000. The top floor double may have sold in a different manner to reflect that lower transfer price, but I’m not privy to any details, and those don’t matter. What matters now is that a singular owner now owns all of Stone Manor excepting one single top floor unit. The price paid so far? $13,544,667. This means every reported number you’ve read over recent weeks and months is wrong.
So now what? An owner who isn’t well known locally now owns nearly all of Stone Manor. The new owner has paid a handsome market rate for the property acquired. And because of this, everyone is going insane. Local news reports on the purchases as if they’re somehow unexplainable. Los Angeles based bloggers can’t figure out what’s going on here. Why would someone want to own so much of a building in rural Wisconsin? Has the world gone mad? We demand answers. We must know. We have to know. What’s going on at Stone Manor?
The answer, is nothing. Stone Manor is a monster limestone structure. It’s somewhere around 30,000 square feet. The property has 400′ of frontage and nearly 10 acres. It is, without question, the most important estate on this lake. No matter what other billionaire lakefront owners think, Stone Manor is actually the king. And if you’re a lakefront owner or a lover of this lake, you should be thrilled that the property is on the verge of returning to single family ownership. Why would we bemoan a purchaser investing so much in our market? Why would we wish to understand this beyond what it looks like on the surface? It’s an owner who loves a property that had previously never been given much attention on the market, and that owner now seeks to turn 400′ of frontage into a singular estate. This matters, and we should be appreciative.
Let’s say the top floor holdout owner sells. Maybe he does, maybe he doesn’t, it matters little to me. But if he does, and the price is in line with prior sales in the building (let’s not consider the alternatives for an owner who no longer has meaningful voting power in the condo structure), then the singular owner will have purchased the entirety of Stone Manor for around $16MM. Want to know what Stone Manor, in its entirely is worth? Probably around $16MM. Has the new owner overpaid for this property? No. Does it matter if she did? No. Does it matter that she might be from California and her husband might be from New York? No.
My advice to the community is to recognize a compliment when paid one. This owner could choose to spend millions of dollars in any vacation home market in the world. She chose Lake Geneva. I, for one, am flattered by her interest, and as a caretaker of this market and this lake, I welcome the consolidation of ownership. To that new owner, I say thank you. I say congratulations. I say welcome to the lake.
Tis the season for one of two things. Ambivalence is the most popular option for mid November. Why pay attention to the market when it’s just so easy to eat pie and pretend your weekends aren’t awful and boring? Sellers find and embrace ambivalence today as well, accepting that the market will slow to some degree from now through the earliest part of 2018. In spite of this holiday pause, there’s reason to doubt that several deals will come together over the next six weeks, as the market never actually sleeps. It just rests its eyes once in a while. Because of this, some sellers will remove their property from market (mistake), and others will just continue on as though everything is fine (it likely will be). But some sellers are November price cutters, and those are the sellers we’re looking for.
Last week I dropped the price of my large Basswood estate from $9.75MM to $8.995MM. This is a meaningful price drop, and it wasn’t easy to achieve. Buyers in this strata should take another look at this property, as it offers too much to be ignored. Large frontage, deep property, perfect location. The house itself is large, easy to understand, and ready to host an easy surface renovation. There are many estates on Geneva Lake. Many amazing estates. But there are very few that are complete. What do I mean by complete? I mean a property that’s large enough to feel important. A house that matches. A swimming pool. A guest house. A large pier. Combine all of those elements and you’ve got an estate. Basswood? It’s an estate, and I just put it on sale.
Another listing of mine that’s been struggling to attract a buyer is my modern home on South Lakeshore Drive now listed at $1,095,000. I don’t feel as though I’ve done a very good job explaining this property to the market. It seems as though, after so much market time, the property should make sense for someone. I know it makes sense in the market. I know it’s a screaming value. The house sold during the prior peak for $1.5MM and change. The house sold at that level because of what it offers. Immense and rare privacy. Loads of square footage over four finished levels of living space. Transferable boat slip. Situated on the lake between massive estates, with lake views and nothing but a few trees between the house and the water. This is a lakefront house without private frontage, and it’s downright cheap. If I’m a buyer around the million dollar mark, this is a house I’m looking at. A tiny smear of lipstick and it’ll be a fantastic lake house.
My new listing on Outing in Williams Bay ($1.699MM) is offered today at a reduced price after initially coming to market just under $2MM. These are the sorts of sellers you want to find. The motivated ones. It’s too convenient today for sellers to sit back and wait for the market to come to them. After all, there are several 2017 examples of this happening for aged lakefront inventory. But I’m writing today to buyers. I’m writing today to those you don’t want to throw caution to the wind. If you’re throwing caution to the wind, other agents specialize in that, not me. I’m assuming there are still buyers who want to find value, and if that’s you, then let’s chat. We can aggressively look for new inventory and pounce if it’s right, but I’d rather comb over aged inventory and see if we can find a seller who’s ready to play ball. The myth of this market is that every seller is overly confident and every seller is holding out. The reality of November at the lake (and December for that matter) is that there are still sellers who are ready to sell. They just need a value minded buyer (and that buyer’s dashing agent) to convince them that the time is right.
Above, the pier at Basswood. $8,995,000
Some would say that title is impossible. After all, load into a tour boat and take a trip around these shores and there’s very little that looks particularly affordable. Even the homes that look affordable come with seven figure asking prices, albeit low seven figures. Lake Geneva has historically been home to significant wealth, and the trend in recent years has only accelerated that status. Several years ago a $10,000,000 home on this lake was viewed as a fortunate albatross. It was neat, and lavish, but it didn’t make any particular sense, even for the wealthy. Today, a $10,000,000 home would be met with immediate buyer interest, as the liquidity that traditionally dried up around $5,000,000 now meets little resistance up to and through double that amount. Yes, Lake Geneva is for the wealthy, everyone knows that.
But that’s not where the story ends. Because Lake Geneva isn’t just for hedge fund managers and successful entrepreneurs. It’s for anyone who desires something different. It’s for everyone who wakes up on a Saturday morning in the summer and wonders what they’re going to do that day. It’s for those who are stuck in traffic on a Friday night, but not in the northbound lanes. It’s for those with the means to change their weekends and change their motivations, even if that doesn’t allow for a lakefront home or a lavish off-water spread.
Yes, you could buy a cottage in one of our area towns for $80k and use that for your summer house. That’s perfectly acceptable, and encouraged. But let’s assume you’re not looking to buy squalor. Let’s assume you want something easy, something low effort, something large enough to contain your family and/or friends in some form of luxury. If you’re thinking I’m going to suggest a tiny home, please read this bit on the folly of the tiny home. No, I’m suggesting a condo. A simple, easy, two or three bedroom condo. Something affordable. Something in the scene. Something that allows a weekend to be entirely and completely different from the 9-5. If you’re looking at Lake Geneva, as you should be, these condos have names and well defined price brackets. If you can spend $180-250k, you’re in luck. Lake Geneva has sensible, stylish options for you, too.
I’ve written about this particular segment often, because it deserves inclusion in any vacation home discussion. The condominiums that I find appealing in this segment include Abbey Hill, Abbey Villas, and Willabay. There are others, for sure, but these are the three that fit into this lower price point while still offering some meaningful value. When times were bad, these small condo associations were chock full of inventory. Too much inventory, some slight foreclosure activity, and overall malaise. Today, these complexes have recovered completely, and they offer some of the easiest value in our broad market. Let’s take a look at each one to see what’s happening.
Abbey Hill is perhaps my favorite. The complex isn’t right in town, like the Villas, but I appreciate the privacy. There’s a basic swimming pool and some nice topography here, all less than a mile from downtown Fontana. Today three units are available, priced from $199k to $255k. One of those three units is pending sale. The condo fees at Abbey Hill are around $350 monthly, and taxes run around $3k annually. Factor in a 70% mortgage and you’re looking at a delightful vacation home for the cost of one long weekend rental at the Abbey Resort. Best of all, the units are all a bit tired, so a basic surface renovation can make a dramatic impact.
The Abbey Villas are adjacent the Abbey Resort on the harbor. That harbor is being renovated this off-season, so look forward to a beautiful new harbor (if there is such a thing) by next summer. The villas have a series of swimming pools, and are undeniably in the heart of the action. The beach, restaurants, and parks are all just a short walk from these units. Inventory swelled during the crisis, but today there are just two units available in the MLS, priced from $230-272k. Some units here can sell into the $400s, if they are harbor front. Taxes are similar to Abbey Hill, though assessments are a bit higher. Pets are not permitted here, so if you hate dogs and cats, you’re in luck.
In Williams Bay, Willabay fits into this particular segment. If you like being close to the water (short walk), but dislike the bustle of Fontana on a summer weekend, then Willabay might be a better fit. There’s a pool here and some tennis courts, all close to the Williams Bay lakefront and beach. There are five available units priced between $179-235k, with one unit pending sale. Taxes are similar to the Fontana units, and assessments are, on average, a bit lower than Abbey Hill. These units come with one car attached garages, as do most of the Abbey Hill units (the Villas lack garages).
If you love the Lake Geneva scene, and you’d like to be part of it, I’d gladly sell you a $5,000,000 lakefront house. I’d be happy to, really. But if that’s not in the budget, and a $200k condo near-ish the lake sounds more appealing, just let me know. You have solid options here, and I’m happy to guide you to the best value.
Foreclosures. They’re interesting, and awful. Awful to be a party to a foreclosure, awful to be a neighbor of a foreclosure, awful to be the bank foreclosing. There are no real winners in the foreclosure game, at least immediately. Long term there are many winners, in the same way that a forest fire cooks some rabbits while it chars a vacant mountainside but after the smoke clears and the damage is surveilled, new growth can begin. The easy thing now is to forget about foreclosures. To pretend they don’t exist, to wish they hadn’t. But that’s not the smart way to go about our lives, and so we’ll take a look at the Lake Geneva foreclosure scene to determine if there’s anything afoot.
First things first, let’s check the MLS. As the local MLS scratches and claws to try to remain relevant, much like Blockbuster tried to remain relevant and MySpace, too, they’re implementing different search fields to prove they’re at the cutting edge of technology. They aren’t, but they’ve given agents an opportunity to mark listings as “REO/In Foreclosure, and Shore Sale”. That’s something, so let’s search. Walworth County, Singe Family, both distressed selected: Seven total listings. Two under contract. Nothing priced over $250k. Year to Date there have been 72 such sales in Walworth County, all but five priced under $300k (the most expensive was a mid $400s Delavan Lake property). Looking back to 2014, when the MLS function either didn’t exist or wasn’t readily used, there were 170 such sales in the MLS.
There are two other methods to check for brewing foreclosures, both involving public records searches. Looking at scheduled Sheriff’s Sales, there are just 19 scheduled at the moment. None of those involve any Lake Geneva vacation home real estate, and most are in the lower price ranges of our primary home market (sub-$200k). For a reminder, the Sheriff’s Sale is a step in the foreclosure process. An owner/borrower still has a redemption period that typically extends past the Sheriff’s Sale, but this is usually a last, fatal step in the foreclosure process.
Taking it one degree deeper, let’s look at the Lis Pendens filings over the past 30 days. Remember, a Lis Pendens filing is essentially a notice of default. The bank is telling the borrower: YO. You owe us money. We aren’t messing around. Pay up or we’re going to foreclosure. There are a handful of filings, but from what I can see there’s only one recent LP filing that affects the vacation home segment. That is a filing on a home in a lake access association that lacks a boatslip, or a view. Nothing looks to be in trouble on the lakefront, excepting the property that with IRS entanglements on the North Shore.
Beyond the lake access markets, one item of surprise. Geneva National looks clean. GN, for those who didn’t know, had some significant foreclosure trouble during the last downtown, as volume dried up and foreclosures pressured valuations. My assistant Vicki closed on a GN foreclosure this fall, but these properties have been few and far between this year. Overall inventory has dropped considerably in GN, and without any foreclosures brewing (there may be one or two that I don’t see), GN is poised to continue its very healthy recovery.
Foreclosures will be part of any market, no matter how healthy. A foreclosure here and there can be a positive for a market, as it provides a bit of liquidity when inventory is low and removes property from weaker hands. Today, the ownership base at Lake Geneva looks to be as strong as ever, and a decided absence of foreclosures appears to be the new normal.
I read an article yesterday about slowing home sales in the Hamptons. Hamptons’ Homes See Double Digit Price Drop. Sounds terrible, unless you don’t care about the Northeast, which I don’t. In fact, I root against the Northeast as a general practice. I read the entire article, but I didn’t really need to. The first graph told the story.
The softness in pricing was mainly due to an oversupply in the luxury market…The luxury inventory is still expanding, noting that there were 322 active listings during the last quarter, a 22.4% increase from a year ago. ~ Jonathan Miller, Douglas Elliman
Well then, that sort of takes the mystery out of it all, doesn’t it? Why is the market slowing? Oversupply. Why do my shorts get wet when I swim? Because of the water. News sorts like to look at localized headlines like these and paint a national segment with the same brush. Unfortunately, the real world doesn’t work that way. But the article does bring up an interesting topic, that of supply. If supply is overwhelming the demand, we all know markets have to drop. Why will they drop? Because if there are 322 active listings in one segment, you can bet that at least 30 of those chowder eaters are going to want to sell, and they want to sell now. That puts downward pressure on the list prices, which results in lower sales prices, which results in Mansion Global running an article, which results in David Curry writing another article in the response to the article.
The month of October was again kind to the Lake Geneva upper bracket. Four lakefront homes sold last month, with many others heading under contract. Today, there are just 17 true lakefront homes available on Geneva Lake (with private frontage). That means we have the opposite problem that afflicts the Hamptonites. Though this will also cause our volume to shrink, even as our prices remain stable or increase. The four sales on Geneva from this month are unique, in that three of the four had experienced elongated market time. Did the list prices soften or did the market rise to meet the seller demands? Both, sort of. Kind of.
A Congress Club cottage sold for $1.53MM. That house had been for sale for two years, on and off, and finally sold after a series of price reductions. The property is not private frontage, rather it shares a wide swath of frontage with the other Congress Club cottages. It’s a unique set up, something that the market finds both appealing and strange. This particular home sold for a similar number several years ago, effectively putting a cap on the prices in the Congress Club. Do people mind sharing frontage and sharing piers and having to abide by all sorts of rules? Yes. Do they mind as long as the price is mid $1s or lower? No.
Another old cottage, this one with 84′ of private frontage, sold recently. Main Street Lake Geneva is a location that the market didn’t used to find as appealing as it does today. The traffic, the noise, the scene, were mostly left off of buyer’s want lists until this most recent cycle. Now people like the action, they crave the scene, they tolerate the traffic. The house that sold was one that I had for sale a year or two ago. I failed to sell it, for similar dollars. But that wasn’t because I’m not good at selling things, it was just that the market has increased since then and the increase allowed the seller’s number to make some sense to a buyer. The home closed for $2.1MM and change.
In September, I wrote an offer for a client on a lakefront home in Cedar Point Park. The house was okay, not perfect, but okay. Our offer was followed by another offer, and when our reasonable offer was rebuffed, my buyer stepped out and the other buyer bought. $2,775,000 was the closing price for a modest home on the hill in Cedar Point. I thought this to be a high number, but that’s just like, my opinion, man. This property sold in 2004 for $2,025,000, again in 2009 for $2,575,000, and now in 2017 for $2,775,000.
Lastly, a sale near the Lake Geneva Country Club for $2.85MM. This home had been for sale for what felt like my entire life, though I’m sure that’s not accurate. The house was nice enough, the 125′ of frontage, good enough. But the house was plagued by a location next to the LGCC maintenance building and paddle courts. The market didn’t love these conditions, but as with any lakefront sale, these are each unique and certain buyers prioritize amenities and detriments differently. I’ve sold lots of homes that the broad market didn’t love, but when you find the perfect buyer their perfect house, deals happen. In the context of price per front foot, this sale was the most affordable of the other three private lakefronts to have closed recently, so that’s worth something.
If the market is expected to slow, 3% GDP, all-time index highs, and low inventory aren’t the conditions that will lead to that slowdown. Will the possible elimination of itemized deductions hurt us, as the Crain’s Chicago Business article this week claimed? Maybe, but I don’t think so. Buyers aren’t here because they’re combing over every last dollar. They’re here because they love it, because it means something to them, because it means something to their families. They’re here because they want to be, and they keep coming even when the price of admission is on the rise.
Above, my new listing at 434 Oakwood in Fontana. $1.295MM for so much perfection.
When times were particularly bad and getting worse, I hatched a particular theory. The theory supposed that in spite of the various factors that we know prod consumers to buy and sell homes, things like interest rates and employment and marriage, there’s really only one thing that makes real estate markets move. In bad times, it’s fear. If you have $10MM in the bank and your $2MM home is only worth $1.7MM, do you need to sell it? Of course not. Then why sell it for $1.6MM? The answer, which we can only know now, is that you sell at $1.6MM because you’re afraid next month it’ll be $1.5MM. That’s why this market moved like it did from 2009 through 2012, because of fear.
And if it’s fear that drives a declining market to lower lows, then it must be the opposite that drives an escalating market to higher highs. Job growth is great, but it doesn’t fuel the top end at Lake Geneva. Interest rates are important, but are they? Stock market return are incredibly important to this vacation home market, and with steady returns piling up it makes sense that consumer confidence is as robust as it is. The opposite of fear is confidence, and it’s that confidence that’s driving the Lake Geneva market. And it’s driving super fast.
Another week, more contracts. More offers. More sellers wondering if their house is next, more buyers buying homes they didn’t know they needed but now can’t live without. There are 30 lakefront homes available this morning, per the MLS. Of those 30, nine are under contract. That makes just 21 available lakefronts. Of those 21, several have active offers being negotiated. 20 true lakefront homes have already sold in 2017, leaving us to assume that we’ll break the 30 home mark for 2017. Last year was a banner year, and we only closed 24 true lakefronts (MLS). If we break 30 this year, it’ll be even more important to remember that in 2007 we only sold 17 lakefronts. This new norm is really, really something.
This week, a lakefront closing. That of Kerry Wood’s house in Fontana. At $4.7MM it’s an okay sale. I don’t love it, and I don’t hate it. I’m ambivalent, which is how I feel about baked cod and maple syrup. It’s a lofty sale for the frontage (102′), and the location (mostly homes valued under $2MM in the immediate neighborhood). It’s proof, once again, that our market loves new(er) homes, and will do just about anything to own them.
More contracts this week as well. A new contract on my listing in the Elgin Club. A new contract on a large Fontana lakefront listed in the $6s. A new contract on the non-lakefront modern home ($1.85MM) that sits on the cliff overlooking Fontana Bay. A new contract on the house next to the Lake Geneva Country Club ($3.095MM), and a new contract on the Main Street, Lake Geneva lakefront ($2.495MM) that sits near the Library Park. Hillcroft, that big estate with an older house that anchors 415′ of Snake Road lakefrontage is still pending ($12.5MM), as is the spec home in Williams Bay ($3.85MM) and the Circle Parkway lakefront ($2.95MM). My South Shore Club lakefront also remains under contract ($4.595MM). Rounding out this flurry of activity is the small home on Marianne Terrace in Lake Geneva that’s under contract ($1.799MM). The market is searingly hot. Breathlessly hot.
Do you think every deal is a good deal? Absolutely not. Some of the deals I see are pretty awful. Embarrassing, really. But that ties in with Monday’s bit, so you already know how terrible this is. Still, the market is moving and there’s plenty of room left in 2017 for it to move further. Are prices increasing? Well, yes, they are. The wood sale just printed at $47,000 per front foot. That’s not the average, but a few of those in a year will skew our 2017 average to the very high end. Continue to expect sales as we finish the year, and continue to expect many of these sales to be carried out by buyers who really should have done some more homework before they docusigned on the dotted line.
Above, my dynamite Loramoor listing.
Of the things we know to expect during an autumn here, 95 degree sunshine is not among them. The heat is rare, but in a summer devoid of any lasting heat, I don’t know how we could do anything but welcome this heat with open, sweaty arms. It’ll be cold soon, consistently cold, where the days that hit 60 will be the summery ones. We’ll delight in those days, saying they’re too warm to wear a sweater, and we’ll sweat just a bit and we’ll be happy. For now, the green is fading but the summer remains, which leaves us little choice but to hold onto it like grim death.
This is something we don’t expect, but there are now market things we should expect. If we don’t expect them, that’s because we’re working with the wrong Realtor, which isn’t so much my fault as it is yours. The things you should expect are both obvious and yet, many of them are contradictory. That’s Lake Geneva in a single sentence. It makes perfect sense as long as you understand that sometimes up is down and often down is up and expensive properties sell so long as they have a Wolf range or so long as you’re the buyer who just latched onto a Realtor that you met because that Realtor was working floor time at the office on a weekend.
Sellers. It’s September, and sellers who haven’t yet sold are a bit concerned. Some are, some aren’t, but the general theme amongst aged inventory is some cautious concern. There are two things that must now happen. First, asking prices should soften. This is not going to be the case for all sellers, but for some, prices will adjust as sellers look toward the off season. Second, what off season? Our market will remain vibrant up through Thanksgiving and beyond, with just a seasonal adjustment being made for Holiday weeks when only the faithful few will be actively buying and selling. The key for sellers is to understand the market remains hot, and will remain so, no matter if our 90s fade to 50s. Lake Geneva is still king, and kings do not relinquish their crowns when the temperatures drop, they just wrap themselves in some fine custom garments.
Buyers. There are lots of you out there, and lots of you are making terrible, terrible mistakes. I try to warn you, but some of you insist on waltzing into real estate offices and make the assumption that the warm body in front of you is going to be your best chance at securing lakefront, or lake access value. This is sadly not the case, but you keep doing it anyway. There’s a funny game we can play. It’s called look at properties that no one thought would sell for the prices they sold for, and often you can find the selling agent to be an agent that doesn’t routinely work the lakefront market. To be certain, all agents are not created equal, though agents love to attempt to punch above their weight in the lakefront market because the prize money is alluring. Agents who sell $205k ranches in Elkhorn are not the agents who routinely sell $3MM houses on Geneva Lake. I’m begging you to understand this.
But for buyers there are still deals to be had. There is aged inventory that has been fielding and rebuffing offers all year, and those properties might be open to negotiations. My recent experience is that sellers are still far too confident. Solid offers are being declined, because there is too much optimism. Sellers don’t seem to understand that 9/10s of a bird in the hand is so much better than 10/10s of a bird in the bush. This is what the game has come down to- fractions of lofty valuations- and sellers are proving their lack of real estate prowess by routinely ignoring solid, market bids.
If we’re buyers, does this mean we give up and look to another lake that might more feature more motivated sellers? Just because it’s September does this mean we wear boots and jeans when it’s 95 and sunny?
Above, my Elgin Club lakefront, now $1.925MM. It is, in my infallible, expert opinion, the best lakefront on the market priced under $2.5MM.
There are nice locations on this lake. We know most of the nice ones. If we get to drive down Snake Road while en route to our lake house, this is a wonderful thing. If we turn off of South Lakeshore Drive onto Basswood, this also makes us happy. If we drive down Linn Pier and get to turn left onto Lackey Lane, we know we should celebrate that we were able to turn left instead of just right. There are roads that deserve our praise, and each person who has ever driven these curving lakeside roads knows it.
But the roads we know are not the only roads. There is one road that most people don’t know. Tell them to find Jerseyhurst without the assistance of GPS. Tell your older friends to find it without a the help of a Rand McNally. It’s a road we know about, because we once heard someone at a nearby dinner table mention it. Or we know about it because a friend once went on a garden walk down that lane, though most invitees became lost along the way.
Once you do find Jerseyhurst, just to the West of the Elgin Club, it requires no creativity to understand why it’s so special. There are several homes here, but not so many really. Just a handful, each unique and each manicured and each representing the best that Lake Geneva has to offer. This is a unique lane, short and curved and limited, but why it’s special is apparent to anyone and everyone who has ever wandered down it.
This is why my Jerseyhurst listing sold, and sold so quickly. I was pleased to represent the seller and work directly with the buyer in this transaction, and the print price last Friday of $2,795,000 represents a fair ransom to find ownership on this most lovely lane. To the new owners, a big congratulations for becoming the new stewards of this wonderful lake house. To the sellers who spent many fine years here, a most sincere thanks for allowing me to handle this sale, and best wishes for whatever comes next.
As a self-indulgent aside, this sale has pushed my 2017 sales volume to $34MM and change, which leaves me alone at top of the Walworth County leaderboard. So that’s neat.
By now, we all know the last two decades of market conditions at Lake Geneva. We understand the cycle. The market rose steadily from 1997 through 2008. Then the market fell from early 2009 through mid 2012. Today, we know we’re in year four or five of the latest bull market run. How long this run lasts is something we cannot yet know. I’ll let you know when it’s over. For now, we know the history and we understand it, but the biggest test for the market is beginning now. Not now in terms of September 2017, not now in terms of Autumn.
Every market runs in these cycles. Some cycles are longer. Some are shorter. Some are less aggressive on the way up and less considerate on the way down. What lies ahead is the interesting bit. I can guesstimate the percentages of appreciation and decline, with relative accuracy. I can tell you that at the bottom of our market cycle in 2011/2012, lakefront prices were off around 30% from their prior peak highs (2007/2008). I can tell you that since the market bottom we’ve regained perhaps 20% of those losses. In some cases, properties today are worth more than their 2008 market highs. Try telling that to a lakefront home languishing on market in the Highlands for a price that’s not dissimilar from what it would have fetched in 2012. This is the anomaly of Lake Geneva. The market does not rise and fall with uniformity.
But that’s not the test. That’s just the set up. The real test is in the actual prices paid for properties that sold perhaps at the prior market peak, then again at the market bottom, and now again in 2017. Today Lake Geneva is testing itself. It’s self inflicted, like volunteering to take a difficult exam even though the teacher is on vacation and the other students are still catching up on their week old homework. The test is to prove, not with my theoretical statistics, or with some silly Price Per Foot averaging game, just how far the market has come since 2012. The only way to really know is the look to the lakefront houses that sold in 2012 and see what they’re selling for in 2017.
We know there have been some resales that roughly align with this timing already. I’ve sold a few homes in the last few years that sold during the market bottom once and then again as the market improved. Many of these have sold under unique circumstances. I sold a home on Folly Lane several years ago at the market bottom that has since resold. But the property resold at a higher price to a neighbor because the neighbor had to have it. In the same way, the lakefront sale from last fall on the south shore of Fontana. The house that Matthew McConaughey was rumored to have bought (he didn’t). That home sold for a fat premium just one year after it originally sold. Was that a sign of the market appreciation? No, it was just an interested party pursuing a specific property. That sale looks nice in the MLS, but it isn’t a sign of broad market interest, nor does the PPF mean anything.
In order to really look at the gains since 2012, we need sales that have occurred at an arm’s length, under normal marketing conditions. We need an average sale. Moreover, we need several of these sales if we’re going to consider the outcome to be representative of the market. Thankfully, there are a few such sales, but for the sake of our concept, we’re going to need to cast a wider net. Let’s look at lakefront properties that have sold in the past 12 months that also sold between 2010 and mid 2013. In a low volume environment, which Geneva is in good times and bad, we’ll need to open the view to capture a larger sample size. Those MLS sales that match the stated criteria are as follows:
These are the handful of sales that follow our pattern. The sales are not exact, since transfer prices can fluctuate based on allowances for furniture and other personal property, and the sales are not particularly equal since a sale in 2010 was of a property that likely still depreciated through 2012. Additionally, at least one of these properties was remodeled and updated in between sale dates (1014 S Lakeshore). But this is all we have to base our estimates on. These sales point to an average increase of just 10%.
Is that it? Is that the answer to the question? Well, not really. This is just a small sample size. We sell on average around 23 houses a year on Geneva Lake and this is just a snapshot of five of those sales. I would guess the market gains across the board have been somewhere around 20% since our market bottom of 2011/12. The market hasn’t yet printed enough volume to draw attention to that gain, but that’s my estimate and my eye is fairly keen. The market today is testing that 20% theory with several current listings that had previously sold during that recent market bottom. On average, these sellers are seeking 30% or more over the prior sale prices. The test today is to see if a market that is as robust and active as our lakefront market can indeed support that large increase over such a short period of time.
Do we know the answer to that question? Nope, but the good news is that the question has been asked and the market will answer soon.
This market has a way about it. Sometimes the market feels slow to me. It feels sluggish, lifeless. It feels as though the last seller has sold and the last buyer has bought, and the rest of the days we’ll just while away, wishing for the way it was. It feels as though we’ve done everything that we were going to do. We’ve sold the last big house. Sold the last lot. Sold the last cheap house. It feels as thought we’ve run out of tricks. And then a new week begins and the market proves why it is the single most robust vacation home market in the entire Midwest.
This week was one of those weeks. New contracts flying. New listings selling. A fresh contract on my lakefront home in the South Shore Club ($4.595MM). A fresh contract on a baseball player’s house ($4.995) in Fontana. A new contract on an entry level house ($1.195MM). I wrote on that house earlier this week on behalf of a buyer, only to be told the house had just the day before gone under contract. A listing on 68′ in Lake Geneva for $1.799MM, under contract within 24 hours of hitting the open market. A contract on a spec home in Cedar Point ($3.85MM). Two more contracts are still pending, those on my listing on Jerseyhurst ($2.895MM), and a lakefront in Knollwood ($3.325MM). The market, just when it seemed as though the summer lull was taking hold, has surged.
Of the 28 lakefront homes available today, 7 are pending sale, leaving just 21 available homes. Lest you think all of the good homes are sold, consider that there’s still a lakefront home available on Geneva Lake priced under $1MM. We’re going to run out of those homes someday, so if you have vision, it’s time to snap up this remaining bit of aged, cheap inventory. My listing in the Elgin Club ($1.975MM) has no reason to be available today. It should be sold. Perhaps I’m not very good at this game, because I’m failing on that house. It’s a large house on 50′ of level frontage with private pier and fantastic features, and it’s available today. You should come see it this weekend. My listing in Fontana for $3.2MM is turn key perfection. My Loramoor lakefront for $5.995MM couldn’t be replicated for the price it’ll sell for. The market might be active, but there is value still to be discovered.
Aged inventory has a way of weighing heavily here, and today there is still plenty of it. There are properties entering their second autumn on market, and those homes, in spite of the market conditions, appear ripe to sell right. Let’s go look at those together. Let’s revisit the things the market has passed up time and time again. And let’s be first in line for the new offerings that are bound to make their way to market this fall. Remember, September is only fall in our minds, it’s still summer on our skin. For now, let’s rejoice in the summer that we’ve had. Let’s be proud of this market, and of the recent spate of sales that will let 2017 be our sixth fantastic year in a row. And let’s realize that in spite of all this activity, there are still deals to be had. Here’s to this place. Here’s to us. Here’s to the last Labor Day weekend you’re ever going to have to spend in the city.
It feels like an epidemic. Each day starts full of hope. Each day passes choked with despair. New inventory should be here by now. But it isn’t. Why isn’t it? This is what the people want to know. The smart Lake Geneva buyers are working with me, and I’m working for them, trying to dig up shreds of inventory so that I might offer it to them on this silver platter. Despite my efforts, the silver platter remains empty, carrying only the dust from a desperate summer.
Buyers are active on the lakefront, this we know. Lots of agents have buyers at the moment. Lots. They’re asking me for inventory. David, what do you have that I might sell? This is sweet of them to ask so nicely, but what they don’t know is that any inventory that I uncover will be inventory that I offer to my buyers first, and to everyone else last. This is why buyers should be working with me, among all of the other reasons, but still, the market persists and summer moves along and there’s no inventory.
But that’s not entirely true. There have been seven new lakefronts brought to market from June 1st through August 1st. Of those seven, I’ve presented three of them under my brokerage. The thing is, five of those seven are listings that were previously on the market. Of the two new ones, I sold my listing (Jerseyhurst, closing next month), and the other listing is an entry level home seeking a buyer (visionary). While I do see several of these new listings selling this year, it’s obvious to admit to you that our inventory is light at best. Anemic at worst. But how does it stack up to a typical Lake Geneva summer?
Last year there were nine new lakefront listings 6/1-8/1. For the sake of this historical reflection I won’t be deciphering which listings were “new” new, and which were regurgitated new. The same two months in 2015 brought 10 new listings to market. 2014 saw 12 new, and 2013 gave us 10. For the sake of averages, the market has produced 9.6 new lakefront listings between June 1st and August 1st. If we’re trying to be dramatic, that means the 2017 inventory production is 25% off the pace.
Still, in spite of the lighter 2017 listing volume, we’re still faring much better than the 2007 market. Those buyers were truly up against it, with just 3 lakefronts listed over those two summer months. And back then, the “cheapest” new listing was $2.2MM. So yes, our inventory is constricted. Yes, that makes it tough on buyers. But don’t for a second think it’s some sort of historical anomaly. It’s just a bit behind the running average, and I’m confident that August and September will bring some new inventory that will satiate the market.
Above, the master bathroom at my pending sale on Jerseyhurst.
Ah, yes. Geneva National. The single greatest argument against Walworth County growth that I, or anyone, has ever made. Growth, it’s good, they say. It’s a necessity of life, like breathing and tacos. But it really isn’t. It might be good initially, for the mattress salesmen and the carpet installers, but over time, spurts of growth generally cannot be maintained in low population locations. There was a spurt of growth in a small town of Arena, Wisconsin. Perhaps it was Mazomanie. There’s a new commercial building on the main drag, shiny and bright. Vacant as vacant ever was. It’s for sale now, the restaurants long ago gone. Nothing there to take their place. Sure, growth dictated that the building initially be built, but the community lacks the ability to maintain the vestiges of that growth once the cycle slows. This is the problem with Geneva National.
When times are good, as they are now, things are fine. Things are never terrific, just fine. Today, Geneva National is fine. The inventory is low, which is the single best condition for GN. There are just 70 listed homes and condominiums. There are an additional 11 properties pending sale. All of this is good. What’s not so good for current owners and sellers is the pricing. Consider a little house on Saratoga. I lived on this street once. It’s a nice street. The house is listed at $599k and is pending sale. It’s the most expensive property in GN to be listed as pending sale this morning, which is a side- topic for a different paragraph. The house sold in 2007 for $750k. 10 years have passed, the market on the lake and near the water has recovered most, if not all of its losses from the past crisis, and yet Geneva National properties remain stuck. Geneva National is struggling through the end of its lost decade.
But perhaps this is just anecdotal. Maybe it’s not all like this, right? There’s a house on Edinborough pending sale. That’s a nice street, what a noble name. That house is listed at $347,500 and is under contract for a number that is, presumably, somewhere near that price. The house sold initially in 1995 for $375k. In 1995, lakefront homes on Geneva were selling in the $400-500k range. Those lakefront homes have appreciated 300% over the years, while Geneva National properties have found a way to decline over the same tenure. Not good.
There are currently 11 homes listed for sale over $700k. That’s not a ton of inventory for a development this large, but it’s tough when not a single home in GN has closed (per MLS) over $600k all year. 44 homes and condos have closed this year in GN, outpacing the 38 sales YTD for 2016. That’s a good sign, but the weak performance at the top end, and the lack of appreciation at all segments is the issue here. Last year, three homes sold over $600k, and even that was anemic. Does Geneva National offer a buyer a good value? Yes. Would I be a buyer in GN right now? Yes-ish.
I’d be a buyer of the condominiums in built enclaves. I’m not a buyer of something new in an unfinished section. This isn’t unique to Geneva National, this is my standard for any purchase, anywhere. Why buy into a segment that is possibly more sensitive to a softening of the market? Why buy and leave your investment up to the future whims of the developer? I like the idea of buying in stable segments with a pattern of sales that allows me to feel confident in my purchase. I want to buy something that cannot easily be replicated. Would I buy an existing house in GN right now? You bet I would. But I’d be looking for value in the sub-$550k price range, or over that I’d be considering homes that I can buy well below current replacement costs.
I love Geneva National. Because of this I want it to succeed. Sadly, the only way it will succeed is if future development stops and the existing inventory is absorbed. As long as GN keeps building new products, the existing products will find themselves in a tough spot. But growth is good, the simpletons scream. They’re wrong, and Geneva National can prove it.
This summer, the activity in the single family market has been well documented. In fact, it’s been documented to death. Bludgeoned with exclamation marks. Cause of death? Overuse of hyperbole. But still, the market is hot and so we recognize that. We’re grateful for it. The thing is, each market is connected, each segment joined to the price range above and below it. Each style of property hinging somewhat on the performance and inventory in the adjacent market created by a different type of property. If the vacation home segment of $250k single family homes is hot and low on inventory, then the vacation condo market in the same price range should be equally as hot, right?
The vacation condominium market is dominated here by the two large players- Abbey Springs and Geneva National. But these resort developments are so large they actually operate as their own individual markets, with little carry over from the single family market and other smaller condo developments. Strange as it may be, a $650k house in Geneva National does not benefit from the strength of the $650k lake access market. When I was a seller in GN I would always find reason to complain about this lack of correlation. It felt unfair, but I learned to accept it and have only harbored resentment and bitterness ever since.
The two condo markets that would most directly benefit from the entry level lake access activity are the Abbey Villas and Abbey Hill. Both are in Fontana, where the heart of our lake access market resides. This morning there are only two single family homes with lake access priced below $300k in Fontana. That’s an incredible drought of inventory, and at this date in July it’s unlikely the inventory deficit is corrected before the year ends. If the single family market in Fontana is starved of inventory, then the two condo markets that feature units under $300k should be hot, right?
Well, sort of. Abbey Hill has two available condo units this morning priced from $225-255k. There haven’t been any sales in Abbey Hill for 2017 (MLS), following a 2016 wherein two units closed. Abbey Hill, for the uninitiated, is up the road a mile or so from the Fontana beach. It’s an older condo complex that won’t win any particular architecture awards for the overall complex, but the individual units are quite interesting. I’ve long appreciated the Abbey Hill condominiums for their character, and I don’t expect that fondness to change anytime soon. The units are cool, and if I’m a buyer in the $200s looking for a lake-based weekend, I’m paying Abbey Hill a visit.
The other Fontana property that should be directly tied to the single family market is the Abbey Villa. This is not to be confused with the Abbey hotel condominiums, which are different and, in my opinion, not a good idea. The Abbey Villas have had some difficulty over the last market cycle, but today the recovery seems complete. Last year there were 10 sales in the Villas, closed between $165k and $255k. 2017 had has five closings YTD, all priced between $216k and $260k. There is currently just one unit available at the Villas, priced in the mid $200s. The Abbey Villas have completely and thoroughly recovered, and for that, we can all be pleased.
Two condo markets, both in Fontana, both tied directly to the single family vacation home market. Both performing quite well, as they should be. If you’re a buyer looking for a sub $300k lake home, consider these condos. Specifically, consider the Abbey Hill units. They’re affordable to own and I don’t think there’s a better value in the Fontana market. As always, let me know if I can help.
Fontana aerial courtesy Matt Mason Photography.
In real estate, being shameless is quite important. I’ve struggled with this at times, most of the time, really. But I still tell you I’m this and I tell you I’m that, because if I don’t, no one will. But I’ve only developed some shamelessness when there was something to actually be proud of. Too proud, perhaps. The new market has generated so much shamelessness that you’d think everyone was the top agent. Lakefront Specialist, that’s a common email tag. Lakefront Pro. Some opt for the shorter version, lest they spell specialist wrong. And others still, “The Most Powerful”. This is more like a Master’s Of the Universe theme, but in 2017, all of it has been adopted by my competition. It’s a bit dizzying.
The market appears to me today to be absolutely ladened with buyers. I say appears to me, because it’s impossible to know exactly what buyers are truly active and which buyers are just looking at properties because it’s 2017 and that’s the thing to do. I would guess there are more buyers in the market today than at any single point in the past 20 years. Yes, that’s a serious claim. But it’s likely accurate. The smart ones are working with me, the others are working with the various and assorted Specialists that have very recently self-assigned that title.
Yet for all of these buyers, the market is still a Wisconsin market. We are still Midwesterners. And so we watch and we wait and we look for the right thing. Contrary to what your Specialist may tell you, the right thing is not always whatever was just listed. This morning, there are just 22 lakefront homes available for sale on Geneva Lake. This includes the Trinke’s house that’s really just Trinke’s frontage, but we’ll add it in because we’re desperate for inventory.
Beyond those 22, there are others pending sale. A listing on Main Street in Lake Geneva in the mid $2s is soon to close. It should be noted that another lakefront in that area was under contract but has since returned to market. My marvelous listing on Jerseyhurst is under contract with a fall closing scheduled. A listing on the South Shore in the mid $2s is pending. And a small entry level lakefront in Fontana listed at $1.475MM is pending this morning. That’s a decent amount of activity, but it is not commensurate with the buyer activity on the lake.
There are several reasons for this. First, and perhaps most damning, is the absence of reasonable sellers. Note I say reasonable. The market is hot. Everyone knows this. Even your newly minted Lakefront Specialist knows it. Sellers know it, too, and they’re attempting to capitalize on it. Sellers are listing aggressively, and we cannot blame them. But what we can do is blame them when they receive solid offers within mere percentage points of their bottom line and they choose to walk. This is foolish behavior. Sadly, this is the behavior many sellers have chosen to display. Perhaps the market run will continue long enough to prove them right, but perhaps their 2017 confidence is just a touch too much.
The inventory that deserves your consideration is both the new bits that have been trickling to market, but mostly the aged pieces of our market. If there’s a new lakefront for $3MM, guess what? You’re going to have to go for it quickly or someone else is going to buy it. That’s just the nature of this market. But if there’s a $3.5MM listing that’s been dying on the market for a year or two, isn’t this the sort of property we should be gunning for? I believe the answer is yes. Your Lakefront Specialist is reading this, furiously scribbling down notes, and he/she concurs.
So what comes next? What do we do with the rest of this superfluously soggy summer? If we’re a buyer, we remain vigilant. We look for new inventory. We align ourselves with the only top agent in this market (spoiler- it’s me). We don’t chase every golf course hushed rumor down the rabbit hole. We don’t reach out to the new Lakefront Specialist. We just watch and we wait and when something looks right we take a run at it. If we’re a currently listed seller, then we look at this market through a different lens. We consider our position in the market. We reduce if we haven’t had any offers in months, years. We look to position our property in the perfect light, with a hefty consideration for reality. And if we’re a lakefront owner considering selling, this is the easy part. We reach out to Dave Curry.
Above, my new Elgin Club lakefront listing. $1.975MM.
This would be much easier if we weren’t here. If we were in some other absurd little Midwestern vacation home market, everything would be different. We’d have our season, and it would consist of ice cream and t-shirts and six or eight weeks of hustle. Some bustle. Then we’d have our off season, which would make up the remainder of our year. We’d have in season, off season, and that would be that. Our fingers would be sticky from all that ice cream and our t-shirts would be stained so that you could barely make out the location of that miserable little Midwestern vacation home destination.
But we aren’t there. We are here. We’re in the middle of our season now, but what is this season, exactly? Is it July and August, as some would suggest? Or is it Memorial Day through Labor Day? Is it Memorial Day through Columbus Day? That’s a common thought, and it isn’t a terrible one. But really our market doesn’t turn off, our season doesn’t end, it just changes. We don’t close the doors, we don’t turn off the lights. We just enjoy this place with different goals in mind. The season, it’s upon us.
But this is the generic consideration of “season”. What about the market version? What about this season, this cycle? Where are we now, on this tenth day of July? Agents are scrambling, screaming about activity and offers and counter offers and amendments. They’re excitable, this group. And there are more of them now, more than ever. It’s easy money, so they start and they spout and they tell people things that they have no actual way of knowing. Yes, your house is worth X. I would know, I’ve been selling real estate since 2016.
I would call this current position in our market the Mid-Summer-Pause. Sure, there’s activity. Lots of it. But it’s also taking a bit of a breather. The spring sprint has ended. Inventory is low and refuses to grow. What inventory is present is either under contract, about to be under contract, or somehow fatally flawed and needing price reduction. I have two new listings coming to market this week, one you’ll learn about on Wednesday and the other on Friday, but I haven’t brought two lakefronts to market in one week for what feels like years. Will buyers pay attention to the new offerings? Perhaps.
There are buyers, after all. Many of them. Lakefront buyers, lake access buyers, condo buyers, land buyers. And the sellers who have been in the market for some time now fully understand that the summer is fleeting. Even now, with summer so young, it is escaping us little by little. The days are shorter now. Shorter today and shorter tomorrow. Winter is coming. Sellers know this, and in spite of the measurable buyer traffic there are deals to be made. Sellers, in this mid-summer pause, will be reducing their prices. Why reduce in the fall when you know the market is stronger today than it might be then? Sellers will be considering their position in the market and reacting accordingly. At least the smart ones will.
Today, there are five lakefronts under contract. One is my listing on Jerseyhurst. Others are in the $1.4-2.8MM price range. There are just 18 lakefronts available as of this morning, which is consistent with the inventory for most of 2017. It’s low, and we know it. But there is value in that list, even if it isn’t apparent based on the present list prices. Expect to see some reductions in the coming weeks, even as the market remains hot and buyers snap up new inventory. There’s nothing more frustrating than being a seller who sees the activity in the market and knowing your home isn’t benefitting. These are the sellers that will reduce, and if you’re a buyer, these are the sellers you should be watching.
For now, it’s mid-summer. My arms are tired from superjetting. My nose is sunburned. And all is well.
There are certain things that I know without the slightest inkling of doubt. I know that summer days are best spent lakeside. I know it, you know it, remote villages in Africa know it. I know that pick up trucks should not be lifted as high as the pick up truck at the gas station right now is lifted. You can’t know this, but you’ll need to trust me on this one. It’s just too high. I also know that when a charming cottage in the Lake Geneva Club is listed for $600k it’s going to sell pretty quickly. These things are all different but all the same. They are summer-time truths.
You knew I’d sell this cottage. It wasn’t just my intuition. It was obvious. Yet, the first few buyers who looked at it didn’t find it to be an ideal fit. So the property sat on market for a bit longer than I would have thought, and last Friday it sold. $592k for cottage perfection, a boat slip, a large double lot, and easy access into the Lake Geneva scene. The property doesn’t require much explanation, it’s just an easy cottage in mint condition with a transferable slip and membership to a fantastic lakefront association. Beginning, middle, and end of story.
But the property does give us some insight into the broader market, and that insight should be shared. I sold this cottage in 2013 for $525k. If you’ll recall, our markets in 2013 were in decent shape, but activity was much less intense than it is today. The price recovery had begun, but only modestly. I’d guess that by the summer of 2013 the broad Lake Geneva vacation home market was 10-15% above the cycle lows. With a fresh sale at $592k, we can ascertain that the market has risen roughly 15% since that date in 2013. If we assume that the market was perhaps 15% better in 2013 than it was at the bottom of 2011, then we’re looking at a 30% increase from the bottom of our market to where we find ourselves today.
If we go a step further and remember that our market was knocked off 30-40% between the high of 2008 and the bottom of 2011, then it’s not a stretch to say we’re within 10% of our prior cycle highs. That’s not a universal truth, but it’s a pretty decent data point considering the history of this individual sale. The reason this particular sale is a decent indicator is because the cottage, while maintained, was not significantly upgraded over those years. If I show you a sale from 2013 of an old house and then show you the same fully remodeled house selling in 2017, that’s not a very good data point as the property itself was not merely riding the market wave, it was forcing an increased valuation due to the work that was completed.
Today, there are only two homes for sale priced under $748k with transferable boatslips. That’s remarkable, really. To make matters worse, both of those slips are far from ideal. So what’s next? What does this segment of our market do now? Well, likely nothing. Entry level lakefront inventory is light, which means the owners of a lake access home with slip don’t really have any immediate upgrade option tugging at them. Without that option to upgrade, the only people selling will be those who are no longer wishing to own a Lake Geneva vacation home.
A big thank you to the seller who let me represent them both in this sale and in their upgraded home purchase. And a big congratulations to the new buyer, who finally gets to look forward to the weekend.
Wow. That’s really all there is to say. Wow. Maybe Wowzers. The lakefront market on Geneva Lake is as heated as it has been since the summer of 2007. I was a player in the market then, but I wasn’t a large player in the lakefront market like I am today, so my view of that prior frenzy wasn’t from the front row. Today, with this front row seat underneath me, I find the market to be breathless. How I pine for the darker days when buyers had a few moments to gather themselves before making a lakefront decision. For those buyers who had lakefront opportunities during 2011-2015 and failed to act, this post should be sung slowly as a dirge.
Today there are 21 lakefront homes available in our MLS. There are an additional four pending sale. At least two others have offers in negotiations. At first blush, you won’t find this all that rare. In fact, our inventory has actually risen over the past three months, as for one period there were just 16 lakefronts available. There are two primary points of interest that have presented in this new market cycle. Yes, it’s no surprise that buyers still want 100′ of frontage and they want it now. Yes, buyers still love Viking ranges and Sub-Zero refrigerators. Yes, Calcutta marble remains in high demand. The things you know are still correct, but there are two new drivers of interest that have never, ever fared particularly well in the history of our market.
Buyers have shown that they love being near downtown Lake Geneva. They don’t just sort of like it, they love it. I sold 700 S Lakeshore earlier this year in large part because of its estate qualities and its proximity to downtown Lake Geneva. The two lakefront homes on Main Street just West of Library Park are both pending sale as of this week (mid $2s), and that’s significant as both of these homes have endured some lengthy market times over recent years. Buyers found motivation to snap up these two homes, and I’m betting large amounts of your money that the interest was driven primarily by the proximity to downtown. In prior years, such proximity would have often been viewed as a negative feature. The noise and commotion, the tourists, the higher taxes. Yet of late, buyers love downtown and so buyers are buying downtown. It’s super interesting to me.
The other curious aspect of this new market cycle is the liquidity at the top end of our lakefront. Homes over $5MM have never sold with particular ease. During the last bull run here, from 2000-2010, just three lakefront homes sold in our MLS for a price that exceeded five million dollars. Since 2010, eleven lakefront homes (and a vacant lot, making it twelve) have sold over that benchmark. Of those eleven, I’ve sold seven of them, including three of four to close over $7MM, but that’s not the point (actually, it’s always the point). This increased liquidity is being viewed by the owners as some new stable trait of our market. Something that has finally manifest, and should stay in place forever. I’d question that theory, and would encourage any owner in this range who might be considering a sale to hurry up and sell. This liquidity is beautiful, but cycles are cycles.
And that brings us the concept of a lakefront market cycle. How long will this cycle last, and where are we in the cycle? Obviously it’s impossible to know this, but we do have the benefit of history to look at as a guide. The last cycle began in the late 1990s and ran up through 2008. The cycle lasted around 10 years, with gradual price increases occurring each year during that cycle, including in the years immediate following the 2000 dot com bust. If we look at our down cycle as occurring from 2009 through 2012, we’ve been building towards a new bull market since 2012. Yes, extreme value existed up through 2015, but for the most part our market was in full recovery mode (increased liquidity and increasing demand) by mid 2012. With that in mind, it’s easy to say we’re about five years into our current bull run.
How much is left in the tank? Well, judging by the market conditions today, I’d say plenty. Does it last two more years? Does it go five more? That’s impossible to guess. Keep an eye on the stock market and on our inventory if you’d like a clue as to where the market is going. If the indices stay high and our inventory stays low, you have the makings for a continued bull run. If markets melt to any extreme level and our inventory swells, that would likely mark the end of these conditions that favor our sellers. For now, look at the market. Watch it. And don’t do as many buyers are doing right now and make a mistake. Let me be your guide. Not only will we have a lot of fun with your house hunt, you also won’t end up buying the wrong house in the wrong location.
Above, morning at my 412 Harvard listing.
By now you know I have a problem with cars. I like cars, but I don’t like the process of buying a car. I don’t even like thinking about cars. I’m young enough to see a car I like and think, “I really like that car”. But I’m old enough to not pursue the purchase of such a car. Men tend to track their lives by the cars they drive. I remember when I met my wife I drove a black Cadillac (don’t ask). Then, later, when my girlfriend became my wife, I drove a black Volvo. It was a nice car. Later, my wife almost decapitated our dog by sideswiping a telephone pole in a red Jeep Grand Cherokee. Life is most easily tracked when the memory places you behind the wheel.
The problem with these nice cars is that they’re expensive. Super expensive. And so earlier this spring I found my way to a car dealership and before my timid financial self could win the internal argument, I agreed to purchase a car. I negotiated for this car as best I could. I feigned the walk away. I stood up and paced. And when all of that was over I had raised my price by dollars and the dealer lowered theirs by pennies. I decided I wanted the car and so I had to pay for it. To walk away meant to repeat the process at a later date, and I was weary from so much anxiety. Later, when I think back about the spring of 2017, I’ll remember driving home in the rain with my wife who pretended not to like the new car until the seats started massaging her back.
This experience relates quite closely to the home buying experience. The desire. The negotiation. The decision. The decision, after all is said and done, is what this is really all about. I desired to buy that car of mine for about $1000 less than I paid for it. I could have stood my ground and hoped they called me the next day to accept my price. I could have done that, but I didn’t, because what I wanted to pay and what I had to pay were two different numbers. This is the situation at Lake Geneva today. If you’re a buyer, there is likely the price you want to pay, which is likely the price I want you to pay, and then there’s the price the seller is going to make you pay. You know which price is more important.
This lake is rife with stories of would-be-home-buyers who stood on principle and stood until they were the only man left standing. The buyer who looked at that lakefront in 1998 and said, no. $575k is just too much for that lakefront. Or the buyers who stood with me on properties in 2011 and 2012 and said, no, the price won’t work. These are the buyers who today look at this market and wish they had the conviction needed at the time they needed it. It’s easy to harness buying conviction when it’s too late. I would have paid X! They say. But it’s too late, because someone already paid it. The practices that helped my buying clients purchase lakefront property at significant discounts to the market five years ago are, for the most part, no longer working.
That’s because we know what we’d like to pay, but the seller knows what they’re going to take. That’s why these last few months I’ve stood on many properties with many buyers and discussed the price I’d like them to pay and the price they’re going to have to pay if they actually want the house. Would I want you to pay $1.9MM for the house? Of course. Are we going to try to pay $1.9MM but realize, after a heated and skillful negotiation that we’re going to have to pay $2.1MM? Again, of course. Because in this low inventory environment sellers have the upper hand, and this is an undebatable fact. There are some properties that have accumulated enough market time that they will succumb to our negotiating pressure but these sellers are the outliers today, not the standard bearers.
This summer, approach the market with caution. Certain properties are wildly overpriced. Others are not. Know the difference. Don’t approach the market with reckless, fevered abandon. But when the time comes and you find the house you want, just remember not to get too hung up on a few percentage points. Those few points will be long forgotten when you’re lounging lakeside, blissfully unconcerned with the slightly larger hole in your bank account.
To be the Dodger’s lead-off hitter is to be the invisible man. That first at-bat is a thankless at bat, no matter the outcome. The vendors are still loading their trays with refreshments, the fans still waiting in the longest of lines at the last highway exit. The television broadcast knows you’re batting, but they don’t care. They pan the crowd, to show the empty seats, to show the mountains in the horizon and the brilliant color the smog turns that early evening air. If you crack a thrilling solo home-run to lead off the game but no one is there to see it, does it still count as a run?
Likewise, when the team of large men in the NBA finals races off to a large first quarter lead but later melts under the pressure of a steady barrage of 30 foot foists, does that shimmering start mean anything at all? To the fans who saw it, I suppose the answer has to be yes. What a move!– the dad will say to his son. WOW! Some old lady will say to someone next to her. That lady has been to every NBA final since 1919, the announcer with the purple suit will say during half time. But your team raced out to that lead and you were in line waiting on the nachos, and you only returned to your seat in time to see the other team drop so many threes from such great distances.
Today at the lake, we are in the first inning. It’s perhaps still the top of the first, but there are no runners on and two outs. The pitcher has been flawless, effortless, really. His slider is sliding and his heater is heating. The third base coach looked towards the dugout and said he doesn’t think he’s ever seen better stuff. The NBA game has started, and your team is up big on the visitors. They’re throwing lobs and dropping threes and the coach crouched down in the huddle and told the players that he’s never seen them play better. And he’s been the coach for along time.
It’s early here, yes, but it’s phenomenal. Summer has started, whether you were ready for it to start or not. Last weekend, a client of mine decided to stay in the city. There were errands to run, things to do, a birthday party that begged attendance. The Lake Geneva forecast called for rain, and so the decision was made. The family would spend the weekend at home, in the city. Except then on Saturday the weather wasn’t foul at all, it was hot and sunny and bright. It was summer. Weekend plans to sit idle were thrown aside and the family woke up Sunday morning not in their Monday house, but in their Sunday house. Who could push away summery things when summer is already here? This is like saying you’re skier and you’ve made a plan to ski in January. When it snows 24 inches in two days in December, shouldn’t you go skiing?
Today it’s summer. Yesterday it was summer. Tomorrow? Summer. Summer does many things to a soul; things delightful and refreshing. But summer can also torment, and summer can be cruel. Summer isn’t going to wait for you to be ready, because if you’re not ready by now there’s a good chance you never will be. Don’t get caught in traffic when the first pitch has already been thrown. The grass is green and the sky is bright and the home team is belting homers left and right.
If you’re showing a house on Folly Lane, it’s best to show it in late October. That’s because the skinny road that makes an abrupt turn towards the lake off of Snake Road is lined with Maples. No, not merely lined, it’s choked with Maples. These aren’t your run of the mill Maples with orange and red and all sorts of silly extra colors, these are the yellow Maples. That’s a man’s Maple, the yellow one. And Folly Lane has all of the yellow ones, and as such, you’d be best served to show a house on Folly Lane in late October when these green Maples are brilliantly yellow.
But if you can’t show Folly Lane in October, it’s still a good enough drive any other time of year. I drove down that road last Friday with a cherished client in tow, and later that day we closed on the large lakefront at Folly Lane for $7.4MM. This price, by the way, is the same price the property sold for in 2012 (the furnished number was $300k higher than the recorded print). I didn’t love that sale back then, as the market was in pretty rough shape in the summer of 2012, but today the market is robust and vibrant, especially in our upper reaches. Today, that sale at $7.4MM makes sense to the market, and I was supremely pleased to represent the buyer.
For the market, that’s the sixth sale over $5MM in the last 12 months. Of those six, I’ve closed five of them. That reminds me of something that happened over the weekend. On Saturday morning I was out early delivering magazines with my son. We were walking up to the Lake Geneva Starbucks to peddle our pile of propaganda. A woman was walking out with her husband, a copy of Summer Homes For City People in her hand. She was talking in low, hushed tones to her husband. In a terse whisper she said, “I’m not sure why I’d want to read Dave Curry talking about himself”. I was disheartened to hear this, but I quickly decided that it would be better for me to write 84 pages about myself than about someone else. The waters could get slightly litigious if I wrote 84 pages about someone else. And in the same way, I really don’t like having to tell everyone how I’ve sold five of the last six mega-sales on Geneva Lake, but if I don’t tell you, do you think the other 500 some Realtors here will?
As of this morning, there are six homes for sale on Geneva priced in excess of $5MM. Of those, perhaps four of them are actually worth more than $5MM. Be sure to ask me which ones those are. Of the remaining homes, there’s a rumored offer on one of them, and some interest in another. The properties in this strata are generally large, but of the remaining inventory there’s nothing particularly turn key on estate type parcels of land. That’s an issue for the market, especially as there are many upper bracket buyers in the market today.
The story of 2016/2017 is less about the primary market momentum and more about the incredible liquidity in the upper reaches of our lakefront market. Remember, from 2000 through 2009 there were just three MLS sales on Geneva that printed in excess of $5MM. In the past 12 months we’ve closed six. It’s all really quite remarkable until you remember that Geneva Lake is the best lake in the Midwest. Then it all makes a whole lot of sense.