I operate today under a theory based partly on knowledge and partly on estimation that our lakefront market peaked in terms of value during 2006. There were sales in 2007 that tempt one to believe that the high came in that year, and in 2005 there were sales that could be used to argue the same. I think from a pure valuation standpoint 2006 was likely the high, and if we look to those highs we can get at least some idea as to where properties should sell for today. If a lakefront with some interesting but not highly desirable finishes sold for $3MM in 2006, what should it be worth today?
The Geneva lakefront market has, by most accounts including mine, declined roughly 30%. There are specific examples of homes that have sold for deeper discounts than that, including some of the entry level homes that are currently available that I believe will ultimately sell at discounts potentially reaching 40% or more. There are also examples of homes that have recently sold for discounts of perhaps just 10% off those six year old highs. Most of those homes that sell for little, if any, discount off historical highs will either possess some rare combination of frontage and depth, or perhaps they will host a new structure chocked full of high end finishes, in which case buyers tend to ignore market forces and gravitate towards new, shiny, and gilded. (At least that’s what the seller of a new $5.7MM home on Conference Point is really, really hoping.)
So back to that home that sold for $3MM in 2006. That 700 Club lakefront home with some decent depth and 100′ of frontage just sold for $2.4MM. If I reconcile that sale against the average price per foot for recently sold larger parcels, the $24k per front foot comes in much higher than the $18,800 per front foot average. So was the site extra special or the finishes superb? Not particularly. The neighborhood values are intact somewhere in this range, and the new construction in the immediate area boasts valuations that far exceed this sale price, so this should represent solid lakefront value, right?
I’m not so sure. A 30% reduction from that previous market high would achieve a $2.1MMish sales price, but I suppose it all depends on what the aim is of the future buyer. As I was not involved in the listing or sale of this property (regretfully), I have no idea as to the plans. If the home is torn down, this seems to me to be less than ideal from a valuation standpoint. If the new owner looks to improve slightly with a few hundred thousand dollars worth of improvements, then this might be a nice idea. But if that’s the case I might have been tempted to test the comfort level of the seller immediately to the south. That seller has a newish home on a nearly identical lot and there may be cause to think that a little aggressive negotiating in that direction might have paid off. Then again, that may have been tested, so this is pure speculation. Either way, at $2.4MM for 100′ of 700 Club frontage I am neither excited nor disturbed. It is a fine sale in a fine neighborhood, and all lakefront volume is good volume no matter the number. The real problem with averages and market discussions is that from the outside one cannot know the impetus for the buying action. The notion that a buyer can fall in love with a specific property is one that I might dismiss but it is alive and well here.
But what about that number? Does it mean that values are stabilizing and that sellers will no longer need to be gouged to sell? Could be, though lakefront real estate on Geneva is a supremely personal game, and one willing seller does not make a trend just as one firm seller cannot do the same. Another sale this week was far less lofty but still part of our Lake Geneva vacation home market. A small cottage on Aweogon in Indian Hills closed for $228k. If you watched that property at all, you’ll remember it was originally listed for $425k some time ago. You’ll also know that the price offered then had nothing at all to do with reality. Once the seller couldn’t sell and the pressure of a mortgage note overwhelmed, a local bank took the property back and became the seller. At $228k I don’t see extreme value on the buy side, but it’s still a small cottage on the right side (lake side) of South Lakeshore Drive, and the Indian Hills lakefront strikes me as a pleasant place to while away a rapidly approaching Lake Geneva summer.
And what about that summer? The one that starts 90 days from today? The one that is approaching so rapidly it appears to peel of two days for every one actual day. That Lake Geneva summer is on its way, and while this snow today serves as an annoying distraction, it is just that- a distraction. Warmth and sunshine are going to win the battle for our skies and it’s less a question of when that victory is sealed than it is a question of whether or not you’ll be ready for the celebration. Lord knows I will be. This game ends not with a shovel in our hands and boots on our feet but with us lounging on a bright white pier jutting into a big blue lake. Unless, of course, you’re not interested in that sort of thing, and summer finds you in the suburbs with your AC cranked, which, even though we all agree that your living room is delightful, sounds absolutely, horrifyingly, miserable. Open houses Saturday from 10 am until 1 pm if you’re interested in stopping by to say hello. The roads will be clear- this is Wisconsin, not Michigan. See you at the lake.
Aerial shot above is of my new lakefront listing on Geneva Oaks Trail for $2.75MM.