The news from last week is that I didn’t land a big listing that I was hoping to land. I worked pretty hard to get this particular listing, as it’s going to challenge the upper bracket of our lakefront market to provide another Driehaus level buyer. It didn’t make a whole lot of sense that I wasn’t chosen, but I guess sometimes decisions are not made on qualifications and are, instead, made on promises and hyperbole. It’s a real shame, but such is the business of real estate in 2023. If you’d like to know about this listing before anyone else, just ask me for the details…
And about all of those out of town brokers milling around the lake. I have a lakefront available in Indian Hills, and you might be surprised to know how many showings I’ve had from the new players (zero). But I’m joking, because of course you would have guessed that. It’s one of the primary challenges of the real estate business: Marketing and reality can be thoroughly disconnected but that doesn’t really matter. There is no one in this industry to enforce reality, and so here we are, floating in a sea of experts.
But I digress, there is a market to discuss. The lakefront market over the past two months has been given an opportunity to prove something, and it has failed. The concept that some were hoping it would prove is that pricing can be wildly dislocated but an absence of inventory will overcome all objections. New inventory was presented to the market with a chance to let some buyer show that they don’t care about valuation methods, and yet, the buyers stood strong. This might appear to be a bad sign for the market, or a sign of weakness, but I assure you it is anything but. The market is purely showing that your pricing can be aggressive, but it can’t be insane. This is a positive.
Inventory will continue to trickle to market, but the lesson today is for both buyers and sellers. For the buyers, the lesson is that every house isn’t the house for you. If you think it’s okay to pay $100k per front foot for a house, that’s fine, but the market isn’t agreeing with you. If you’re a seller, the lesson is that buyers are active and numerous, but they’re not motivated enough to accept ridiculous pricing. The market is made somewhere in between buyers who don’t agree with the pricing and sellers who don’t understand how comparable sales work, and as with all seasons of this market, I’m here to help you decipher between make-believe and reality.
There is some surprising strength in the off-water market right now. Anything with lake access or a boat slip will find a buyer. I’d expect there will be one segment that we’re going to test this spring or summer, and that will be the superlative house with lake access or a slip, priced up to $4M. I expect there are buyers for this sort of property, but from the beginning of time until now, association homes closed over $2.5M can be counted without using all ten of my fingers. The cost of private frontage has allowed these off water homes to accelerate their valuations, and as long as entry level lakefront hovers around $3.25-3.5M you can expect these off-water homes to continue to outperform. If you’re trying to sort out the relationship between private footage and off-water homes, just remember the price of lakefront dictates everything else. “So you’re saying the price of a $6M lakefront with undersized frontage somehow impacts the price of a $2.5M association home with a slip”? Yes, that’s exactly what I’m saying. And to make matters worse, the price of a $3.5M entry level lakefront home impacts the price of a $1.5M association home.
I’ve lived in this market my entire life, and I’ve sold real estate here every moment for the past 27 years, and today I would suggest the market is as complicated as I’ve ever seen it. Predicting a collapse in valuations in 2010 was an easier call. Predicting the rebound in 2013 was easier. This market is more difficult to understand than any of those markets, largely because the absence of inventory has a direct impact on valuations but no one is quite sure exactly how that impact translates to valuations. The good news is I’m here to help and I’m working every single day to figure this market out, and I have plenty of theories that we can leverage to your distinct advantage. There might be a time to work with an agent who doesn’t understand the depth of this nuance, but I assure you that time is not now.