In Miami, or somewhere like Miami, some guy decided to list his house. I think he listed it for $24MM. Then, after some time of not selling, he decided to raise the price to $31MM. Then, a while later, after the home hadn’t sold, he decided to list his home for $40MM. Or maybe it was $41MM. The Wall Street Journal has an article today that suggests this is somehow a normal practice. That in some borough of New York a bunch of people have been doing this, citing the really rich Russian Billionaire’s daughter as their target buyer. I have another thought as to this practice, and the thought it that what might work in large metropolitan areas from time to time would lead to an unmitigated disaster in a small market, say, like Lake Geneva.
In large markets, weird things happen. Russian Billionaires buy homes. Athletes and liberal movie stars buy things too. But when you’re outside of that large market setting, the real world operates quite differently. Lake Geneva, while large in terms of inland lake standards, is an alarmingly small real estate market. Owners sell and buyers buy, and after some amount of time pretty much everyone knows everyone else. These close relationships between existing owners and would be buyers, those that travel in the same social or work circles, can lead to hushed discussions that poison certain homes, and ridicule certain owners moves. In small markets like ours, pricing shenanigans like they might get away with in New York will only lead to mockery.
There is a pronounced pricing trend on Geneva Lake today, and that trend is downward. As much as I love buyers getting great deals, and champion that thought in my daily life, I see some price capitulations bordering on the extreme. Clear Sky Lodge once listed at $6.9MM now under contract at a $3.995MM ask? Sunny Hill once floating around $7.9MM and then reduced to $3.5MM before almost immediately selling? These price moves teeter on insanity, with value being discovered that far exceeds the drop in the local and national markets.
Much of the movement downward isn’t necessarily because of financial constraints or factors. If a seller is going broke, it’s likely that they’ll seek to sell their home. That concept, by the way, of a seller going broke in order to sell isn’t entirely common up here, but you’d be awfully naive to think that it doesn’t exist. Cycles play out, sellers move out of the Midwest, children move away. These are reasons that people sell. But people who pulled $3MM notes against houses they use only once in a while can sell not because of any other factor than the one that matters: They are getting pinched, and soon enough a pinch leads to a bruise and a pinched bruise can bleed and bleeding over a long period of time causes death. Sooner or later, you’re going to run out of blood.
The moves aren’t just in the far upper bracket, they’re pretty much everywhere. There are some sellers that are holding out, in much the way that Lake Geneva sellers used to hold out all the time. But today, those stalwarts are sitting wondering why no one wants to buy their home. The answer, of course, is because their neighbor has cut his price from $2.5MM to $1.9MM while the steady owner still thinks $2.5MM is a reasonable expectation of value. When a market slips, it must find solid footing not just in the number of buyers but in the resolve of the sellers. If there’s inventory numbering in the 40s, and as many as five sellers at any given time are looking to sell ASAP, then those other 40 or so sellers are going to have to realize that until the motivated sellers are cleared from the market their property is unlikely to sell.
This doesn’t mean that steady, reasonable prices aren’t attainable. They are. Plenty of our sales this year represent solid market values; properties that sold at the market price with neither the seller nor the buyer effectively winning. Today, I see more and more sellers willing to cut their noses off to sell, and while each circumstance is different, there seems to be more selling motivation in the market today than I’ve seen in quite some time. It’s not that people are running from the lake, because to do so would be to adopt an insanity defense, instead they’re selling for one reason or another but unlike sellers of recent vintage, these are sellers who are actually intent on selling.
These motivated sellers have done some damage to the market of late, and I’m keen to point out that some of the capitulations have been necessary and others have not been. Case in point: I just reduced my Folly Lane listing from $2.695MM to $2.395MM, and then a week later (yesterday) from $2.395MM to $1.899MM. That’s 1.9 acres with 101′ of frontage off Snake Road for $1.899MM. That’s an unheard of value, but it’s not alone in the market place this fall. I’ve been telling you to expect price reductions on stale inventory for quite some time, and this trend is going to continue until the last motivated seller is swept from this market. Until then, prices will remain soft, and only unique or otherwise rare properties will find a way to sell at prices that beat this downward trend.
Pictured above is my newest lakefront listing in Loramoor. Great house. $3.398MM.