The celebrating of the last year and the lamenting of the one now arrived, finally over, it’s time to discuss what this market is doing now and what it’s going to do in the coming days, weeks, and months that will define 2015. Last year, it was no secret what happened. Low rates and high stock prices fueled a continued buying boom, one that has now found no fewer than 105 lakefront homes print since the start of 2010. While I’ve been on the buy or sell side of more of those transactions than anyone else, I cannot entirely understand what pushed each seller to sell and each buyer to buy. I would say that most of the buying has been opportunistic, featuring a mix of long-time lakefront seekers alongside of new entrants to the market that see little nostalgia when they look to these shores, instead seeing only the sparkling clean water and heeding the call to jump in. We’ll walk through the different vacation home segments individually in the coming days and weeks, to see how they fared in 2014 and to guess what they’ll be doing in 2015, but today I paint with the largest of brushes. This is the macro approach to our micro market.
As I write, I’m distracted by the glowing Mobile sign across Geneva Street. It isn’t the sign that distracts, it’s the bright, proud numbers 1.99. Gas is cheap, so cheap that I feel the need to use as much of it as possible, to ward off this polar vortex that’s bearing down. This cheap gas is much to the delight of those far-away vacation home markets in northern Wisconsin and in the strangeness of Michigan, for cheap gas will bring travelers that are required to travel very far indeed. Our travelers needn’t travel much, so the cheap gas doesn’t mean anything to our market, at all. It might mean day trippers have an extra $20 to spend on ice cream and I’M WITH STUPID t-shirts, but that’s great for the storefront economy but not so important to vacation home owners. So if you hear someone on CNN tell you that cheap gas will be good for vacationing road trippers, just remember that while they’re right, Lake Geneva doesn’t care.
The stock market, those variable indexes that tell us whether we’re rich or poor, this is the continued key to this ongoing Lake Geneva celebration of security. If we are to keep pace with prior years, and sell 20-24 lakefront homes, we’ll need this market to stay stable. We don’t need it to go up, remember that, we only need it to stay within a 10% range of where it is today. If the market corrects violently, that won’t be enough to deter the most confident buyers, but it will make a dent on those buyers who may find themselves riding the fence. If the markets stay put, our market will continue its march.
Interest rates, as I’ve said a billion and three times, matter less than you’d think. However, these rates do fuel enough of our purchases that continued low rates will chip in and give us some solid volume that wouldn’t be present in a higher rate environment. If the top dogs on the lakefront can earn higher rates on their invested money by keeping it invested, they’ll easily opt for the cheap borrowed money to pay for this vacation home. How do they afford this vacation home lifestyle? Why high stock markets and low interest rates, of course. Expect the low rates, if they continue, to bring more buyers to our shores yet again in 2015, as cheap money locked today remains cheap money for the duration of the lock. Profound, I know, but these are the deep insights that you require of me.
Inventory will remain a concern as we move into this year, just as it did last year. The lakefront is thin on inventory, leaving any new sellers in a position of strength. They’ll test that strength, which is why you’ll see brand new inventory come to market at prices that look a bit bold. Entering 2014, I found myself calming many lakefront buyers. I attempted to assuage their concerns by promising new inventory. I told them it would come, if they would only find patience. Many were patient, and many waited through last January and all of February. They waited when the calendar said spring, and they waited in the chilled sun of our now ended summer. They waited and waited and for the most part, my promise of interesting new inventory went unfulfilled. This year will be the same, as we await the lakefront inventory that we rather desperately need. What sort of inventory?
Well regular inventory, of course. We have loads of upper bracket inventory, and while we only sold one true upper bracket estate this year ($5.195MM by yours truly), we have plenty that will carry over into the new year. Expect at least one of these to sell, and if the buyer has their bearings about them and their eyes and heart set on a carefree summer at the lake, they’ll choose my 1014 South Lakeshore Drive listing. At $7.95MM you couldn’t touch if if you were trying to replicate it in this environment, so a value hunting buyer will see the discount to replacement and buy it. I’m sure of it. That might be the only upper bracket inventory to sell in 2015, but there’s no way to tell.
The inventory we crave is that priced from $2MM to $4MM. Blue chip lakefront parcels measuring at least 100 feet along the shore, and featuring some sort of house, nice or new or old and bad. Buyers will gobble up any sort, and new inventory priced from the high ones to the upper threes should have no problem selling. There’s plenty of demand, and that buyer will find the year end stock charts to his liking, and the low interest rates may force her hand. It’ll be a good year to be a lakefront seller in this price range, again, assuming you’re a new seller and not a tired old one. Buyers should take note of the tired old ones, and work with me to secure value that exists in these passed over properties. If you’re a buyer and you want to steal something, the new inventory is not going to be to your liking. If you want a deal, work with me, and we’ll circle the herd and pick of one of the weaker, older ones.
The lake access communities should do find again this year, with Geneva National and Abbey Springs leading the way. Foreclosures have ebbed around the area, so while there will be some coming to market in 2015 it’s no longer a market segment deserving its own forecast. The off-water lake access market had a very strong year, particularly in the $800k to $1MM price range, and we should expect that will continue. If inventory provides rare opportunities, as it did this last year particularly in my private sale of that fine Alta Vista property, we’ll see plenty of sales like this in 2015. The entry level lakefront market has a few offerings, but very few, which will help this off-water market as buyers find little to their liking on the low end of the lakefront and opt for a nice off-water property instead. Rates matter to this buyer, and it’ll be a good year to be a seller of an off-water, upper bracket home.
2015 should look a whole lot like 2014. The weak ownership has largely been removed from the market, and that should allow prices to continue their gradual ascent. Before you label me a market cheerleader, consider that I’d greatly prefer several years of modest appreciation rather than quick, immediate, overdone gains. While this year looks like it’ll be starting slow for me personally, the broad vacation home market is active and will remains so throughout the year. Inventory will be coming to market in January, a bit earlier than it used to. In order for buyers to be prepared for a summer 2015 spent at the lake, they must spend January and February trudging through some snow and braving a vortex or two. I’m ready to help, and my value aim is as true as it has ever been.