There are times that real estate doesn’t make sense to me. Times like this morning. Thankfully, I only feel at odds with Lake Geneva real estate when a buyer or seller makes a move that doesn’t make sense in light of the market.(Like paying $800k for a non-lakefront condo…) I’m a tad confused by a lakefront sale that just closed this week at 190 Circle Parkway in Williams Bay. The property was originally listed for nearly $2.5MM in 2009- a list price that was necessarily high on account of the owner having paid $2.2MM for the home just a couple years prior. That price of $2.2MM was also way too high, even for the magma hot Lake Geneva lakefront market of the mid 2000s. But mistakes are made all the time, and the price paid in 2005 shouldn’t be dissected at the end of 2010. The original $2.5MM list in 2009 wasn’t in line with the market, just as the eye gauging closing price of $1.2MM wasn’t in line with our market today.
Yes, your eyes did not deceive you. I wrote $1.2MM. The property, previously listed for the previously discussed prices, sold this week after a final price reduction to $1.5MM. This sale is a bad thing for our market, and it’s not bad for the reasons you’re thinking. It’s not bad for what it does to the value of neighboring properties, as the effect, while measurable, isn’t as debilitating as you might think. And it isn’t bad solely for what it did to the sellers balance sheet. It’s bad because of what it does for buyers expectations. If you’re a buyer who missed out on this property, you’re dangerously close to falling into the classic Lake Geneva trap of waiting for the next $1.2MM lakefront in a similar location in similar condition. The problem with a finite market is that not only does this “next” property probably not exist, the problem is that in your mind there is an endless supply of such properties.
The Great Real Estate Market of 2010, or GREM as it shall be known from here forward, caused several entry level lakefront properties to be purchased at low prices. During the previous ten years, lakefront homes in the sub $1.475MM category were not easy to find. During the GREM (not as catchy as I had hoped), no fewer than eight lakefront properties closed at this price or less. The issue, if you’re an entry level lakefront buyer, is that we haven’t been replacing this sold inventory. As of this morning, there are only three Geneva lakefront properties priced at $1.475MM or less; one next to a boat launch, one hiding in the shadow of a neighboring condominium complex, and another is a short sale that doesn’t appear to have an offer on it, but I’m pretty sure it probably does by now. The inventory is thin, and for entry level lakefront buyers thin is definitely not in.
Back to the sale on Circle that bothers me so. This property apparently had an offer on it that fell through, and another buyer swooped in and picked up this deal. I understand the seller had moved on to another lakefront property, and wanted out. But $1.2MM? In a scenario where multiple buyers exist, and you’re the best deal on the lake priced less than $1.5MM, that was the best offer available? Perhaps a little more patience was in store, or perhaps there were unknown personal reasons, financial, tax, or otherwise, that led to this sale. All I know is that for all of the sales on Geneva during 2010, only one has the feeling of a fire sale. And if you’re near 190 Circle Parkway, chances are you can still smell the smoke.