The political application of the Overton Window is quite easy to understand. If you’re a mischievous politician and you’d like to raise taxes by 10%, you publicly ask for a 25% tax increase. You argue for your increase with a straight face. Then, once you’ve sufficiently convinced your public to the degree that they’re actually considering voting for those tax increases on other people, you strike a grand compromise and lower your tax increase to just 12%. You’ve halved your demand, and the voters see you as a great and charitable thief. You’ve known all along that you really only wanted a 10% tax increase, but through utilization of the Overton Window, you’ve cleverly outperformed your target by 20%. You are something. Really, really, something.
Lake Geneva’s real estate market is something of an Overton Window professional. If you want to sell your house for $4M, because it’s really only worth $3.5M, you might price it at $5.5M. The odds are reasonable that some unintelligent, uninformed buyer shows up and pays you $5.35M because they have a crippling case of FOMO, fueled by almost was and nearer misses. But what’s more likely is that you don’t sell right away and you reduce your price, little by little, or a bunch at once. Then you look like a benevolent or otherwise motivated seller, and when your list price falls to $4.95M and you accept a bid at $4.5M, you’ve sufficiently outperformed both your own elevated target and your actual likely, repeatable value. Congratulations to you.
But this isn’t about sellers this morning. Sellers know what they have in this market, and they’re well aware that their property is in demand. The balance is in knowing where the premium lies. Is a 2022 market premium 10% over repeatable value? Or is it 25% over? Or, as some might suggest recently, is it 40% over? Regardless, you’re a seller and you’re in luck. That’s why this isn’t about you, even though you’d be foolish to not recognize that a challenging stock market and the threat of a spreading war abroad will, and have, created some slight headwinds for the perpetuation of these established market conditions.
No, this is about buyers. And about how you might recognize the Overton Window and your role in it. It pains me to see properties that I know have list prices that have no relationship to any prior comparable sales. I have two off market lakefront deals pending today, and closed five off-market lakefront deals last year, which means I understand rather clearly exactly where the market may or may not be. If you don’t have knowledge of those deals, how can you understand where the pricing accurately falls? I would argue that you can’t, and that’s why the market is increasingly confusing. I wrote the term “repeatable value” several times in this post, and that term is useful for you to know and understand. It supposes that just because someone has printed a value at a certain price point on an individual house, that does not mean that value is accurate. Can we argue that it was indeed a market price? Of course we can. But I’m not trying to guide buyers towards one-time-attainable market pricing. I’m trying to guide buyers towards lasting value, and that value is found by understanding market conditions, being aware of on and off market sales, and understanding what locations are capable of supporting the sought after premiums. Without those items understood, you’re just guessing.
I have been sending out plenty of inventory updates over the past year with comments that read like this: “don’t buy this. sucker pricing”. If you’re engaged in this market and you’d like to be reminded that not every house is a house worth buying, then let’s talk. Likewise, if you’re a seller and you find the market to be more confusing than it used to be, I’m here to guide you through it.