In light of the post from Tuesday, this might on the surface appear redundant. I struggle with redundancy here, as you already know. Monday: It’s beautiful at Lake Geneva! Tuesday: It’s still beautiful at Lake Geneva! And on and on it goes from here until eternity, this guy carrying the flag for a destination and proudly righting it four mornings a week. But the impact that foreclosures had on the Lake Geneva vacation home market during 2011 can not be diminished, even if the numbers were low, the pricing capitulation light, and the pain more reminiscent of a nail trimming than an amputation. The fate of the national market for 2012 might lie with the foreclosure, but not so in Lake Geneva.
During the year now past there were foreclosures. There were banks unwillingly transitioning from lender to owner, and perhaps fewer of them made this Jekyll and Hyde transformation in 2011 than did in 2010. I say perhaps, as the foreclosure scene at Lake Geneva is not an exact science. There is a criteria in our MLS descriptions that can be checked or left unchecked, to signal to the open market the state of the REO ownership. Many times, this criteria goes unchecked, and as such, relying on the MLS to produce highly accurate results is not a safe bet. Watching sheriff’s sales and witnessing the ownership papers shift is also not the best way to monitor this segment of our market, as even when a bank becomes the unfortunate owner they will often take many, many months from owner to seller.
So how best to judge the ebb and flow of foreclosure and, in do so, take a relatively accurate temperature of a market? We’ll have to gather up a broad range of factors, weigh them, squeeze them, massage them, and when the prodding is done, we will set them down and take several steps back and view them. The application of these oddities is in the reviewing of REO inventory, both active and sold, scanning for short sale activity, watching lis pendens filings, and reviewing scheduled sheriff’s sales. If one can do this, then a complete understanding of the 2011 Lake Geneva foreclosure scene will yours.
Or ours, as is this case. During 2011, there were foreclosures in Wooddale, Indian Hills, Country Club Estates, and Cedar Point Park. Abbey Springs had one or three, and in our vacation home market, Geneva National had the most. As I have pointed out before, it would be unfair to consider Geneva National on even par with an association like Indian Hills. If Geneva National has 20 foreclosures in a year (no idea if that is accurate), and Indian Hills has three, who wins? Likely the winner in that exchange is GN, as the bulk of existing inventory can more easily absorb that fairly light ratio of foreclosures. It’s not the number of foreclosures in a development, it’s that number figured against the size of the development. It’s like the size of a ship versus the motion of the ocean. It’s just like that except entirely different.
There are active REO listings on the market in Indian Hills, Country Club Estates, and soon there will be one in Wooddale. The Wooddale foreclosure is an interesting one. That property hit the market during 2011 and did its absolute best to wriggle off the hook. It was listed and then reduced, and then reduced again. And then it became a short sale offering and the price dropped further. Then more. And ultimately no buyers paid any attention. That home is, rumor has it, being purchased by an investor direct from the bank, and will return to market in 2011 as a refurbished property. Pay special attention to that. Many believe that the way out of the foreclosure crisis is to somehow incentivize primary home buyers to purchase REO properties. I’ve thought since day one that the investors were the answer. I’ll end up being right, which is a burden.
I’m wracking my brain to think of any lakefront foreclosures from 2011. There is one pending now in Geneva Manor, a possibility that appears owed to an unfortunate circumstance. There is one foreclosed property in Bay Shore on the Williams Bay lakefront that should be hitting the open market soon, and there have been foreclosure rumblings that may or may not still be in the works at Vista Del Lago and in The Fontana Club. Another lesson we learned in 2011 is not to trust the lis pendens filings as a purely accurate foreclosure indicator. Many owners will succumb to default in order to obtain a loan modification. This is a bad idea, as negative equity is not cured by a half a per cent reduction in a borrower’s rate. Crain’s Shia Kapos (whom I love) had a story a while back about some guy who has a brilliant “solution” to the housing crisis. It’s simple, he says, all it’s going to take is for the banks to write down the balances of outstanding notes. Genius! So all we need to do is to take one person’s loss and spread it out to the shareholders of the bank? This is a bad idea, bordering on the criminally stupid.
For all of the illiquidity of recent years, the South Shore Club has still had just two foreclosures. One was of the vacant lot that I sold last spring, the other of the home immediately to the East of that lot back in 2010. These two foreclosures are not a positive, but the strength of the ownership there in light of slow sales should be viewed from the outside as a sign of stability here. The same applause is due the lakefront condo market- a market suffering from a severe lack of volume. Owners in this segment have stayed strong in their resolve, and this market has been buoyed as a result. One lakefront foreclosure in Bay Shore and rumors of others elsewhere does not create a crisis.
Look forward to a 2012 that is going to look almost exactly like 2011 in this regard. Foreclosures are going to be a visible portion of any individual market for years and years to come, so we best get used to their existence. There will be more defaults moving forward, and some will ultimately be on the lakefront. Keep in mind that a few foreclosures here and there does little but spur more volume in a narrow market, and those few sales cannot drag on a market like an inundation of sales would. Geneva will remain strong, a fortress girded against foreclosure in most any form, and we will be grateful for it.