2013 Geneva Lakefront Market Review

I dedicate one measly post to a burgeoning appreciation for winter, and this is how I am repaid. It’s -18 in Lake Geneva this morning, and while the view out of this office window is beautiful, it’s deadly. Summer views are beautiful too, but at Lake Geneva they are not deadly. Exposure to summer may burn your skin, but you are a bit pasty anyway. At dinner, after summer exposure, your friends will say you got a little color, and though sunburn can sting, the compliments that follow are worth the momentary burn. This is why I like summer better, because summer loves us and winter seeks to kill us. I take back nearly everything I said about how winter was this and how winter was that, and instead I’ll sum it up: Winter is cold. That’s why the header photo is new today, and that’s why there’s a giant pile of tires ablaze in my yard (there isn’t), because as of this date on this new year, I’m pretty much over winter.

While my winter hate rekindles, it seems as though the lakefront market does rather fine whether it is summer or winter. It’s easier to sell real estate here during a warm July afternoon, but the deals don’t present quite as often in July as they might in December. That may be the key to this 2013 lakefront market review, as the shift in market conditions are as key to understanding where we’re heading as the sales themselves. This was a year of change, perhaps more so than 2012, when had 24 lakefront sales on Geneva Lake. That year, the sales were fast and they were furious, and heading into 2013 I had but one very heavy question- Could we replace the 2012 buyers with new ones for 2013? Looking at 2013 from my perch in 2014, the answer was absolutely yes we can. And in this case, unlike in political applications of the phrase, we actually can, and did.

Geneva had 24 lakefront sales in 2013. We not only found a way to replace the buyers from 2012, we found a way to replace exactly the same number of buyers. In that, there is an important market truth to always remember. Lake Geneva requires no great flood of buyers. We do not need masses. We do not hold open houses and have dozens of buyers walk in over the red carpet that we laid out for them. We don’t do these things because we simply do not have enough buyers to fuel the buying interest that most sellers wish for. This is a function of our total reach, and it should be obvious that the group of buyers who are paying $1MM+ for a vacation home is a small group indeed. This is rarefied air, sweet, delicious, rarefied air.

The 24 sales followed some pattern, and perhaps most important for future buyers to remember is that buying mistakes were made. Those mistakes are masked by the fun of a lakefront vacation home, but they are monetary mistakes nonetheless. Some properties sold for too much money, because those properties were somehow impaired, either by adjacent blight (boat launches), or by pure market metrics that found some buyers paying huge sums of money for lots that weren’t quite worthy of the decided ransom. Thankfully, these mistakes were somewhat far and few between, and most of the sales made sense.

There were nine lakefront sales that printed at or under $1.375MM. This is the entry level range that buyers have come to expect, and this is a range that will still offer inventory in this new year. Of these nine sales, one wasn’t true lakefront, that one being up front in the Lake Geneva Club, but I chose to include it anyway because of my benevolence. Of note in this price range is one sale that closed at $1.1MM that made little sense. The home at $1.1MM was not lakefront, it did not have a slip, and it did not have particularly efficient access to the lake. A quick lesson for the market- if we’re spending $1.1MM we probably should have some sort of fantastical setting, or a slip, or a view, or preferably all of the above if we are to justify that number.

The sweet spot of our market, those homes priced from $1.5MM to $2.5MM, had an active year, but was somewhat diminished because of limited inventory. There were seven sales in this category, and there was no better value discovered than my sale on Folly Lane at $1.65MM last spring. An investor just purchased the property in Geneva Bay Estates for $1.765MM last week, and I mention it now only because it closed during the Holiday week and I failed to write about it at the time. I had a contract on that home earlier this year, so I obviously believe in the value that 133′ of frontage at that price point can represent. Expect this home to undergo a major renovation over the winter, and then look for it to come to market this spring or summer. If I’m the one doing the work, I’d put $350k into the home and then list it at $2.595MM. We’ll see how that one shakes out.

The upper bracket of our market, those homes priced above $2.5MM, posted seven sales in 2013, but that number too was limited by inventory. There were more than seven buyers in this segment, and if there had been a few more offerings in the $2.7MM to $4MM range that fit the buyers’ pricing expectations, we would have had another two or three sales. There weren’t any true estate type parcels closed this year, with the exception of the large property known as Sunnyhill on the North shore of Fontana. That large property was gobbled up by a neighbor for $3.25MM last spring. There wasn’t a true trophy estate that changed hands this year, though several trophy properties were available this summer, including a spectacular home on Pebble Point that has been listed at $10MM. That’s my favorite, in the event that anyone of those southern state lottery winners wish to diversify into the Lake Geneva market, assuming there’s money left after all the truck and bait shop purchases.

I should note now that I’ve written two accepted offers on lakefront homes in the past three weeks, so 2014 will have at least a couple value buys printed before the year has any chance at getting strange. Strange in this context means aggressive seller pricing. There is a tolerance in these prices, and a price that’s 10% too high will likely be viewed this year as an acceptable premium. Some sellers will likely get out over their skis and price things without much thought for the actual market, and while I’m not a fan of such pricing I can’t blame a seller who sees the last two years of market activity and wishes to take advantage of it. If pricing shows a moderate increase, and we see ample new inventory come to market over the next 90 days, then we should be in good shape to replicate the 2012 and 2013 numbers in 2014.

That said, that’s not exactly how I see it shaking out. I’m guessing we’ll print 18-20 sales this year, and that prices will inch upwards another 5%. The pricing rebound will be slow, and it should come at the expense of some volume, but if we build quality inventory then we could very well match the volume highs of the past two years. Inventory dictates volume, which is an obvious statement, but it’s more true in low volume markets for even more obvious reasons. Expect sales to be steady, and expect value to be harder to find as we move into and through 2014. This value discovery is key to making a wise purchase, and I can’t think of a better person to help you find it than yours truly. With four lakefronts closed in 2013, and two new contracts ready to close in 2014, I know the market better than anyone (true story), and I’m ready to help.