One would think that first understanding, then forecasting market conditions would be a rather important requirement from any agent that any consumer chooses. To be able to understand the current market cycle, then to have some grasp on where the market is both immediately and some-day heading, this should be something a buyer, and a seller, would expect of their agent. Unfortunately, often times what sells property is not a keen awareness of current value, but instead a blaring, BUY THIS QUICKLY BECAUSE THE FRONT LAWN HAS GRASS! GRASS! This is too bad, but if you never make a forecast you can never be wrong, so I suppose the focus-on-the-grass approach does have its benefits.
This forecasting of market conditions and of demographic shifts is what brought me inside the wooden gates of Geneva National. The year was 2005, or so. I recognized the incredibly growth in the primary home market, and noticed that the prices of homes in standard-issue neighborhoods, i.e., Baywood Heights, Edgewood Hills, Lakewood Trails, were rising rather rapidly. I saw these primary buyers, most of whom were in their 30s and 40s, and looked for what would be their next real estate move. They couldn’t live in these subdivisions forever, I reasoned, and as their income grew they would look for the next logical spot to bite off a bit more real estate. They would graduate from these regular neighborhoods and look to what’s next, to what’s better, to where they might spend $550-$750k on their next home. These primaries generally do not care about lake access in the way that a vacation home buyer might.
This is why I built in Geneva National, and it is apparent now that my thinking was rather flawed. What I failed to realize is that these buyers of these homes in Baywood Heights and the like had, for the most part, very little actual equity. I thought their incomes would grow and their appetite for real estate increase, but instead their incomes grew stagnant and the reversal in values crushed any hope they had for that next, more expensive move. I had found my way into Geneva National through a series of buying and flipping, not solely through income growth. The typical homeowner doesn’t have a flipper’s agenda, so while I was able to bob and weave and find my way to GN, most just sat and watched the market fall because there was little else they could do.
That anecdotal tale matters to Geneva National today, and there is likely no better reason for the stalling of prices and volume in GN since 2008. The vacation home buyer fueled much of the condo growth there, but without primary buyers GN simply could not maintain its momentum. While the primary buyers remain stuck in place, GN suffers from their stagnation. 2013 was a good year for Geneva National, but while the rest of the vacation home market frolicked through a truly great year, GN found itself struggling to keep pace. The lack of primary buyers is just one of the reasons, though it may be the most important.
There were 56 sales in Geneva National during 2013, ranging in price from $43k to $1.2MM. If there is a neighborhood with a more diverse scale of value I’d love to know about it. The 56 sales outpaced the paltry 35 from 2012, and in fact beat the volume from 2009, 2010, and 2011 as well. So what’s not to like? What’s there to say that GN hasn’t climbed back in the same manner that the broader vacation home market has? Um, well, in 2006 there were 91 sales in GN. Ninety. One.
That isn’t entirely fair of me, as GN was fueled by ridiculous growth during those prime years, but that aggressive peak is also part of the 2014 problem. Those buyers who bought in 2006, when things were mostly insane, paid high prices. They also leveraged themselves more than current buyers typically do. GN is a wonderful community, full of amenities and hills and trees, a pleasing mix of natural beauty and resort amenities, but those activities do not come at a low monthly expense. Combine the high prices from the peak years along with values that have fallen as much as 40% and throw somewhat heavy dues on top of that painful mix and you have the makings of a very slow recovery. GN is too big to recover quickly, to rid the community of those owners that through no apparent fault of their own were caught on the wrong side of a price switch. GN is healing, but slowly.
The volume from 2013 was solid, though only 4 homes printed over $500k. Of the 56 sales, around 40% of them were marked as cash purchases, which is a wonderful sign for the future of GN. The volume of 2013 was fueled somewhat by the insanely low mortgage rates from last spring, but I don’t expect a huge volume drop off for 2014. There are four properties pending sale in GN now, and just 72 active homes and condominiums on the MLS. This low inventory will help GN, as high inventory has done a fine job scaring some buyers away over the past five years. I don’t think we’ll see 56 sales this year, but if GN can get into the 40s, it’ll be a fantastic 2014.