The real estate market in 2011 was pretty bad. It was fun, if bad, because sellers wanted to sell and buyers, though fewer than now, wanted to buy. It was a great year, and the Lake Geneva markets functioned as they should. Few buyers, few sellers, plenty of motivation for both sides. What’s not well understood now is that the market is no longer healing. It’s no longer mending. It’s no longer about to be something. It is something. It’s already there. It’s four full years into this new housing boom. To suggest that the recovery is somehow nascent is to either misunderstand the word or the markets, possibly both.
The lake access market on Geneva had a most terrific 2015. 2014 was similarly good, and in that year we sold 61 single family lake access homes near Geneva Lake. This year just ended we sold 70, making the good of 2014 look small and weak compared to the splendor of 2015. Both years saw activity in all segments, as the woes of individual off-lake segments have long been left in the dust of 2011 and 2012. Both years experienced their share of anomalies, with 2014 printing a parkway home in the $1.5MM range and 2015 trading a Knollwood house for $2.2MM. Outliers they are, but still proof of a market truth: Shiny sells, if the implementer of the shiny is willing to take a bath on their shiny bad investment.
Proving that Lake Geneva can indeed be a market for the masses, we sold 17 lake access homes under $250k in 2015. I would have expected that number to be higher, as interest rates hovered at their lowest levels since Cain asked Abel for a short term loan to buy a very heavy rock, and this market should be especially sensitive to interest rates. We sold another 48 lake access homes priced between $250k and $1MM.
Of interest in this meat and potato portion of our off-lake market is that two parkway homes in Cedar Point sold just under $1MM. For those who were not feverishly watching this market in the early and mid 2000s, you cannot appreciate the spectacle that is two parkway sales in one calendar year. For a while, during the escalation years of the prior cycle, Parkway homes were mythical. They were sometimes available, most of the time not. They were rare. To catch a glimpse of one on the open market was akin to a Yeti sighting, or to Tim Allen actually vacationing in Michigan. They were elusive, and they were desirable and the market loved them. That affection has returned, and prices up to and just over one million dollars is a reasonable ransom for such a rare property.
In that segment there are two other market tales, both sad tales, sure, but both telling an obvious market story. In 2007, a large log-ish home in Somerset came to market for $1.1MM. Two years later, it was raised to $1.295MM. The years that followed featured a vast array of For Sale signs in the front lawn, including a stint where my sign was there. The price dropped and dropped, as the market didn’t particularly enjoy an off-water home that lacked a slip but did possess a $20k property tax bill. In 2015, the home finally sold. For $600k. The heat of the last three years of bull market didn’t touch that property until last summer, and at $600k one could hardly suspect the transaction gave the seller any warm feelings.
Another sale that tells a similar story, but on the other side of the lake. It is no secret that the Lake Geneva Club is one of my favorite lake access associations. I like the street, I like the feel, I like the aesthetic. A home came to market there in 2007 for $829k, hoping to ride the coattails of a sale I had just closed for $790k in the same association. My sale was of a cottage one home from the lake, this offering was much, much farther away from that water epicenter. This property came to market at various prices over recent years, on and off again, under contract at least once, then back to market after a failed deal. That home mercifully sold last summer for $500k. What was it likely worth in 2007 when it listed for $829k? Around $500k. Medicine is often best taken quickly and without hesitation, because the longer you dwell on the smell and texture the less likely you will be to swallow it.
I’m not sure how I feel about 2016 in this segment. In theory, market returns for 2015 will not make anyone feel particularly paper rich, especially if they went long TWTR with me in April. Interest rates will be rising, sure, but slowly, and anyone with any historical perspective will not be too upset by 4.75% interest rates. I expect the market to remain solid, and there will be outliers in 2016 just as there have been in recent years. Brokers love to whip markets into a frenzy, and all it takes is some shiny photographs of a Wolf stove and voila, some naive buyer will pay a lakefront price for a lake access home. Want to avoid that sort of amateurish buying behavior? Work with me, because I know the difference between an outlier and value.