2020 Lake Access Year In Review

If you live in the Chicago area, chances are one of your friends or neighbors bought a lake house last year. I don’t care who you are, where you live, what your age, odds are you know someone who bought something, somewhere. Depending on the discernment of your friends, but assuming you are a high quality individual who surrounds himself with high quality friends, one of those friends bought a house here, at Lake Geneva. It seemed that everyone was doing this, and while the naive took to airplanes to buy homes in far away places, the intelligent took to their cars and looked for vacation homes within two hours of home. The lake access market at Lake Geneva was absolutely on fire for almost the entirety of 2020, with a slight pause in March for that whole global pandemic thing.

According to the local MLS, there were 87 Geneva lake access homes sold in 2020, not including homes with private frontage (even those homes with shared private frontage is excluded in this case). That number isn’t particularly exciting, and that number doesn’t tell a single story about the market. If you’ll recall a Crain’s article from this past fall, there was some attention drawn to the volume of our transactions during 2020, but that attention was misplaced. In total, those 87 lake access homes reflected a very average volume total. The 2019 volume for this segment was 74 such homes, and while that is a lower total than 87 the increase in volume means nothing to the market. The real story from 2020 is one of buyer activity and market appreciation, although I’m mostly upset about buyers that behave as though the home they bought exists in a vacuum.

Of the 87 MLS sales from 2020, nine of those closed over $1M. This is a significant move from the four that closed over that mark in 2019. There were homes with transferable slips and homes that sold with lake-views. One of the hottest amenities, second only to a boat slip, was a pool, and we closed two lake access homes that offered one. I won’t be averaging sales prices to tell you about valuation increases because I don’t feel that statistic is meaningful. Prices are up, inventory is down. When inventory is down, prices will be up. This is the constant across all markets, both at Lake Geneva and anywhere else houses exist, and their connection shouldn’t be a surprise.

If I see one trend from 2020 it’s the acceleration of owners (usually new buyers) feeling that their particular homes can defy both the broad market they belong to (lake access segment), and the individual neighborhood they reside in. We’ve discussed this at length over recent years, but confidence makes buyers do very odd things. Let’s say you’re looking for a lake access home priced around $500k. Typically, that would mean you’re looking in Country Club Estates, Indian Hills, Cedar Point Park, Knollwood, and perhaps some of the smaller associations like the Loch Vista Club and Shore Haven. Those associations will predictably offer inventory in that price range, and so you’ve found your way to one of those available cottages and you’ve purchased it. In our story, we can all agree that you’ve done nice work here. The cottage was $530k, the neighborhood comps suggest that the pricing would routinely be in the $375k-$700k range, and so you’ve split the middle of that segment. You haven’t printed an outlier, which is as good as anyone can hope to have done in 2020.

And then you tear the home down. Because the living room was too small and the dining room table only seated 10. Everyone knows you have a large extended family in Texas, and everyone knows no one wants to live in Texas in the summer on purpose, so it stands to reason that you need a bigger table. You tear the house down, and build a new house. Construction costs are up, because of lumber and steel and the fact that kids today would rather go to college than learn how to bend fewer nails, so you spend $600k on your modest, but new, 2000 square foot house. Congratulations, you just dropped $1.13M in a $375k-700k neighborhood. You have, without any question, made an egregious market mistake.

Except that today it doesn’t feel like one. It feels like a good idea, because rates are low and inventory is sparse. The grill is hot and the lake is luke, and so you’ve decided that you couldn’t be happier. You’ve found your piece of Lake Geneva, and we’re glad to have you. The problem is that hot markets hide market mistakes. They gloss over terrible decisions, but what is not well understood is that the decision was still terrible. It hasn’t been made public yet, as that happens in six years when you’re ready to sell either to upgrade or to move to some soulless southern town so you can save $14,540 annually in state income taxes. Once the market cools, the mistakes will be exposed. How can I be so sure? Because I saw the mistakes of 2007 exposed in 2011, and we’d be foolish to assume that the same mistakes aren’t be made again, only the new mistakes are even more obvious.

So what’s a buyer to do when faced with a hot market? Buy blue-chip property and exercise patience in the process. If you want a Geneva lake access house and your absolute drop-dead top price is $800k, then stay focused and find a lake access house under $800k. Don’t buy a house on the other side of town because it’s $500k and you can drive to the lake if you feel like it. Don’t indulge your lack of patience and head for another lake in some other town. Don’t waiver. Aside from recognizing that not every house that comes to market is the house you should buy, this is the best bit of advice I can give to the buyers in our market. Do not give into the temptation of a short cut. And once you find your piece of this scene, don’t forget that market segments and historical performance still matter, even in a remarkably active market.

I expect a repeat of 2020 in the new year, albeit at lower volume. Buyers who bought last year will likely only sell if they see upgrade opportunities, and those opportunities are bound to be few, at best. Inventory will stay relatively low, and buyers will snap up available properties as they come to market. It’ll be a fun year, assuming the stock market doesn’t collapse under the weight of the promised growth-slowing tax policies, but that doesn’t mean we can’t stay disciplined. We should remember that markets never stay hot forever, and once a softening occurs we don’t want to be the one who built that $1.13M house next to a bunch of $600k cottages.

Above, one of my favorite houses in the lake access market, a Geneva Manor home I sold this past summer.

About the Author

I'm David Curry. I write this blog to educate and entertain those who subscribe to the theory that Lake Geneva, Wisconsin is indeed the center of the real estate universe. When I started selling real estate 25 years ago I did so of a desire to some day dominate the activity in the Lake Geneva vacation home market. With over $650,000,000 in sales since January of 2010, that goal is within reach. If I can help you with your Lake Geneva real estate needs, please consider me at your service. Thanks for reading.

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