Over the past several months, there have been several new lakefront listings in the $1.6MM to $2.1MM price range. This, on the surface, is a positive for our inventory starved lakefront market. But not all inventory is good, and not all new offerings have a chance to compete with the existing inventory that has had time to season on the market and adjust to market reaction and expectations. If new inventory is priced above the market, doesn’t the new inventory just help the existing inventory by changing price thresholds and skewing asking prices higher?
On Geneva, there are plenty of buyers. I say this not to sound like a Realtor, but to tell you the truth about the mood of the market, and the expected pace of sales during the next several months. As a buyer, or a market watcher, it’s important to know what the market looks like from the inside out, and that’s what I’m trying to do when I tell you that there are buyers- probably more buyers than most think. But these buyers generally know what they want, and what they don’t want is boring and overpriced. They may be willing to reward a seller who has a unique property, whether it’s unique in design, or location, or price, or all of the above, but if the structure doesn’t excite and the location doesn’t touch a nostalgic nerve, what do these buyers want? They want to buy built properties for a number that they deem reflective of land price. In short, buyers want to buy your house not because they like those stripes you painted on your living room walls, but because they like your dirt.
It’s in that simple understanding of the market that I feel the need to deem most of the properties hovering just under $2MM overpriced. I see the market today much as I saw the market from 18 months ago. There are handfuls of available listings in the $1.6MM to $2MM price range, but nothing too exciting. Nothing overwhelming, either for the land or the structure. Nothing memorable when viewed from an angle that places utmost importance on value. When I survey these offerings, I see one unavoidable truth: Nearly every one of these almost $2MM homes will more than likely need to sell in the $1.4MM to $1.575MM price range if they are to find a buyer. The price adjustments show that this is already happening, with price reductions prevalent in this market segment, and inventory on the verge of growing stale. The market will adjust to find buyers, and the buyers on Geneva in this sub-$2MM range generally hover in the $1.5MM range, waiting for an offering to slip down the ladder far enough to be picked off in this price range.
Such was the case with my lakefront on Upper Loch Vista from last fall. With an original list price of $2.5MM, we languished on the open market for most of last summer. Then, the seller grew aggressive. Price cuts were made to $2.2MM, with no market reaction. Then to $1.9MM or so, with little boost in market appreciation. Then, finally, to $1.795MM. At that price, we were on the radar of entry level lakefront buyers, and when we finally settled at $1.61MM the price was far below the original ask, but it had fallen into the segment of the market that has the most energy and motivation and was gladly snapped up by a waiting buyer.
The danger of the market today is that sellers have seen the activity on the lakefront, and they have summarily assumed that the market is stronger, and as such, assumed that their price is agreeable. Remember, for this particular discussion, I’m only addressing homes in the $2.1MM and under price ranges, as the upper reaches of the market have behaved slightly differently. Today, it’s about the $2MM lakefront home, and its relative inability to find a buyer. The entry level buyer typically wants to be $1.5MM or less, and with a spate of offerings in the $2MM range, the entry level buyer feels as though there is nothing to choose from. Wake up entry level buyer. The $2MM offerings are struggling to attract buyers, and so they’re reducing a little here and a little there. They’re slowly moving to find the buyer, but I’m telling you now what they don’t yet know. Those homes are going to sell in the $1.5MM range, regardless of their possible $2MM list price today.
That isn’t to say that some sellers won’t wait out the market. This is Lake Geneva, and sellers will always flex their financial muscles and wait out poor markets. It’s just that this time around, sellers have realized, albeit slowly, where the market is and they have reacted to those conditions. It happened last summer, and the way the market looks and feels to me today, it’s going to happen this year again. Expect many of these $2MM properties to ultimately sell in the $1.5MM range, as nothing I see currently has the land or the structure to justify the $2MM range. There are exceptions to these broad paint strokes I’m using this morning, but the bulk of the market in this range is overpriced, and will struggle to attract buyers without sizable reductions. To my prized buyers, let’s get out there and make my prediction come true. See you at the lake.
Photograph by Matt Mason.