A year or so ago there were as many as eight units on the open market at Fontana’s Abbey Hill. It seemed, to a casual onlooker, that the market there was broken. Foreclosures occurred, significant price reductions followed, and the market failed to make inroads as buyers ignored the Hill in favor of Abbey Springs and others. The nature of a market in decline is a worrisome one. When will the price cuts stop? When will the individual market find a true and supportable bottom? These questions I thought about last year at Abbey Hill. This year, the market has strengthened, the bottom established, and a simple market fact discovered.
In all associations, Abbey Hill included, there will occur inevitable market adjustments that cause many owners to lose their financial grip. This weakening of a market and the accompanying equity loss is a difficult thing for many owners to absorb, particularly if they bought at prices that we can now identify as being the market high of this past cycle. This swift and painful move downward is too much for many, and small associations will react more violently than will large ones. A foreclosure or two in Geneva National isn’t a big deal. But a foreclosure or three in Abbey Hill where just 63 total units exist equals pricing disaster.
And so it went at Abbey Hill, the unfortunate surrender of market value, an influx of inventory, and a failure to attract as many buyers as there were sellers. Prices dropped, foreclosures occurred, and owners capitulated. What is unspoken about these times of difficulty both nationally and on an association specific level is that the cleaning out of unable or disinterested owners is a positive for a market. It’s like a controlled burn in a forest. Sure some nice trees get singed, and it smells like smoke for a while and all hope appears to be covered in ash, but the following spring new life is enabled and the cycle repeats. A down time in the market is a necessary evil to clear out those owners who may be weaker financially, or those who may have just decided that it’s time to move on. Either way, a property sale that transfers a property from one owner to a more motivated, stronger owner is a huge positive moving forward.
This is what has now happened at Abbey Hill. In the past twelve months, seven units have sold. They range in price from $110k to $200k, and in that range they have established a reasonable expectation of value. The lower priced sales have been foreclosures or small, lesser units. The higher priced sales ($180k-$200k) have shown the rough valuation range for units in better condition, with larger floor plans, or superior views. The most recent sale at $195k was yesterday to a buyer whom I represented in their vacation home purchase. Did I love $195k as a sales price? Not really. Did I want the price to be $180k? Of course. Did the buyer still find value? When you consider the unit previously sold in 2004 for $270k, I think the answer is a solid yes.
Today there is just one available unit at Abbey Hill. Priced at $200k, it’s a nice unit in the correct price range and it should sell fairly soon at a price that I’ll accept. During the summer of 2010 nearly all of these now sold units were on the open market, cluttering the MLS and presenting an untoward impression to shy buyers. Today, with all but one unit now sold and transferred to new, stronger, interested owners, there is new life and a new found strength at Abbey Hill. When you compare the remarkable turn around at Abbey Hill with the dire straits still present at the Abbey Villas, it’s obvious that price is the number one driver of markets both in Fontana and everywhere. A market willing to accept a 30% haircut is a market that will adjust and find stronger footing and recover more quickly than a market vaccilating between acceptance and pure denial.
A special thank you to the buyer who let me represent them in their fine purchase. A vacation home with garage, two bedrooms, two baths, a massive fireplace and ample decks just a mile from Geneva Lake for just $195k sounds like a great idea to me.