One of the problems with this blog is that I cannot cite specific examples of the market mistakes I see. If I were to do so, I’d get in all sorts of trouble. Trouble from the seller, or the buyer, or the brokers involved. It stands to reason that good practice dictates I avoid these specificities, rather only mentioning the general rules being broken. I can draw attention to the mistakes, just not to the offenders. Still, I wish I could because this blog would be a whole lot more fun, and also dangerous.
This year has taught us all sorts of lessons. One is to not eat bats, but that’s not a lesson I needed to be taught. I just sort of knew it. The other lesson is that in historical times of crisis homeowners tended to hunker down to ride out the storm. During this time of crisis homeowners did the opposite, and bought more real estate elsewhere. The rural and resort communities were the beneficiaries of this flight, though I still contend all of those produce managers from Brooklyn who bought mountain homes will, in time, come to regret their decisions. There are specifics in the market today that bother me, and particular transactions (whole groups of them) that bother me, but today let’s look at what’s happening from 38,000 feet.
The key rule being broken in the real estate market today, and this is not uniquely a Lake Geneva 2020 issue, is that buyers are no longer focusing on location. Buyers are focusing on a greater goal of “BUY SOMETHING IN LAKE GENEVA”. It should be applauded, this decision, as the goal is noble indeed. What’s not noble is the increasingly sloppy execution of this greater goal. If you come to Lake Geneva to spend $750k on a lake house, or a country house, what matters here? Does it simply come down to the finish of the kitchen and the count of the baths? Does nothing matter aside from finding one bed for each of your children, and a cot for your mother-in-law? If the goal is to be here, and you’re just trying to sleep all of the members of your family, then your aim can be wild. This year, buyers are proving that their aim is wild, and they’re buying all sorts of miserable things in miserable locations just because it fits, sort of.
I saw this happen in real time during the 2005-2007 market. Buyers would focus on finding a lake access home in, say, Cedar Point Park. Then, after looking for a while, they’d find nothing to their liking so they’d buy a house on Cherry Street in Williams Bay. Cherry is a fine street, but Circle Parkway it is not. Buyer fatigue mixed with extreme motivation is a fatal brew, and buyers committed these sins en masse back during the prior market froth. Today, it’s like that but times ten. Buyers don’t care about location, at least the sort of buyers that tend to not work with me. They care only about checking the box. Lake House? Secured.
But at what expense? Is it reasonable to buy an absolutely soulless house in a terrible location just because it allows you an escape hatch when JB decrees the next round of lockdowns? You could say yes to that question and I wouldn’t hate you for it. I’d just think you’re a bit naive, that’s all. Because you’re making a market mistake, no matter if it’s a personal decision that you find acceptable. Market mistakes are like that. To the individual, there is no mistake being made. In fact, there is celebration and champagne and a daily delivery of at least one new package of some coastal shelf decor from Pottery Barn. Today, it’s a starfish. Never mind we don’t have those at Lake Geneva, you have a starfish itch and you’ll be damned if you’ll let ecological accuracies get in your way of your own satisfaction. You’ll make this mistake, because you want to, and none of your friends will have the heart to tell you about your terrible mistake.
How to avoid these mistakes? This is the part where I normally tell you to work with me, and I’ll do the job that I perceive to be the most important thing I do every day: Help people avoid market mistakes. But the answer today is less direct. To avoid a market mistake in a hot market do not sacrifice location for expediency. Location is key in any market, but it’s so much more important at Lake Geneva than you can imagine. During this market boom, it doesn’t seem to matter, so you can easily get caught up in the emotion and the haste. But when the market someday softens, you’re going to hate that stupid gray and white kitchen that tricked you into buying on a street that has no business justifying the sort of value you randomly decided that it could.