One of the things that’s fun about being in the same business in the same market for so long is that I get to see my own theories play out. One of my theories is that when you buy expensive properties in a frothy market, you should look to buy blue-chip properties. Yes, you’re paying a premium, but at least you’re not going to be the sucker who bought the stupid house in the stupid location for that premium. One of my other theories isn’t so much a theory but a reality, even though it’s promptly and continually either misunderstood or not acknowledged by the market, is that the lakefront market is the only market that matters to the Lake Geneva vacation home market. The lakefront market is the key, and everything else follows it. A condo in Abbey Springs hinges its value on a $4M lakefront house? Yes, yes it does.
This contagion should be obvious to the market participants, but it isn’t. If a house in Geneva National is listed at $800k, it’ll be a pretty nice house. What sort of buyer would buy that house? Well, for starters, a buyer looking for a nice home in a golf course community. Beyond that, any $800k vacation home buyer in the Lake Geneva market might consider that sort of home. Typically this buyer seeks to be close to the lake, with a slip or a view, but those sorts of opportunities have vanished from the market for the time being. That’s because the lakefront homes are now $2-3M for an entry level cottage, which means a decent home with lake access and a slip or view is $1.5M+. Because of that, the $800k lake access home that our buyer friend is seeking doesn’t exist, which makes him consider Geneva National. This is how the whole market works, up and down the pricing scales, from now until forever.
The lakefront condominium market has taken some real lashes on this blog over the fourteen years that I’ve been writing it. The condo market used to be my personal bread and butter, back when I could sell $400-600k condominiums and feel somewhat content. The market fell apart in 2009, and took forever to recover. But was that recovery delay its own fault or that of the residential lakefront housing market? After all, as recently as 2019 you could still find a decent private lakefront home for $1.5M. How could the condo market compete with that? It couldn’t, and so the lakefront condo market stayed in its preferred value range, somewhere between $450k and $750k.
But you know what happened next. Lakefront homes exploded upward in value. Inventory evaporated. Buyers consumed every last lakefront property as thought their very lives depended on it (they sort of do depend on it). If lakefront homes were nowhere to be found, then it stands to reason that the condominium market would finally break free of its decade long pricing stagnation. Last week, I closed a three bedroom condominium in Bay Colony South for $1.35M. That’s the high sale in the building, and while I rarely delight in marking high sales when I’m on the buyer rep side, let’s consider what other options a $1.35M lakefront buyer might have.
None. They have none. If you want to be on the lake with a slip and a big view, and you don’t really want to undertake some form of massive renovation, you’re out of luck. That’s why a condo at Bay Colony South can find a $1.35M buyer. I was pleased to represent this client, and am certain that the residence they purchased will be the elixir they hope it will be. How long will lakefront condominium prices be able to achieve $1-1.5M buyers? As long as a cottage on the lake will cost more than double that price.