If we remove the lakefront homes that look like lakefront homes but are not really lakefront homes, like those in the South Shore Club, and then we remove those lakefront homes that are pending sale, we’re left with 40 true lakefront homes on the market today. If you missed the headline of this page, we’re talking solely about Geneva Lake lakefront homes, which is what we’re talking about all the time, or at least three days a week as my time grows scarce on most mornings in a way that it never used to. So we have 40 lakefront homes. Let’s talk about those.
It’s important that we take out the pending sales, assuming that they indeed will close. That foreclosure on Maple Lane was pending, and now it isn’t, because there’s a rather unfortunate deed restriction on that home and that’ll make it very difficult to sell for anywhere near the $1.584MM price tag. We’ll assume the other pending sales will close, so we’re ignoring them because they are privileged, which should sound familiar if you’ve been watching Democrat funded television ads.
We’ve spent a fair amount of time over the last few years discussing the compression that exists at the very top end of our lakefront market. Homes that exceed $4MM in price are rarefied, and so it makes the nine lakefront homes priced over that mark quite unique. There was a sale last month for $7.1MM, and that was a wonderful sale. It gave hope to the high end market that buyers would indeed buy their newly built mansions, even if the price those buyers will pay isn’t going to make them any money on their large endeavor. Other than that sale, the only other high sale in that strata was the one that I helped print in August of 2010 just under $6MM. These other offerings, while impressive in price, are not long on buyers. Should we expect to see one of these $4MM+ properties sell yet in 2012? Um, maybe?
Now that we’ve cleared that up, the real strength of the lakefront market now is found in the lower reaches. If we’re to understand that lakefront prices are off 30-40% from the market highs set in 2006, we should be seeing a whole bunch of properties that were valued around $2MM listed now in the $1.2-$1.5MM range, and that’s exactly what we have right now. My listing on Sauk Trail was just reduced again, this time to $1.329MM. This was, believe it or not, a home that had a peak value somewhere very near $2MM. Today, it sells at a discount that will follow the market trend, and today the best we can hope for is to buy properties that have made this adjustment. There are six lakefront homes priced at or under $1.5MM, and while one or two of these are not liquid unless the prices drop even further (ahem, boat launch neighbor), my listing on Sauk and a listing in the Birches are primed to sell to a value minded buyer this month, or maybe next.
Just as that entry level market is primed to deliver value, the middle of our lakefront market, those homes priced from $2MM to $3MM doesn’t offer all that much to a value minded buyer. There are unique properties that will sell- those somehow different from the others either in terms of architecture or property of geographic position on the lake- but many of the properties in the $2.5MM to $3MM range are about as exciting as a weekend trip to Harbor Country in October (Yay! Everything is closed and no one is here!) There is inventory in this range, but most of it is tired and boring and I don’t even want to talk about it. Sure there are exceptions, but even so.
There are pockets of value out there right now, namely those couple in the entry level range, my Folly Lane listing at the absurdly low $1.899MM mark, and a few here and there in the $2MMs. But what the market is sorely lacking right now is inventory in the hottest lakefront stretches. Buyers would pay right now for lakefronts in the stretch from Black Point to Fontana, and again they’d be excited over larger parcels on North Lakeshore of Fontana. Some inventory from Cedar Point to Pebble Point would be welcome as well. There’s a new listing in Elgin Club that’s pretty nice, and I’m betting that listing sells fairly quickly not because someone will cherish the Elgin Club but because it’s a very pretty home that’ll print in the low/mid $2MMs and there are enough buyers out there today to reward such a property.
If I look at the lakefront this morning, I’m betting we’ll see four more lakefront sales in the remaining weeks of 2012. If we see just two sales, oh well. If there are six, that’ll be wonderful. Pending election results, there maybe either a moderate or a giant capital gains tax increase on the horizon, and that looming uncertainty will be enough to push some sellers into taking offers this fall that they never thought they’d be willing to take.