Geneva National Market Update

Geneva National Market Update

Geneva National Market Update

To understand Geneva National you must first understand the fundamental issue with Geneva National. Notice I didn’t call it a problem. A problem suggests that it’s something we can solve. If I have a problem with a certain pair of pants, I would first identify the problem (they’re too long) and then fix the problem (hem). Geneva National doesn’t have a problem, it has an issue. And that issue is simple. It’s such a large association that it requires a significant amount of annual volume to keep it moving forward, both in terms of market positioning and price stabilization, or appreciation. In good times, that volume is present. In bad times, it dries up. And unlike the lakefront market, which can endure some lengthy periods of low volume, Geneva National tends to see pricing pressure the moment (or year) that sales soften. This is the Geneva National condition.

Understanding this, you can imagine how nice it is for me to write a positive review of the market conditions in Geneva National. Just last week I closed on a nice home in the Geneva Club, a gated enclave within Geneva National, for $640,000. This is a nice sale for GN, a nice sale for the seller (lost money) and a nice purchase for the buyer I represented. We contracted on that home in May, only to close in late August, and while we spent the summer under contract the Geneva National market had a serious run of sales.

Currently, there are 12 homes and condominiums pending sale in GN. Of those 12, four are priced in excess of $500k. Since the beginning of 2019, there have been 71 closings in GN (per MLS, excluding vacant land sales). Of those, 12 have closed over $500k. This is an important price point for Geneva National, as you can sell all the $180k condominiums you want and it won’t signal any sort of meaningful activity for an association that is reasonably heavy in $500k+ homes. Liquidity in that upper-middle market is what GN craves, and this summer provided that movement. Consider for 2018 there were a total of 81 sales, with just 11 of those printing over $500k. And for context, you must know that 2012 saw just 35 total sales with only two of those closing over $500k. Geneva National, you’ve had yourself quite a 2019 and it isn’t close to being over.

In spite of this activity, the one thing that continues to weigh on the single family home component (all condo classifications) is the presence of vacant lots that are priced far, far, far below their initial valuations in the early 1990s. There are currently 41 listed lots available in GN, and just one of those shows as pending sale. That property, by the way, is listed at $10k. That $10k lot had sold previously in 1996 for $62k, and again in 2003 for $52k. And in this you’ll find the Geneva National conundrum. On one hand, no one really feels like enduring a construction process when there is ample built inventory priced between $450k and $750k. The presence of this built inventory and the elevated construction costs associated with new construction has left the vacant lot market out in the cold. But on the other hand, the existence of so many cheap vacant lots is weighing on the built home market, because why would I buy your 1994 brick and cedar creation only to have to remodel it (extensively) when I can buy the lot next door for $Free.99? This is the issue within GN, and it all stems from that volume situation. Too much inventory, too large of a subdivision.

There are things that can turn the tide in GN, and one of those that I’ve written about often, would be to adjust the Geneva National Declaration to allow property owners to buy adjacent lots and not have to pay additional association fees on the purchased lot. This would help absorb some of the vacant land inventory, which is at the root of the GN market issue. The association won’t do this because they can’t imagine the loss of that vacant lot revenue (owners pay dues on a vacant lot, just as they would on a built home), but this fixation on the dues is causing market strains that are self-inflicted. If the concern is over dues, then charge each owner who purchases an adjacent vacant lot a one time fee of $3000, or similar, when they purchase the lot. That’ll grease the budget a bit on an annual basis, as owners snap up cheap, adjacent lots. GN, I do hope you’re paying attention.

GN should benefit from low interest rates moving forward, and if this exaggerated Illinois Exodus exists, GN will likely be a landing place for many of those newly minted Wisconsinites (psyche, our top income tax rate is 7.65). Rarely would a family from Illinois (or an individual for that matter) move to Lake Geneva from the Chicago suburbs and land in a small cottage near-isn the lake. Instead, they’d look in GN and find that $400-700k buys a remarkably nice home, and they’ll like the way that looks and feels for a new primary residence. For now, Geneva National, rejoice in your solid 2019. The sales volume is meaningful.

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