Geneva National On Fire

Geneva National On Fire

In basketball, the head fake is a pretty important variety of fake. It’s usually best if accompanied by a bit of a shoulder shrug, some elevation of the tops of the shoulders, or maybe a turn of the shoulders, depending on the direction of the head fake. It’s important, because it frees up space, which is what you need in this new game of basketball wherein nearly all of the shots are three pointers. You, with the ball. Your head, in fake position. Your shoulders, faking, too. Your hands, the ball, fake city. You make the move, the fake, and your opponent bites. Then you move aside and shoot a three pointer. My cousin Steph Curry does this very well, and why shouldn’t he? We worked on that together at family gatherings, and he’d know nothing about the head fake if not for me. (those last two sentences are not true)

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Geneva National also knows a thing or two about head fakes. It’s been keen on giving one or two during the early spring of a few of the past years. Sales ramp up, pending contracts rise, and GN looks as though it’s completely and entirely cured of whatever has ailed it. This happened in 2013. Unfortunately, the reason the early activity proved to be purely a head fake is because the volume stalled, prices sagged, and the year ended up being nothing like it started out to be. Last year, in 2014, Geneva National didn’t even bother with the spring head fake. From January 1st through March 25th, 2014 GN only recorded 6 home or condominium sales. Head faking can get tiresome, and GN decided it would rather rest last year than attempt to go through the motions of a continuing recovery. This year, it’s back to its 2013 form, and it’s either mending or faking. It’s too early to tell.

So far in 2015, Geneva National has printed thirteen home sales, four of which were single family and the remainder of the condominium variety. That’s impressive, compared to the miserable performance of the prior year, but what’s really quite attention grabbing is the number of pending sales. I counted 16 pending sales this morning, which is significant. There are just 96 homes and condominiums available in GN as of this morning, and those 16 others pending sale. That makes me really quite happy on behalf of Geneva National, as I continue to believe that there’s no real reason that the properties there should be forced to suffer as they have. We’ve discussed this at length before, but it’s important to remember that GN suffers from a very simple absorption problem, not some fundamental problem with the property itself. Simply put, GN requires lots of sales annually to keep the gears of its market effectively greased, and lots of sales in individual segments is not something that the Lake Geneva market does particularly well.

As a point of fact, there are seven single family homes pending sale in GN, priced from the upper $300s to nearly $1MM. The single family market in GN, especially those homes priced under $600k, provides considerable value in this marketplace, and it’s nice to see the market recognizing that. As to where the GN market is at in terms of this last decade cycle, it’s hard to say. I don’t think it’s keeping pace with the pricing recovery in the broader Lake Geneva vacation home market, which is likely at par with 2005 valuations right now. GN is likely still back at 2003 pricing, and because the prices have stalled in this recovery, plenty of value exists.

One particular pending condominium in GN caught my eye this morning. It’s currently under contract at an asking price of $320k. That home sold in 2010 for $349k. So GN from 2010 to 2015 has, at least in one anecdotal case, lost value. Compare that to the $4MM listing on Bonnie Brae priced at nearly $1.4MM more than it sold for in 2011. That’s the one that’s pending sale now, and we’ll see just how much one buyer and his agent thought the market appreciated since then. Seems to me that Geneva National is not the same as the lakefront market, but it’s interesting to note the printed prices of these other markets and contrast them to the lakefront market. For a reminder, I think the market is up, at least as a broad measure, 10-15% since the market bottom of 2011/12.

Today, let’s celebrate Geneva National and their blazing start to 2015. The inventory is light, but tons of value still exists. If I’m a buyer in GN, I’m avoiding new enclaves of condominiums, because I don’t trust the developers to uphold current pricing in the event that the market softens while inventory still remains. I’d be looking to pick off single family homes that look cheap, and I’d be focusing on built-out condo enclaves, the sort that have a history of sales that would allow me to easily ascertain current value. If Geneva National interests you, I’m pretty sure no one knows it better than I do.

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