I suppose I shouldn’t be here right now. I should, instead, be cutting down sturdy trees and scraping their soggy bark. I should cut these trees into boards, some big, some small. I should construct a kiln, to fire the wood and make it dry and strong. I should be gathering nails, hopping from hardware store to hardware store gathering my pointy treasures like an antique hunter might canvas a neighborhood wide garage sale. I should be buying tar by the barrel, or at least as many cans of anti-fouling bottom paint. I’ll likely be adrift for more than a few days.
But instead of focusing on the Ark that might become necessary later today, I’ll instead talk about the market. The market. It’s doing quite well, and I can’t help but imagine what might have been. If the spring that continues today with its rain and aggressive petulance hadn’t been quite so clingy, what might the market look like today? Would it look different? Does weather really matter? Yes, on all fronts. It matters more than most rational people think. A vacation home purchase is logical, and rewarding, but the pursuit of the home is an emotional experience that doesn’t allow for rational thought at all times. What scenario makes such a purchase more likely: Rainy weekends or sunny ones? Last summer had activity because we’re Lake Geneva and we always have activity, but did 95 and sunny every day for a majority of the summer encourage buyers to leave their sweat behind in the city and come to the lake for a refreshing dunk? It’s rhetorical.
If you haven’t been paying attention, interest rates are on the rise. Like, on the immediate, significant rise. Buyers who are milling about on the rain-soaked sidelines are finding the motivation to pursue vacation home spoils even in this weather, primarily because every week seems to be coming at the expense of a heavy fraction of a basis point. Buyers are acting, and the primary beneficiary of this action is the lake access market and the condo markets in Abbey Springs and Geneva National. Perhaps the only market that isn’t being moved at the moment by these rates is the lakefront market itself. And that begs this: Why not?
The secret is mostly out- our market hit rock bottom sometime between the fall of 2010 and the fall of 2011. Since that time, the market has rebounded. First, in terms of volume. Then, pricing stiffened. It would be difficult to say that prices have increased around the lake since the fall of 2011, but I’d like everyone to consider the simple fact that seller resistance has caused prices to appear as though they have increased even if the baseline of value has not. In other words, if a seller might have taken $2.2MM at the bottom of this market, and today, with increased optimism that seller will only succumb to a $2.4MM offer, this increase in acceptable price may well be considered the equivalent of a price increase.
If prices are firming and inventory is light, does this create a bad buying environment? Of course not, but it certainly puts a damper on the buyer enthusiasm that was present when prices were at their absolute bottom. Today, one driver of increased lakefront interest could very well be these interest rates. They are swelling, and some buyers in strong cash flow positions would do well to make financing a part of their vacation home purchase. Even if rates today are 4+ instead of 3.5ish, will that matter in five years if rates at that time hover hear 6? Of course it won’t. Cheap money is cheap money, and 3.5% money is indistinguishable over time from 4.5% money. If you are able to notice the difference, then the attention you’re paying this is way too close.
The lake access market today looks to be rather active. There are pending lake access sales per the MLS in Sunset Hills, Summer Haven, Shore Haven, Knollwood, Cedar Point Park (2), Indian Hills, and The Lake Geneva Club. As an aside, the listing in Summer Haven tells its own story, even if I’m the author and the narrator, and it’s a Pier 290 story. If you weren’t sure weather or not Pier 290 would have some affect on the residential properties immediately surrounding it, consider the tale of the Summer Haven home. Originally listed for $519k in 2010, that property whittled away its ask until it settled at $299k this spring. The sales price is unknown, but that property is soon to sell at a price equal to roughly half of its original list. The home is also immediately adjacent the Pier 290 entrance. A price drop that coincided with Pier 290’s emergence? Pure coincidence? Doubtful.
The strength in the lake access market at the moment is obvious. There are pending sales in every segment, and the resurgence of a previously soft $500k-$800k range is quite important. Movement in this market frees those in that market to pursue the possibility of upgrading to lakefront, as that is a common move in the market. First buy is many times an association home, and then, as love of the lake grows commensurate with income, the move to private lakefront is all but inevitable. Liquidity in this middle segment means a group of buyers who may have been eying lakefront can finally make the move. If that’s the contemplation and they need a little more motivation, rapidly rising interest rates will likely do the trick.
Above, my Valley View lakefront. $4.195MM