With one superficial glance, the entry level Geneva lake access market appears to have had a troubled year. At least that would be the flippant verdict if you were me, and the eyes doing the glancing were mine. This particular market didn’t excite during 2010, but it still ended the year with 29 sales closed at $400k or less, numbers that represent a solid year for the meat and potato course of our Lake Geneva vacation home buffet. Perhaps this individual market didn’t seem as busy to me as it really was, an unfortunate situation that I was lulled into as a result of my ridiculously interesting 521 Wilmette not garnering the market attention that it deserved. And it could have been that my on again- off again relationship with 10 Liechty in Summer Haven also didn’t catch the eye of the 29 buyers that flooded this market with liquidity and greased the internal gears of a market that had previously been sputtering. Whatever the case, the entry level market on Geneva had a solid year in spite of how I felt about it.
This narrow segment of our vacation home market recorded only 19 sales during 2009, and just 17 sales during 2008. With 29 sales during 2010, we’ve even surpassed the 27 sales that took place during 2007. So there is indeed life in this entry level market, and if I can be candid, I wasn’t expecting it. Sure I figured we’d have some form of a volume recovery up and running during 2010. I figured we’re increase sales, but not at a rate of 50%. I didn’t wish bad things for the entry level market, rather I figured some of the forces at work in other market segments within this price range would put a little more pressure on this market.
The Geneva National market (review forthcoming next week) has suffered tremendous casualties during this cyclical decline. The lack of liquidity in that development is troubling to me, but it’s downright garment rendering to those who own there and are unable to sell without taking a very hot bath in the space where their equity used to be. I believe the culprit behind the lack of movement in the GN market is the lack of available equity in the suburban homes of the target buyer. The Dave Curry theory goes that if Fred and Sally had a home in Kildeer worth $1,000,000 and they only owed $400k on it, they had easily accessible equity that could easily provide for the purchase of a Geneva National condo in the $200k to $350k price range. With home equity lines being unilaterally shrunk or withdrawn all together by the banks that originated them, home equity, even if still present, isn’t easily tapped. If you take away this source of easy funding from a market like GN, the market dries up.
The same scenario that has hurt GN should have hurt the entry level lake access market. It should have, but it obviously didn’t. The lake access market plowed forward, even if prices continued to soften in spite of an increase in volume. That phenomenon might make some agents heads explode, but it makes perfect sense. If more buyers are present, but those buyers are still demanding discounts, volume will increase even as prices decline. The declines haven’t been severe in this market, as most of the properties have probably only experienced a decline in the 15-20% range. Compared with a drop of 30% for entry level lakefront homes, this decline is palatable. Closing occurred during 2010 in Country Club Estates, The Loch Vista Club, Oakwood Estates, Cedar Point Park, Indian Hills, and a few select other lake access association that host homes in this price range. The few foreclosures in this segment during 2010 didn’t do much to dent the momentum, and had little impact on pricing outside of the ultimate sales prices for those REOs.
2011 brings a new set of challenges for the entry level market. Can we find a way to replace the buyers that have purchased in the last year? A delightful increase in stock portfolios during 2010 will certainly make buyers feel a bit wealthier as they open their year end statements this month, and that increased feeling of wealth should bode well for the market. The unemployment picture means little to the entry level market, which is cruel, but true. If financial markets hold steady, and rates stay in the 5% range (even to 6.5%, really), the entry level market could be on track to duplicate its 2010 performance. I’d expect between 24 and 29 sales this year in this segment, though as with all things Lake Geneva, the inventory and accompanying pricing will play a large role in that encore. For now, would someone please buy 521 Wilmette? If so, I’ll write about your obvious savant-like genius and the crystal clear clarity of your real estate vision.