I’m pretty much done talking about the summer market. If you noticed, I didn’t even talk about it that much in the first place. What else could I say? Should I have written you daily to tell you just how many buyers and how few sellers we had? I have buyers looking for updates. What do you say when there’s no update to give? Do I say the market is hot? Do I say it with different words that imply the same meaning? Perhaps I should have. But I didn’t, because it felt so absurdly redundant. The summer market was insane. It’s still summer now, but in the world of real estate where everything is forward looking, the summer is essentially over. I find no value in telling you once again how hot it was, or is, rather I think the key now is to figure out what comes next.
If you were to create a sellers’ market in Lake Geneva, Wisconsin, you’d do so by concocting some sort of event, or a series of events, that might make people wish to leave the nearby large city. If you did this, and this existed as the only particular driver, the market would react positively but it wouldn’t knock your socks off. If you establish this event or condition, and then combine it with interest rates at or below 3%, you’d have two pretty potent keys to fuel a market. Perhaps then, if you had this event and you had these rates, and you added in a rip roaring equity market with $3300 AMZN and $500 AAPL, then that would be something. Now you’d have wealthy folks who are looking to leave the city for a while and you’d line their pockets with all sorts of paper wealth and access to free money, so they can hold those big-gaining-investments and still purchase a lake house. If you could do these three things, you’d really be onto something, but what if you could toss one more can of gasoline onto this fire? What if you also had the most amazing summer weather that a particular market has ever experienced? What if you woke up to see your city in flames and your portfolio in the brilliant green and those interest rates sub-three AND it just so happened to be sunny and 82 like every single day? Well, then you’d have the summer 2020 market at Lake Geneva.
The question now is what happens this fall when things return to some level of normalcy. Luxury markets typically pause in the run-up to an important national election, and this fall there appears to be an election of relative importance. The stock market generally won’t love the uncertainty of an election either, so it stands to reason that this insane run has to show some weakness one of these days, doesn’t it? Looking at lake houses under an 80 degree summer sky is really quite something, but is there as much romance and motivation when viewing the same houses under a 61 degree, disrupted gray sky that’s also spitting rain? The market over the coming 60 days will answer these questions. For now, I insist the torrid pace of this summer won’t last forever.
As with all times in all markets, there are sellers being too bold and buyers being too bold. Sometimes, those two meet and a deal is struck. Other times the seller is just sitting there, with his boldness and his summery disposition, waiting in vain for a buyer. Sometimes, buyers who should be bold are shy, afraid of the market and afraid of the coming election and afraid of a QQQ that isn’t closing at record highs every other day. The market, while greased with the aforementioned greasy conditions, cannot keep this pace up forever.
But the question isn’t about forever, it’s about this fall. And this winter. I expect the market to remain in this current state until the stock market falters. When it does, buyers might see a trickle more inventory. They might coax a seller out of hiding. When we all realize that corona won’t instantly vaporize us if we leave our homes, a seller or two might venture out. If our kids stay in school this year, and our lives return to some level of normal, so will our market. Does this mean the market is going to soften considerably? No, I don’t think it does. I think the market still has gusty tailwinds, and I expect that lake houses will not go out of style anytime soon. But can we continue this absurd pace, the sort that has seen me personally put three lakefront homes (Geneva Lake, only) under contract in a one week span not once, but twice this summer? No, we most definitely can not. There’s a balance to this market, and the balance has been upset over the summer because of the reasons we all know and understand. This balance will return, but I expect the only catalyst capable of disrupting this Lake Geneva bull run to be a breakdown in high flying US equities.