If the foreclosure scene in Las Vegas is as crowded as a New Year’s Eve party at The Wynn, then the Lake Geneva foreclosure scene is roughly as crowded as a Thursday lunch at Scuttlebutts. And it’s a late lunch at that. While the Walworth County market may have endured a difficult year in terms of foreclosure activity (Elkhorn I’m brow staring dead into your Fair loving eyes), the Lake Geneva vacation home market has been spared in what amounts to either an act of divine intervention, or a simple indicator of the strength of the owners in this select group. The Lake Geneva foreclosure market was boring in 2010, and it looks equally as eye watering in 2011.
Developments that should have been flooded with foreclosures weren’t. Market segments like lakefront condominiums with their relatively hefty monthly association fees ignored predictions and bank risk assessments and found a way to deflect almost every foreclosure bug that was intent on biting. The lakefront market itself, a market that might on the surface look to be heavily leveraged due to the enormous purchase prices of the past decade, showed just how un-leveraged it is when it yawned and rolled over as the foreclosure man knocked at its door. Geneva National and Abbey Springs, boasting a combined inventory of nearly 1800 units beat back any significant infiltration of the REO, and ended 2010 just as they began it: stable.
Of course it wasn’t all roses and kitten whiskers during 2010, as foreclosures did surface in all of these segments. There was a lakefront foreclosure (sold at sheriff’s sale), two South Shore Club foreclosures, including one home that sold as REO ($1.75MM) and one lot that remains listed ($399k), and there was at least one lakefront condominium foreclosure, that at the Harbor Watch Condominiums in Lake Geneva. The lack of liquidity in the lakefront condo market caused that foreclosure as much as the owners inability to pay, as no reasonable buyer would approach the lofty numbers that were paid for those large units during the mid 2000s.
Geneva National might have attracted the most foreclosure attention in our vacation home market, and while an exact number isn’t available to me, I’d guess that a dozen or more foreclosures occurred in this development during the last year. Even if the number was 20, the impact of 20 foreclosures in a 1100+ unit development isn’t cause for celebration, but it certainly isn’t cause for alarm. If anything, I was surprised there weren’t more foreclosures in GN during 2010. Abbey Springs held up much, much better, in spite of condominium fees that dwarf most of those in GN. I remember seeing one or two foreclosures in Abbey Springs, but at this date I cannot remember what they were, or if they ever actually fell to the sheriff’s gavel.
The lake access market endured more than a couple casualties, as associations like Cedar Point Park, Country Club Estates, and Indian Hills all threw a couple foreclosures at the open market. Most associations bucked the trend all together. Even with the handful of foreclosures in this lake access market, roughly ten foreclosures (give or take) does not make for a crisis, even though even an insignificant number of REO’s can put a heavy heel on the head of pricing trends. If you want to know who loves time shares more than buffet loving simpletons, it must be banks, as many of the Grand Geneva timeshares have ended up on countless sheriff’s deeds.
2010 was not a year were foreclosures were the story at Lake Geneva, and I don’t expect the REO to be the story during 2011 either. The reality is that elevated foreclosure numbers are here to stay, and they provide, at times, an avenue for a bargain hunter to find what it is they’ve been looking for. The problem with bank owned properties is that they appeal to someone who is searching for price above all other factors. Lake Geneva is a market where location should be the driving force, with price nipping at its heals. Instead, if you’re an REO hunter, your target price is leading the way, which can make your long term investment a poor one if the location isn’t ideal. It’s like buying a bad stock because it’s cheap. I’d rather pay market value for a leader than a discounted price for a dog. If the dog is a Goldendoodle, I may pay extra.
There will be foreclosures this year at Lake Geneva, this much is obvious. There will be some distressed sales and some short sales. These sales will provide opportunities for some, but not for most. There are foreclosure actions pending in Country Club Estates and Indian Hills right now, and at least one lakefront home that is in dire straights and might be facing foreclosure in the next 90 days if they don’t find a buyer who will unnecessarily bail out the seller. (No deal to be had on this one now, wait till it’s bank owned, then pounce. Email me for more details.) Thankfully, foreclosure activity will be the exception, not the rule that it has become in other markets. Do a quick search of condominiums in Chicago and you’ll find what appear to be the vast majority of units in some stage of foreclosure or being marketed as a short sale. No such headaches exist here, and after a year where 2010 delivered beatings to many national markets via a foreclosure shaped strap, Lake Geneva got off with a mere slap on the wrist. Expect more of the same during 2011, where foreclosures will trickle to the market but never flood it.