Lake Geneva Foreclosure Update

I wasn’t looking for any sort of advice on how to default on a mortgage, I was just looking for some appropriate strength contact lenses. And I’m sure the woman who told me to put my chin on that tissue lined rest and press my forehead against the plastic brace wasn’t looking for any sort of rebuttal to her advice, but both of these things happened a few days ago and the brief exchange shed much bright light on the plight of our housing market. The woman knew I was in real estate, not because she knew who I was but because I had to write “real estate” on the white card next to the line labeled “Occupation”. She was probably just being friendly, making conversation. But when she told me that her friend had just walked away from her house because she was underwater on it, I’m sure she wasn’t prepared to defend the move.

Could she afford the house? That was all I asked. Because, the theory goes that if a homeowner can indeed afford their chosen mortgage payment, it matters fairly little if their house is underwater. The market shouldn’t matter, neither should liquidity. This is what I asked her, and she said she didn’t know. She said she didn’t really care about her friend’s personal situation, but it was obvious to me there with that white tissue under my chin that she thought her friend had somehow outsmarted the system. There was some pride in her voice as she told me about what her friend did. Her friend had outsmarted the rest of us, and though I mentioned that I disliked the public sharing of individual losses, I didn’t do much in that brief exchange to convince her that her friend had not, in fact, outsmarted anyone or anything. What had she done? She had forced her lender into accepting the loss that she had personally agreed to accept, and in turn, she signed up for perhaps seven years of renting in a very poorly trimmed apartment. Hurray!

Foreclosures. They continue. They will continue for a long, long time, and as long as simple minded people with no motivation to honor their commitments choose to walk from a home simply because it is underwater, foreclosures will make up a very large part of our national housing scene. There is some harshness in those words, I understand that. But until most of the rest of us wake up and realize that the motivating circumstance for foreclosure is not solely personal financial distress, the sooner we’ll get a grasp of this phenomenon. Negative equity continues to drive foreclosures. While financial duress brought about by unfortunate job loss or unexpected medical bills can indeed make mortgage payments difficult or impossible to make, these are not the foreclosures that are rampant, and these are not the problem. The problem is this now acceptable attitude that if a homeowner is underwater on their loan it is shrewd, if not prudent, to walk from that loan and that house. This is our plague.

Thankfully, Lake Geneva is not full of such owners. The scene here remains remarkable because of what isn’t in foreclosure, not because of what is. I searched the sheriff’s sale schedule as well as recent Lis Pendens notices this morning, and the Lake Geneva vacation home market continues to find refuge from this national storm. Surprisingly, when searching through the Geneva Township foreclosure activity, I didn’t see much at all in Geneva National. Much of the scheduled foreclosure actions were taking place in the Lake Como Beach Subdivision, which is not now nor has it ever been considered even a fringe part of the Lake Geneva vacation home segment. Geneva National has a couple foreclosures in the works, but ongoing prosecution of a few does not make for a significant issue in such a massive association.

The lakefront looks to be void of any serious foreclosure threat for now, and the lakefront condo market continues to defy the odds and avoid any pattern defaults. Remember, a condo market should be the most susceptible to foreclosure if the market is relative illiquid and the condo fees are somewhat onerous. Our lakefront condo market at Geneva has many of those “qualities”, but the market remains solid. The lake access market has a few hiccups here and there, notably one in Country Club Estates, perhaps two in Cedar Point Park, and some condotel trouble at the Abbey Hotel. Lake Lawn Lodge is not a part of our Lake Geneva market, but there is some continuing trouble over there amongst the individual unit owners. It seems that the re-opening of a hotel does little to rekindle a condotel market that is effectively dead to all but the very aggressive investors who will gladly purchase your $120k unit for $38k.

If you find the REO to be a sexy product, then you will find Lake Geneva to be a rather un-sexy market. However, if you value stability and find comfort in knowing your neighbors hands are as strong as yours, then you will find Lake Geneva to be a most hospitable place.