If the song is right, and the foot bone is connected to the ankle bone, which in turn is connected to the leg bone, then it shouldn’t be such a big surprise to know that each segment of our market is connected to the segment either above, or below it. Markets do not exist in vacuums, and neither do individual segments. That’s why activity in one segment can boost activity in another segment, or an absence of sales in one segment can cause fewer sales in another. Case in point is the housing crisis. In 2009, did we really lose every sort of buyer, for every sort of home? Or did we spend 2009 through 2013 suffering, at least in large part, to a lack of jobs and apathy amongst that buying demographic that gets this whole thing started- the young, previously energetic, entry level buyer?
One key to understanding the Lake Geneva vacation home market is to understand that we do not need legions of new buyers each year. I love introducing a buyer to this market. A buyer who grew up on the East coast, and spent their Chicago existence pining for clear water and northeasterny things. When that buyer comes to Lake Geneva, they feel at home, at peace, and more times than not, they feel like buying. This is a wonderful buyer, but it’s a rare buyer. A decidedly not rare buyer? The sort that has a summer home in Cedar Point, or Country Club, or Indian Hills, who decides that, after a growing love of the lake and a growing wallet, that it’s time to move to the lakefront. The move up buyer is really what fuels Lake Geneva.
When our recovery was nascent, we had activity on the lakefront, because the lakefront is king now and forever, and there was activity in the $500k and under lake access market. The middle segment of our market was light on volume, those homes priced from $500k to $1MM. I think the market behaved this way because the entry level lakefront market was yielding straight deals. I sold multiple lakefronts in 2010, 2011, and 2012 that printed for 40% off their prior sales prices. If you were a buyer who wanted to spend $800k but could indeed spend $1.25MM, the odds were you couldn’t resist the value in the entry level lakefront market so you pushed yourself to the lakefront. The opposite is happening today.
The entry level lakefront market has some offerings, but I find them to be mostly boring or impaired, or probably boring and impaired. And ugly. If I’m a buyer who could swing lakefront to $1.25MM, the inventory does nothing to excite me. With low lakefront inventory in that segment, the segment below it should, in theory, benefit. Buyers happily overextend to capture something that they really love, but buyers also gladly dial back their purchase price if there’s nothing worth stretching for. If I’m right in this theory, then the mid-upper end of our lake access market should be hot. And that’s exactly what it is.
There are currently no fewer than eight lake access homes priced from $600k to $1MM pending sale. That’s a lot of volume in that segment, and I think it stems from a both a lack of quality entry level lakefront inventory and increased liquidity in the lower range of the lake access market. If I’m a $800k vacation home owner, it might be normal to see me someday end up on the lakefront. In the same way, a $300k vacation home owner in Cedar Point might find the financial courage to step up to a $700k lake access home with a slip. Ever have a vacation home here without a slip? Ever then upgrade to one with a slip? If yes, you know the lifestyle upgrade that comes with such a promotion.
With this increased activity in the $500k to $1MM market, I think it’s important that we go over our buying criteria in this price range. If I’m a buyer for this sort of property, I’m looking for a few very distinct things. I really would like a slip, but even all slips are not created equal. There is some inventory in this segment plagued by bad slip locations. How do I know this? Um, because I’m smart? As a buyer working with me, you’ll never have to wonder if you’re paying a premium for a dog of a slip. I’ll tell you the slip is lame, and if it’s extra lame then I’ll tell you it’s super, disgustingly lame. Some of these bad slips are under contract, so let’s avoid those mistakes together.
If I don’t have a slip, I want a view. Many people would trade one for the other, and I could live with both scenarios. If I don’t have a slip or a view, then I better have a really, really nice house. Ideally I’d have a slip and a decent house, or a view and a decent house, or if I could find a really nice house with one or the other I think I’d be rather content. If you’re buying a marginal house with no view and no slip and you’re paying a premium, this is sad. How can you guard against making a mistake and buying the right house in the wrong location? Just type dave@genevalakefrontrealty.com and hit send.
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