A few years ago, I stood with a buyer on a large piece of lakefront on the south shore while the buyer hemmed and hawed and kicked at the dirt. The house was marginal, even if the boathouse was inspired, but the property was wide and it was deep and it was everything this buyer wanted. What it wasn’t, however, was $100k cheaper. Had it been the buyer would have bought it, but his offer was $100k light and my buyer turned away from the property and later he turned away from me, presumably because I pressed him a bit too hard when he decided this magnificent property wasn’t for him. He let 160+ feet of frontage in an incredible location get away from him over some variable of $100k. I tell you this so you know that 2021 hears this story and can’t stop laughing.
How the market has changed in recent years. If there’s a comparable sale from 2019 and a buyer would like to use that as 2021 justification, this is pure lunacy. The careful words cannot be used anymore. The market is too hot for hedging opinions. The market has fundamentally changed. I worried about this year back in January, as we saw a rush of covid motivated buyers in 2020 and I wasn’t sure we hadn’t just pulled forward 2021 buyers and forced them into 2020 homes. I had buyer back away from the market in January while he explained to me how the market was going to crumble this year due to the re-opening of Europe. I tried to explain to him that people can own lakefront homes here AND travel to Europe once in a while, but he wasn’t having any of it. At this date in July, it’s apparent that he was dead wrong.
But what of the market itself? What of the waves and this grass and these wood framed structures that make up the easy harmony of our lakefront scene? The general theme this year is haste. There is no time for contemplation. There is no time for making sense of the movement, there is only movement. It’s a dance of perpetual motion and if you step out for a moment you’re swept aside, unable to force your way back in to the chaos. If you think $4M home should be $37M, then you’re just not a 2021 buyer. If you thought hunting for a lakefront home was going to be fun here, you’re learning that it is anything but.
In 2020, we had produced nine lakefront sales by this date. In 2021, we’ve produced 16 sales (14 per MLS and two off-market sales that didn’t make it to the MLS as a sold comp, both sold by yours truly). I’ve sold eight of the 16, representing a 50% lakefront market share. I’d prefer to get that to 100%, but it’s taking a bit longer than I had hoped. The increase in sales for 2021 proves that inventory is actually freeing up, even if it doesn’t feel that way. In 2020, I argued that we hadn’t really introduced large numbers of new buyers to the market, we just restricted supply as owners of lakefront homes sought to use their homes rather than to sell them. If that argument was true in 2020, then the following is true today: Inventory has been making its way to market, but the number of buyers continues to overwhelm the limited inventory, meaning there are more opportunities but there is also more competition. The end result for buyers: continued pain.
I have no issue with the speed of the market. How could I take umbrage with a market moving quickly, fueled by the voluntary actions of its participants? What I find most curious is how pricing has become detached from historical noms. I’ve discussed this often over the past year, both on this site and in person with my buyers and sellers. The concept of neighborhood value on the lakefront has almost been completely abandoned. $2M for a home in a $2M neighborhood? That’s fine by me. A tear down of a $2M purchase in a $2M neighborhood? That used to be an unforgivable sin, but today it’s just business as usual. The valuations have been blurred, and while I take deep offense to any market that operates without concern for rational valuation theory, I have no choice today but to press forward in a market full of buyers and light on sellers.
What that means is that I will continue to arrange off-market deals for my buyers and sellers. The traditional real estate model discourages such activity, but how could you ignore the fact that he who controls the buyers and the sellers also controls the market? The only benefit to this hurried market is that it is exposing cracks in the traditional brokerage model. What model? The one being utilized by every single real estate brokerage in the United States, including the “tech” companies masquerading as something other than the traditional brokerages that they are. List home on MLS. Market home. Hold stupid open houses with champagne and miniature horses. Sell home. That’s the model, but increasingly the 2021 model looks like this: List home privately. Avoid the silliness. Pay less commission. Sell home. Who could argue that this isn’t a better model? The answer, in case you didn’t know already, is the brokerages that aren’t controlling enough of the off-market business.
What to look forward to for the remainder of this year? I’d say it’ll be more of the same. The market is moving at a frighteningly fast pace, but you cannot let that force you into a bad decision. The reality of any market is that not every home is worth buying. The frantic movement of this market is capable of pressing the most cautious buyer into a panicked mistake, but it shouldn’t be this way. The goal this year should be to jump at blue-chip properties that are selling at a premium, while avoiding the types of properties that have fundamental flaws. Just because flaws are overlooked this year doesn’t mean they will be overlooked in the future. Don’t be caught holding the bad properties when the market someday decides that value ranges are actually important.