Lake Geneva Lakefront Real Estate Update

When does a market shift? Does it shift when the news tells us so? Does it shift when the buyers outnumber the sellers? Does it shift when market times shrink and new inventory introductions slow to barely a trickle? We know it can’t shift when the Realtors tell us that it has, because they’ve been telling us that it’s shifting since before it shifted the last time. 2008- It’s not that bad! 2009- It’s pretty great! 2010- Better buy now while rates are low! 2011- Some economist in California said housing is cool! 2012- Foreclosures are a thing of the past! Or does it just take a few years of sustained volume gains and a few more years of steady price gains? Or is it simply a time of year thing- markets shift and heat up in the spring and summer and into the fall, and then once winter comes we’ll be wondering when our next shift starts?

These are the many questions, and someone could be understood if they had a bit of concern over the state of the Geneva lakefront market as it rests today. The market is hot. It is. It’s full of activity in most price points, and with new pending lakefront listings on Harvard Avenue (Glenwood Springs, $1.995MM), Oak Birch (Cedar Point Park $1.574MM- my buyer) Sauk Trail (Indian Hills, $4.199MM), and the 700 Club ($3.15MM), it seems as though the shift has begun. But has it? Is it really all peaches and thick, heavy, delicious cream? Have I ever told you that I’ve been known to swig heavy cream once in a while straight out of the refrigerator? I mean, have I ever told you that I have a friend who has been known to swig heavy cream straight of the refrigerator? Anyway, the market, for the uninitiated or easily excitable, appears to have completely reversed course. The sailing looks smooth, the urgency apparent, our course set.

The thing about this is, while the activity is incredible and it’s a blessing for our local market, it does not signal a clear reversal of fortunes. The sale on Basswood from last week at $3MM was an important sale for the market. The pending sale on Sauk will be as well, as a closed price in excess of $3.6MM will make that property the second most expensive home sold on the lake in recent years- leaving my $5.885MM sale from 2010 as the reigning champ. But what of the broader lakefront market? What is the general mood around the water? Is it entirely cheery, or are there pockets of cheer and pockets of deep depression, where one seller feels relieved for the recent contract and his neighbor wonders if burning down his own home to more easily sell the bare dirt is the best course of action. The market, through its robust summer of 2012, is not everyone’s friend.

The lakefront inventory today is a bit stale. There are still plenty of great listings, and plenty that will receive contracts in the coming weeks and months, but exciting new inventory has not been easy to find of late. There has been new inventory- don’t get me wrong- but that inventory is mostly over priced and over hyped, and I don’t like it all that much. What is being missed by the superficial gyrations of the summer market is that there is still extreme value that exists here. The market recovery is not affecting each owner the same, and while some owners are selling there are others that are ready to sell more than you might think. The lesson for today to buyers is simple: If you think you’ve missed out of the best buying times, you’re dead wrong.

There are factors in the market today that have propelled some of these summer sales. Interest rates are insanely low. Money is cheap. We all understand this. So if you’re able to swing a large mortgage and have the cash flow to support it, there may indeed be no better time to lock in a reasonably low price on an ideal piece of lakefront. If you’re a cash buyer, those same low interest rates are convincing you that perhaps that static money may be best assigned to another asset, one that, in theory, may appreciate a significant amount over the next 15 years. Low money market returns are bringing supremely affluent buyers to the market and low interest rates on notes are ushering in high cash flow buyers to the market, and generally low prices are letting both of those buyers find some form of value.

That’s the positive, but there is a negative side of the market as well. There is a sitting president who intends to tax the wealthy into submission, and if this isn’t considered to be a very thick, very wet blanket on our market then the person doing the considering isn’t thinking very clearly. Pending tax increases on those people who have worked hard enough, or smart enough to transform into evil rich people represent a fundamental issue for ours and every other high end vacation home market in the country. This is an issue for our market today, and there is no way to pretend that it isn’t.

But these are the positives and the negatives, and in between those exists a very potent market. These recent sales are going to push our 2012 volume above our 2011 volume, and if we can continue the pace we’ll end 2012 on a very high, sweetly tuned note. Take these sales as you will, but know this. If you’re a buyer in search of blue chip lakefront on Geneva, you are no longer alone. There are buyers out in numbers that we haven’t seen since 2006, and the days of comfortably watching a listing for a year or two to see where the seller might capitulate to are possibly over. For now.