When the sun is shining and the smoke has cleared and the market is ripping it’s easy to not care about the question that’s on our minds. If you take the conditions of summer and you blend them into the pace of a rapidly fading August, you won’t find much time for deep contemplation. But no matter how we push the question to the back of our minds, it’s still there. Lurking. Stewing. Festering. The question isn’t about the forecast and it isn’t about the lakefront, it’s just about the market itself. How long does this last?
You should be asking yourself that question no matter the market you’re attached to, but in our case, it’s solely about the Lake Geneva Vacation Home Market. I capitalized all of those letters for dramatic effect. When the year began I started it with less concern than I typically start a year with. See, my main worry in the months that follow a particularly hot year is that the market sucked up all of the buyers in one dizzying buying spree, and that causes me to wonder if we’re about to run out of buyers. Not that we’d run out of buyers forever, just that we pulled some of the Q1 buyers forward into Q4 and because of that we’d find Q1 to be light on sales. That’s my typical worry, but this year I didn’t feel that way. I knew we had buyers left over. I knew the year would be good, with my one caveat being the valuations of the stock market. If the equity markets held, then so would our housing market. That correlation has yet to prove incorrect.
But back to August, and back to the question. There’s no doubt that a pause in our markets will occur. Everyone knows that. The person who bought the most overpriced house in the United States this year knows that. He’s a moron, by the way, but at least he knows that. The pause will come, but the timing is the question. I can say at this point in August that no matter what, the pause isn’t going to be this year. That has nothing to do with our YTD performance, it has to do with the behavior of the buyers in our market, and the relentless introduction of new buyers. I don’t judge a market by its recent sales. I judge it by the number of buyers that contact me over any given multi-week span. The good news for sellers is that the supply of buyers continues to impress, even in August when new buyer introductions historically wane.
The lakefront market remains as hot as it’s been. I’ve closed several lakefront transactions in the past few weeks, including one that I didn’t tell you about. I didn’t tell you about it because I had a seller contact me to sell and I had a buyer for that house, so I sold the property with no market exposure. I had another seller contact me two weeks ago and I put that property under contract to a direct buyer last week as well. The market isn’t happening on Zillow anymore, so if you’re waiting for some ridiculous auto-feed to supply you with new inventory, then you’re missing the market. The business is changing, and most people know it. There will be a time when I need to load up my battered OPEN HOUSE signs and stick them into the ground in order to find a buyer, but that time isn’t 2021.
I do sense a shift in the primary markets, as inventory continues to build. If you own a lakefront house that you paid $3M for in 2014 and now it’s worth $5.5M, you might be tempted to sell if you decided to move out of the region or if you had some other lakefront opportunity you wished to pursue. Absent those motivations, you’re just not selling. If I can make you an extra million bucks on your home, that’s likely not going to move your needle. To quote one of my customers, when I told him I could make him a million US dollars over his 2020 purchase, “I need another million dollars like I need a hole in my head”. Good times, this market. In spite of the lakefront owners’ tendency to hang tight, the primary home market is much more influenced by opportunistic prices. In that market, capturing some of the market heat might be life changing, and so that inventory continues to present. For now, it’s still being gobbled up, fueled by absurdly low mortgage rates and a general appetite for housing.
Expect these market conditions to maintain throughout the summer and into fall. I expect we’ll see continued lakefront inventory, with a good chance at increased opportunities this fall. That said, do you think all of that inventory is going to make its way to Zillow?