May is a pretty good month. It’s the month that we see when our January minds concentrate to conjure up an image of spring. The calendar might say spring starts in March, but it doesn’t. It’s May, and now that we’re here, we should feel some level of smugness for both our ability to survive the Virus, and our ability to survive both winter and a miserable early spring. Well done, my fellow survivors.
The Lake Geneva real estate market over the past sixty days has been choppy, which is to be expected. Activity under $1MM has remained solid, as have showings on several of my listings up to and around $2MM. A spec home listed just under $6M received a contract during April, but aside from that movement the upper bracket has been relatively quiet. This should also be expected, to some extent. I have had two new lakefront buyers initiate searches recently, but with many still cautiously abiding by the rules of the our respective states, in-person showings have remained sparse.
You’ve likely seen the real estate articles originating in the New York markets, those articles telling us that city dwellers are flocking to suburban or upstate markets . Greenwich, Connecticut, a market mired in a multi-year slump, has had an uptick in sales. I’m seeing Hamptons summer rentals marketed at $500k-$1MM for three months. Clients are sending me these clips, and I read them with great enthusiasm. There’s only one issue: Lake Geneva is not near New York. Midwesterners are more sensible than our Northeast counterparts. While their market might be bustling with fleeing city dwellers, I can tell you without any equivocation that Lake Geneva has not experienced this same boost.
At least not yet. There are several factors at play here, and while I own’t pretend to be an expert on each of them, I will pretend to be an expert on what drives affluent buyers to our shores. When the stock market was busy shedding three years of gains during that March massacre, it was obvious to me that our market would shut down rather quickly. And, aside from that sub million dollar activity, it did just that. But then April came and we added back much of that lost equity. The markets calmed, the bottom was declared to be in, and everyone (including me) felt some relief after checking their equity accounts. I would have expected this reprieve in the bloodletting to fuel some added interest in our high end, but that hasn’t yet happened. Why? Perhaps because of the Safer At Home orders? Or perhaps because of continued fear that the worst is not yet behind us?
One thing is certain, for every buyer who pulled back because of fear, another buyer might have been spurred to initiate a search because of incredibly cheap money. I refinanced my primary residence at 3% last month, which is quite meaningful. These low interest rates might be around for a while as the Fed props up our markets, and who are we if not opportunists? I’ll gladly take that free money, and I’m betting that others out there will see increased affordability in their real estate purchases and act on it. Or at least consider acting, pending their own personal economy and personal confidence in their career choice.
We cannot pretend this hasn’t been a negative for our market in the short term. There are competitors of mine that are pretending things are normal, and they most definitely are not. Does that mean that sellers should negotiate from a position of weakness, or that buyers should expect some huge CoronaDiscount? Absolutely not. But does it mean that a seller who was staunch in the defense of his list price in February might be a bit more interested in a buyer’s slighting lower offer price? Obviously.
We have had a tremendous uptick in rental requests, which is unfortunate because Lake Geneva isn’t a rental market. Too bad for the renters, they’ll need to go to Michigan. Psyche, Michigan has banned short term vacation rentals for the time being, which is a huge blow to the Harbor Country market. That market already struggles with upper bracket liquidity in a way that our market does not. I wrote about this sort of thing a few weeks ago, how you’d be so much better off if you valued a market engineered to benefit the vacation home owner, rather than the vacation home landlord. Inventory has remained low, and I’ve personally had two sellers cancel pending listings as they have decided to use their homes this summer and have no interest in selling while the homes have proved such a valuable amenity during this period of duress.
For now, I see a continued lull in our upper bracket lakefront market, perhaps through this month, depending on the performance of the stock market and the general mood regarding the Virus. If buyers remain fearful, they’ll remain in their homes. If buyers gain some confidence, they’ll venture up to the lake, and once they do, then the market will find some movement. How could it not? It’s lovely May, the flowers are blooming, the lake is clear and the piers are white. There’s nothing not to like about this scene. As buyers face the prospects of a summer in a motion-less city, they’re going to realize that this summer would be better spent here. Then they’ll realize that every summer is better here. Long term, the virus will prove to be a positive for this vacation home market, as city dwellers understand what an incredible benefit it is to own a nearby retreat that functions perfectly well during the good times and the bad.
Above, sunset at my listing in Glenwood Springs. Wouldn’t you rather spend summer here? $1,999,000