Well, that’s that. The inventory that should have arrived in February, didn’t. I know why it didn’t. It doesn’t have anything to do with the Ukrainians or the Russians or the QQQ or my SPY puts that never, ever work out. It doesn’t have anything to do with those things, but it has a lot to do with many other little things. Let me explain.
Inventory at Lake Geneva typically presents in January and February. That isn’t to say that it won’t still present in March and April, but historically our spring market begins with winter inventory. This year that happened, to a slight, very modest extent. A couple of new listings came to market and within short order, sold. A couple of stragglers from last fall sold as well. This is a terrible sign for buyers in our market. I expected buyers to push back against prices that didn’t make a lot of sense, but that’s the thing about markets. If there are fifty potential buyers and forty-nine of them think a property is overpriced, what happens? The answer is painfully obvious: The house sells and the forty-nine buyers go back to looking for the next offering. This is the part about markets that I really dislike.
I do think there are pricing errors being made right now. I think the supply side market is overestimating the quantity of buyers in the $6M+ range. There are plenty of buyers, mind you, but not quite as many as some might think. Many of the listings that might otherwise have come to market in February are being offered as off-market listings instead, much to the chagrin of those who don’t have buyers or sellers in their camp. This is why your zillow feed looks so light.
While buyers look to the their SPX holdings and the war abroad and cite those for reason enough that the market should pause, the real key to the Lake Geneva market for this year is going to be inventory and absorption. Absorption of high end real estate works like any other product driven by FOMO. If a buyer sees a new listing and they don’t think it’s particularly nice, or worth the demanded ransom, they should skip it. And if they skip it and it sells, they go back to the drawing board, pencil in one hand while the other hand scratches the back of their head. When another piece comes to market and similarly sells, the buyer does the same. And when it happens again, the buyer reacts the same, albeit with heightened irritation. A fourth time? Well, that buyer is likely to jump at the newest listing, even though she doesn’t like it very much. This is the FOMO of a real estate market (and a sport watch market, and a GT3 market, etc, etc), and it’s palpable and often fatal.
The best a buyer can hope for right now is increased inventory and resolve. Any agent can talk you into any house. It’s not really that hard right now. But a good agent (me) tells you what houses not to buy. Look for bluechip real estate and consider it. Look for something high quality in a high quality location, and consider how much you’re willing to potentially overpay. Seek proper, objective guidance. And remember, I’m begging you to not buy garbage just because you can make the budget work.