Don’t look now, but summer is no longer young. It’s no longer new. It’s no longer out there in front of us. Today, it’s here. It’s around us. Behind us. What’s yet to come is rivaled by what has been. Summer is dwindling. It’s slipping through my finders and I have no explanation as to why. It’s mid July now and soon it’ll be August. Once it’s August we know that football starts soon and once our minds turn to football then everything that we once looked forward to about summer is over. Summer is dying and with it our hopes of finally capturing it in the way we once imagined we would. Alas, the market update:
As best I can tell the market this summer is mixed. On one hand, you have the market realists. There are those who recognize the market impact of the value destruction in nearly all asset groups and the rise in interest rates and the failed auctions of 993 turbos that everyone thought might sell for $300k or more forever. Then there are those who don’t know what these things mean and they think that the mood of the day will be the mood of the month which will be the mood of the summer and ultimately the year. How I wish I could be this simple minded. I’d be excited to write a contract and get the deal to closing. Once the deal closed I’d go shopping for something I don’t need and all would be well.
But this isn’t me. I worry about things. Lots of things. I worry about the direction of the market and I try my best to sense where individual segments are headed. Certain segments feel as though their outcomes are not debatable. Overpriced primary market homes in our lakeside towns are going to drop in value. Carve it in stone. The opportunists who seek to exploit this segment at the very end of this cycle should be stuck with their homes forever. I know this segment is sensitive to interest rates and I know that the buyers in this part of the market are largely left over from 2021. They’re tired of looking and tired of losing and the opportunistic sellers in this range (let’s call this $300k-$1.5M) are hoping against hope that one of these weary buyers show up at their weekend open house. I’m hoping these buyers ignore the overpriced inventory in this segment and in doing so force the sellers to recognize that the market in mid 2022 is not the same market as we had in mid 2021. When will they realize this? Perhaps in November if 30 year fixed rates are still hovering between 6 and 7%. Maybe then they’ll realize the fevered gobbling of all varieties of risk is over.
I also know what I see in the vacation home markets. I missed out on a few listings this year that probably should have been mine. I largely lost out on these because I disagreed with the value estimates of other agents. Value, as we all know, is subjective, so this makes fine sense that opinions can differ. But so far this year my valuation estimates have been proven accurate, and that brings some consolation to my listing-less existence. Speaking of, if you’re a seller, do you know how you to increase your odds of a sale? The answer, shockingly, is to list your home with an agent who sells the most homes in whatever segment your home resides. Some sellers think that advertising in Sri Lanka might yield a Lake Geneva, Wisconsin buyer, but we know better. Relationships inside a market are how deals are made, and while that should be painfully clear it somehow remains comically misunderstood.
The lakefront market today has one pending sale in the South Shore Club. The other properties in the South Shore Club hope this pending contract produces more buyers, but I’m not sure if that’s the likely outcome. Around the lakefront inventory remains low, and buyer activity remains high. The difference between 2022 and 2021 is that the inventory isn’t be snapped up just because it’s limited. Buyers are present, but they are developing a little bit of patience. They sense the subtle shift in the market, and even though certain properties should and will sell immediately, many should not and will not.
Earliest this year I told you about an auction of the government owned home on the North Shore of the lake. That auction has yet to be scheduled. The market might be softening slowly but I would expect this home to still bring a $6M+ sales price. I really hope this sells to someone who wishes to preserve the parcel as one estate piece. I abhor the division of residential lots on this lake, and find the practice to be disgusting and insulting. Let’s hope that plague doesn’t reach this marvelous north shore parcel.
I anticipated a slowing of new buyer activity on the lakefront this year, but I didn’t expect to see the inventory this tight at this point in the year. We know I’ve been closing several lakefront homes off-market last year and this year, and there was yet another off market sale (not mine) in Williams Bay this month at $4.8M. I remain confident that inventory will slowly increase over the coming year, but I admit I figured that increase would already be underway. Perhaps the increase will come in the fall, but for now buyers remain plentiful at most price points (especially so under $7M) so it’s apparent that any attempt at increasing inventory this summer will be met with buyers, unless the pricing misses the market. And if you’re a market participant who doesn’t understand that you can indeed overshoot lakefront pricing, tell that to the seven lakefront homes that are available and not under contract (per MLS).