Lake Geneva Market Update

Lake Geneva Market Update

Lake Geneva Market Update

Well, I continue to be wrong about this market. Or, perhaps, as Christian Bale as Michael Burry said in The Big Short, “I’m not wrong, I’m just early”. The market is no where close to running out of steam. Every time the supply side gives the demand side a shot to prove them wrong, the demand side succumbs to their FOMO and jumps. Two properties this week, one on market and one off market, have found contracts at lofty valuations. I use that adjective because everyone is incredibly sensitive these days, so I can’t use the adjectives I’d prefer to use. So what’s a buyer to do in this market?

The first thing to do is to calm down and remember that just because a property sells that doesn’t make the property a good idea. I bought PYPL last summer at $260. Just because there was a meeting of the minds between me, a dumb buyer, and someone else, a smart seller, doesn’t mean that was a good idea. Nor does it have any bearing on the value of the stock today. As a buyer in this market, it’s best to have a short term memory and learn to discount certain sales as being outliers.

Then, once you’ve come to terms with leaving the outliers for other less informed buyers, you must also recognize that these outliers are still impacting the market. I’d go so far as to say the market movement of the past week will buoy the lakefront market throughout the winter. Nearly every other vacation home market in the US that isn’t being propped up by massive economic drivers has faced at least a modest softening of demand. Lake Geneva is going to someday approach that slowdown but I’m at my desk this morning telling you that it is not today. Nor is it tomorrow. In fact, it might not be until next summer. The reason is simple, and it’s not because I underestimated the pent up demand in certain price segments. I knew there was demand, I just figured that demand would evolve with the macro economic forces that created this incredible market. For now, the market has bucked the trend, and it seems as though it’s going to stay that was for the foreseeable future. As long as inventory remains constricted and what inventory does present to the market does so in a controlled trickle, prices cannot soften.

For buyers, this doesn’t mean you should be frantic. It means you should act with intent. If you see something you like, let’s go after it. But let’s temper that enthusiasm with a desire to find those blue chip lakefront properties. For reference, those blue chip properties should have appropriate lot square footage and frontage for their target price range. They should have appropriate pier rights that line up with their pricing. They should have appropriate settings for their price range. If you’d like to buy a $6M house in a $3M neighborhood, you can do that, but you should admit it’s a terrible idea.

For sellers, it means more of the same. Prices are still elevated. They have not, except in certain price ranges, come down. Most market participants are still building value based off of the last sale, rather than seeking to make sense of the valuations based on myriad factors. Because of this, and the recent proven demand, prices are stable at these elevated ranges. If you thought you missed the cycle top, I’m here to tell you that you haven’t. It’s still here, and as best I can tell, it’s not going anywhere soon.

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