Lake Geneva Market Update

Over the past many months the market in our lakefront and lake access market has been dislocated. The dislocation, due to the absence of accumulating open market inventory, led to pricing that was, much to the delight of the ownership, unchallenged. Limited inventory, as we learned over the past three years, trumped all concerns of equity market levels, interest rates, and any other pesky historically significant conditions that might have otherwise impacted valuations. Those were the best of times for sellers and the worst of times for buyers. On the minds of the lakefront and lake access market today is one question: Is it all over?

For the first time in a lengthy while, there are price reductions on the lakefront. These reductions are having a curious effect, as both buyers and sellers react to a staple action of any real estate market and view it as a potentially detrimental harbinger of what happens next. The last three and a half years of real estate sales allowed for, and even embraced, overreactions, so it should be expected that we’d follow that trend into this new season. But are the reductions a sign of a deteriorating market, or just the typical pricing gyrations of a market finding its way back to a normal pattern of buyers and sellers? Time will tell, but here’s what I think.

I think these dramatically higher interest rates have pushed a few would-be buyers to the sidelines. If you’re engaged and motivated, the high rates today represent an obstacle to overcome. A meaningful and challenging obstacle, but not necessarily a fatal blow to a lakefront dream. But if you were moderately ambivalent about your lakefront or lake access search, these rates will put a serious damper on your casual pursuit. Curiously enough, the interest rates have not calmed much of the off-water lake access activity that is still producing exceptionally strong prints at all off-water price points. I would have expected the interest rates to have the most dramatic impact on this particular market segment, but the segment continues to push through the rates and I’m not entirely certain as to why. It’s a sign of strength, to be sure, and it’s likely a result of the entry level pricing on the lakefront sitting firmly between $3-4M. Anything off water, even if priced stiffly, seems cheap in comparison.

I think the price reductions we’ve seen on the lakefront this summer are merely a result of a handful of listings that have been vying for buyers in a narrow market segment. When any number of active listings are competing for the same buyers we seem to have forgotten what happens. Price reductions happen, because one of the owners might be more motivated than the others. How could it be otherwise? And if a price reduction occurs and fails to yield a buyer, then that new pricing drags on the other inventory which, in turn, creates more widespread price reductions. The listings we’ve seen stall this summer almost all overshot their initial listing prices by wide margins (relative to their actual value), and the price adjustments are the result of those overly optimistic starting points. For sellers, there’s a lesson here. If you list too high and fail to sell in a reasonable period of time, your ultimate sale will not only be delayed, but the property will face the reality of elongated market time, which is, in case everyone has forgotten, pricing erosion. The past three years have allowed us to ignore the reality of market exposure and its detrimental impact on value, but welcome to the new market (it’s the same as the old market).

I see some inventory today that failed to sell over the summer in spite of offers that were written on those properties. On this crisp September morning I sit here and wonder how those sellers feel about their summer optimism. Are they content with their confident summer negotiating? Or are they now aware of the reality that would suggest those summer offers are not going to return this fall?

Recent sales on the lakefront include my large sale I told you about the other day, and another off market property I sold on the south shore in the mid $5s. A listing in downtown Lake Geneva came to market a couple of weeks ago and rapidly sold after multiple bids (likely as a tear down), and an entry level property in the low $3s surrounded by the George Williams property found a contract recently as well. Both of these properties sold after very short market exposure (neither are my listing or my buyer), which proves that buyers are still motivated in that $3-4.5M entry level range on the lake. The market segment that appears to have some eroding inventory is that $4.75M-5.75M range, and above that the only quality piece of reasonably priced upper bracket inventory is my Folly Lane listing on the north shore. That property is currently subject to considerable interest and I would suspect that home will find a buyer in the next couple of weeks. When compared to recent comparable sales on Loramoor, 700 Club, and Lackey, Folly Lane is a rare piece of quality inventory in a price range that is well supported.

The remainder of 2023 is likely going to see some sales in that segment that has seen the price reductions, as some of the reductions are going to prove too tempting for buyers that have been watching these properties over the summer months. Let’s assume of the seven active lakefront properties priced between $3.9 and $6M that we’re able to sell three or four of those before the end of 2023. I think that’s a reasonable expectation. Let’s also assume we add a small bit of inventory over that same time frame. So long as the new inventory is priced well against that aged inventory, I believe new inventory will sell. The year should end with 20-24 lakefront sales, which will put our volume on the light side of the historical average, but still well within the normal range.

Lastly, it’s my opinion that there are plenty of upper bracket buyers in the market today ($10M+) and that this particular market segment will continue to print sales with regularity. Lake Geneva has proven to be uniquely potent at this upper range, and if you’re a buyer seeking a Midwestern vacation home where you can have a reality based expectation of future upper bracket liquidity, it should be clear now that Lake Geneva is just about your only option. I do not see prices moving higher in the remainder of the lakefront market ($3M-$9.5M), as we seem to be building support for the ranges that we established over the prior 12-18 months. Rapidly accelerating pricing was fun while it lasted, but it was never going to last forever. Prices are stable, activity is considerable, and liquidity is available. For buyers and sellers alike, this market should be far more enjoyable, and predictable, than the hysteria of 2021-2022. If you’re a seller that means pricing in line with recent comps, not 20% higher than recent comps. If you’re a buyer that means you get to tour more than one home at a time, and having some ability to negotiate on most pieces of inventory. And if you’re looking to figure out what the market might be doing behind the scenes, I’m back here, behind the curtain, ready and willing to help.

Above, Folly Lane. 128′ of frontage, 3 acres of lush, gated landscaping, boathouse, guest house, heated driveway, and more…

About the Author

I'm David Curry. I write this blog to educate and entertain those who subscribe to the theory that Lake Geneva, Wisconsin is indeed the center of the real estate universe. When I started selling real estate 27 years ago I did so of a desire to one day dominate the activity in the Lake Geneva vacation home market. With over $800,000,000 in sales since January of 2010, that goal is within reach. If I can help you with your Lake Geneva real estate needs, please consider me at your service. Thanks for reading.

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