Lake Geneva’s favorite metric continues to be one of my least favorite: The Price Per Front Foot. I generally disapprove of the importance that the market places on this defining metric, but I’d never pretend that it doesn’t matter. This revered metric has increased over the past six years from mid $20K to just over $60K for 2022 to a staggering mean of $72K in 2023. I intentionally left vacant land sales out of this detail, though it would be expected that a significant proportion of our single family sales have sold at land value as the market has a voracious appetite for new construction and sees most aged structures as tear down candidates.
Something that’s not well understood is that the price per foot of frontage decreases as frontage increases. You can think of this as diminishing returns to frontage size, or price compression as you consider the larger properties on the lakefront. The idea is simple: If a high quality lakefront home on 50’ of frontage can now sell for $5M, that doesn’t mean an average home on a 200’ lot is easily justifiable at $20M. Do not make the mistake of assuming the price per front foot holds up as frontage increases.
There is some noise in the data regarding these lakefront sales, and that stems from the persistence of off market transactions and the manner in which lakefront homes tend to transfer. It is common practice for buyer and seller to allocate a mutually agreeable dollar amount of the contract value to personal property. If a home contracts for $5M including some furniture, the pier and the shore stations, it might be agreeable to the parties to specify $300k of that price to the personal property transaction, which results in a $4.7M transfer of the real estate. The issue I take with the accounting of this practice is that it incorrectly reflects the true contract value of the transaction. In the case of Lake Geneva lakefront sales, this personal property allocation is now a market norm, and if we can guess that the allocation typically amounts to 3-8% of the contract value, then the presentation of comparable sales data is incorrect. Consider that as you review these numbers and if you think the prices are elevated, just remember the actual contract values are often higher than what is visible to the market data.
This is post on in a multi-part series where I break down the performance of the 2023 lakefront market. This data will be appearing in my second winter issue of Summer Homes For City People, which will be available January 5th. Information deemed reliable but in no way guaranteed. Stats from residential single family lakefront MLS and known sales, excluding vacant land and South Shore Club.