Times were, a condo buyer was a condo buyer. They wanted a condo because they liked the idea of having someone to handle their maintenance for them, and they weren’t looking for anything but a condo. If they were looking for a condo on Geneva, they liked that they’d have a nice lake view, perhaps a boat slip, and maybe a pool or a tennis court or some other amenity. This is what they wanted, and they looked at condos until they found the condo they liked. Life was so simple back then.
When the market sputtered, all segments of our vacation home market were thrown into some level of chaos. The condo market looked like it might suffer some serious foreclosure trouble, and one astute young man who writes a real estate blog speculated that lakefront condo foreclosures may become common. The theory was that condo buyers were often leveraged, and many condos sold at peak valuations. Throw in complete illiquidity, high monthly fees, somewhat high taxes, and you would have the makings of a mini-foreclosure boom. That was the theory, but that didn’t happen. Very few foreclosures occurred on the lakefront, but the market suffered nonetheless.
When buyers returned, they were no longer true condo buyers. Most were price range buyers, seeking out something to buy in a specific price range- say $500k. If you’re a $500k buyer, you have options here. You can buy a condo on the water, yes, with a lake view and maybe a slip and perhaps a pool, or you could buy a classic cottage, with a slip and no view, or maybe just a nice home off the lake a ways with no slip and no view, but a super shiny kitchen. Post-apocalypse buyers were rarely focused solely on condominiums, instead opting to explore all of their housing options, condo or otherwise. This open minded approach hurt the condo market.
There are macro forces at work that have also hurt the condo market. Our buyer at Lake Geneva can be anyone, but increasingly our buyers are young city dwellers. If you live in the city, in a condo or a narrow brownstone, you’re looking to get to the lake to escape congestion. Because of that, this buyer rarely looks at condominiums. They opt for cottages with yards, for those sort of single lane associations with community and freedom, like Shore Haven, or the Lake Geneva Club, or the Loch Vista Club. They aren’t looking for condominiums.
Another issue with the condo market is that the condo model has proven, time and time again, to be broken. Condominiums operate on the theory that every owner pays a little to the association every month, and when a repair is needed the association has the money to make that repair. It’s a nice idea, really, but perhaps it’s a bit naive. The way condos typically work is an association takes your monthly money, spends it on whatever, and then when the roof needs replacing they levy a special assessment to pay for the roof. The model is broken, and when you combine that with the demographic shift in our buyer base, you have the makings for a very slow lakefront condo market.
The good news, after all of that bad news, is that the condo market has finally recovered. There have been 10 lakefront condo sales YTD, and that’s a lot. At this time in 2013 we had only sold 3 lakefront condo units, so our volume this year speaks for itself. The inventory has also dwindled, with only 14 lakefront condos on the market today. There are units pending at Bay Colony (two have sold there this year), and one at Fontana Shores. Fontana Shores is probably the best value on the lake right now, as those units are able to be bought in the low $300s and while the building may not be much to look at, the views from those units are among the best on the lake.
Prices have fallen in these lakefront condominiums, but they really haven’t fallen as much as the broad vacation home market. I’d guess prices are about 20% off the peak, which is about right, the important difference being the lakefront condo market never plummeted to a 40% discount from peak in the same way that the single family market did. With the two units pending, I’d expect another two sales of other units yet this year, bringing the 2014 total volume to 14. That’s peak market volume, so perhaps the lakefront condo market isn’t really dead at all.