In the fall of 2008, the world melted. In the spring of 2009, the market bottomed. In the fall of 2009, all hope that this cycle would be slight and the trough shallow, was mostly lost. In 2010, the world finally realized that if it wanted to liquidate some real estate, it would have to put it on sale. The sales were significant. They ran through 2010 and into 2011. They ran all of 2011 and into 2012. They ran most of 2012. By the end of 2012, the bulk of the sales were drying up, but 2013 found a few more. By early 2014, there were a couple sales still ongoing, and buyers snapped those up because they knew they should. It’s now 2015 and most of the sales are over. But it’s 2015, and most of the buyers are back.
That’s because what causes markets to freeze up isn’t low markets or high interest rates, it’s fear. Fear is what made the markets collapse, and confidence is what started to return in mid 2010. That confidence was building for every quarter since the bad ones of 2009, even though prices were soft and softening through early 2013. When confidence returned, that pushed fear aside, and with no fear, markets can grow and grow, and indeed, markets can grow out of control. Today, our market is held in check, not by fear, because fear is all but gone, but by inventory.
This is nothing new. You’ve heard this hear before, often. But today, on this cold and blustery Friday, I see a market that’s full of buyers and low on sellers. I see deals, still, amongst those sellers that haven’t been able to sell, but mostly I see buyers wishing for new inventory. It’s the desire for something new, for something that the market hasn’t already dismissed- that’s what’s driving our market. Combine a lust for new inventory with a solid stable of buyers and you have the makings for a very robust 2015.
In this prediction, there is risk. There is risk in understanding value, or mostly in failing to do so. Buyers get caught up in this momentum, and they buy something bad for too much, or they buy something bad just because they see that it’s priced at too little. It’s scary to buy an expensive vacation home when the markets are in ruins, as it was in 2010, but it’s far more dangerous to buy an expensive vacation home in 2015 when the markets are seemingly in perfect health. That’s because buyers see new inventory and they pounce. They buy first, then consider asking questions much, much later. There’s significant risk in buying into a hot market if your decision is not informed, guided, and well considered.
Right now, there are small pockets of value around the lake. I see some deals in the sub-$300k vacation home market, those lake access homes. I see some value in the condominium market, especially on aged inventory that might be sniped at the right price. I see value in pockets in the $500k type homes that have boatslips, but very little, really. There are some nice values closer to $1MM, but only for project seekers who wish to have some remodeling rewarded. Quality locations cannot be changed, but countertops can. That’s super easy to say, easy to understand, but the market proves it isn’t easy to apply.
On the lake, there are a couple of entry level deals that should sell immediately. There’s that one house left in the South Shore Club at a paltry $1.725MM that’s going to sell for a terrific buy-side price, and there are a couple lots in the club that I may be able to sell privately should any interested parties contact me directly. The meat and potato section of our market, those homes priced from $1.8MM to $3.5MM really doesn’t have anything solid to offer right now. The lakefront for $2.6MM in Fontana is under contract, but that has a shared pier and shared piers are like strobe lights. They both make my head hurt even after I instinctually close my eyes.
For those few pockets of deals, I do see one segment that should yield some incredible value this year. Those homes priced over $3.5MM and below $5.5MM. I think there are a large handful of these homes that should sell at steep discounts to their current asks. Expect some bold buyers to venture out and try to steal a few of these, and if those buyers are smart they’ll contact me to carry out that plan. No agent can negotiate these deals like I can, and I say that with confidence. Lastly, expect something to shake loose in the upper bracket over $5.5MM. We can’t go two years without printing one of these palaces, so I really do see something happening this year as the market is fueled by high market returns, low interest rates, and most of all, confidence.