Low volume markets typically have a hard time establishing a pattern of recognizable value. This is the reason that Kenilworth vexes those statistics that cover the back page of the Tribune’s real estate section. One year, three sales at an average price of $1.9MM. The next year, one sale for $1.2MM. The spreadsheet then reflects a “loss” of median value equal to that decline and Kenilworth gets a red arrow next to its name. Did Kenilworth shed 35% of its average value over those past twelve months? Obviously not, but these are the unfair circumstances that plague small markets everywhere.
Lake Geneva is, at its very core, a small volume market. In times good and times bad, the single family vacation home market on and around Geneva Lake is a low volume concoction. Low volume over a long period of time is a sign of strength for any market, but it can also yield troubling statistics. If twelve homes on Geneva sell in a year, and they’re all $2MM+, what exactly does that mean? Are we to believe that the cheapest home available is always going to be over two million dollars? Don’t be silly. In the same vein, if particular calendar year is bottom heavy, with numerous entry level lakefronts selling but only a few upper bracket sales, does this average sales price accurately reflect the broader lakefront market?
Thankfully, 2011 has provided many lakefront sales that can clearly spell out our value. We needn’t guess at these prices. If equipped with a calculator and an understanding of the different segments of the lakefront market, value is easily defined. This week, another lakefront parcel on Geneva sold. This property measured 131′ along the lake and had more than 2 acres in total land mass. There was a home on the property, but for the sake of valuation, we’re counting that home as an unfortunate squatter on what is as otherwise magnificent parcel. The parcel sold for $2.4MM, reflecting a $595k reduction off of the $2.995MM list. The price paid per foot of deliciously level frontage was $18,320.
This number shouldn’t shock you. If you’ve been reading along, you’ll know that most of the larger parcels sold on the lake this year were similarly near that $18k price per foot. The lot immediately to the East of this just sold parcel traded earlier this fall for a nearly identical price per foot ($18,939). There is a parcel still pending further to the southwest along North Lakeshore Drive should be closing soon, and expect that price to be in line with these now closed valuations.
My pending sale on Black Point will ultimately close in a range that reflects similar valuations, as did the lakefront that just closed on Maple Lane ($18,803 per foot). These solid statistics drive my pricing theories for Geneva this season, and they are what directly confirm my interest in the parcel on Basswood and the new estate listed on South Lakeshore. Basswood is offered at roughly $22k per front foot, and South Lakeshore is offered at a pleasing $18,836 per foot. Both parcels exceed two acres in size, and both represent clear value in this increasingly easy to understand lakefront market.
Of course there are exceptions, and fantastically improved homes will sell at a premium to these raw land type valuations. The key here is to attempt to purchase built property for the same price as the raw land value. If this can be accomplished, and the buyer gets the added benefit of having a usable structure on a parcel that was purchased at land value, this is a most inspiring win.
Also sold this week was a large lake home on Black Point. The home was not lakefront, but had a slip and three acres and it was a pretty perfect example of an off-water estate. Listed for $1.95MM and closed at $1.85MM just weeks later, the home must have equaled perfection for the new owner. What does it mean for the broader market? Absolutely nothing. I’m happy to see the sale (not my buyer, nor my seller) but it does little to reinforce or question overall value here. Two large sales in one week are a positive for our market, and further proof that owners must be one of two things in order to succeed. They must either have a unique property that is wonderfully turn key, or they must position their property in the target zone of the lakefront buyer. If that property is around 2 acres and has more than 115′ of frontage, $18k per foot is the November equivalent of a breaking ball that never broke.