On Markets

On Markets

When a real estate market is slow, the fundamentals matter. The price per front foot, price per square foot, of the land, not house- this isn’t Beverly Hills- it matters. The prior sales price, the current list price, the expected discount to ask and the all time highs against the current cycle lows. This is the sort of research that matters in a down market. This sort of thing mattered in Lake Geneva, at one time, back in the good old days of 2010, 2011, 2012, 2013, back when market context and market forecasting was everything. RIP, days when things mattered.

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Don’t get me wrong, they still matter to me, to those among us who seek value in times good and bad. All of those things will always matter to me, which is why I’ll likely spend the remainder of my working days loving tumultuous market times and tolerating times of hyper lift. It’s easy for Realtors who lack a greater degree of curiosity to see a rising tide and throw everyone into the sea. Leave your fancy math behind and jump into the water! Quickly, we haven’t much time! This is what they say, and this behavior is an insult to my intelligence but mostly to yours.

Delavan Lake this year has performed remarkably well. There have been no fewer than 11 lakefront sales, which is nice, but most impressive is that six of those have closed at or over one million dollars. Nice job, Delavan. I hope that most of those sales occurred in the winter, early spring, or the coming fall. Those are the times when the water rests a bit, and if you weren’t a student of water clarity (I have my PHD) you’d be forgiven for thinking the water is fine there. The sales mostly make sense, and even the outlier that closed last week makes some sense. But this is before you consider the prior sales activity- the peaks at the high and the supposed valleys at the low. Things look fine, until we dig a little.

If we throw out the highest lakefront sale at $1,599,000 and consider the other 10, the average lakefront sale this year printed at 84.4% of the ask. The top sale, the one mentioned prior, closed at full price. That’s 100% for the math-hating-market-hypers. I was about to demonstrate the egregious price per foot difference between this top sale and the others, but Delavan Lake is an odd bird and doesn’t really follow any rough price per foot outline that can be trusted. It’s especially difficult on a lake like Delavan, where some spots you can walk on water due to weed growth, and other spots are more lake like.

That property had closed in the fall of 2008, at what was likely very near the top of the market, for $1.425MM. It sold again in 2012, at what would have been the bottom of the market, for $1.3MM. For perspective, the nearest priced sale to that one, a victorian style Delavan lakefront that sold for $1.44MM this year, had sold for $1.657MM in 2012. Some of the other sales on Delavan this year also sold prior in 2012, and some sold then for less than the recent 2015 sale, while others sold for less. It’s this sort of research that should be done for these sorts of sales.

I am not, as you have noticed, a Delavan Lake expert. I don’t want to be such an expert, and I never will be. I’ll leave that to the agents who are actual experts on that lake, of which there are several. I’ll stick to Geneva, and I’ll do that because this is the market that I know and understand, and this is the market where most pricing makes some level of sense. The two full price off-water sales near Geneva this year, one at $1.475MM and one at $2.2MM aren’t included in that prior statement.

Today, there’s a very serious admonition. Pay attention to the numbers. Pay attention to the market cycles. Pay attention to prior sales, prior failed marketing attempts, and future downside. Just pay attention. If you have an agent that’s not from this market, one that wishes to be part of the market solely because our prices are nice and rich, then suggest to that agent that they keep your best interests in mind and refer you to me. That’s a terrific way to pacify your city agent and gain exposure to some high caliber local knowledge. After all, we can’t be experts in everything, which is why I’ve spent my life trying rather hard to be an expert in all things Lake Geneva and nothing else. Delavan Lake? Why I barely know where it is.

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