If we’re going to be fair about it, we should still consider the South Shore Club a work in progress. One weekend in the middle of December, I made a Gingerbread House. I capitalized it because this House was worthy of that proper name status. The construction of such an edible house has become a tradition in my house, and I gladly beat pounds of butter with gallons of molasses and scoops of dried ginger and some more cinnamon and then I shovel in the flour. This is easier said that done, particularly when you understand that my KitchenAid mixer has but one speed. I believe it’s labeled “violently fast” in the manual. And as is the annual tradition, there are equal parts flour inside the bowl and on the floor, and when I’m finished there will be flour footprints traced from my kitchen to my living room. This is just the way it is.
The nature of gingerbread is that it must be made and then cooled and then assembled with royal icing as the only structural glue. This process takes days, and what began on a Saturday was not finished until Wednesday. There was cutting and shaving and gluing, and chimney building and chimney repairing, and there was the cutting of more than a hundred little gingerbreaded shingles. You don’t make shingles for your roof? You should.
The house that looked complete on Wednesday looked like a burnt shell on Monday, and so it goes at the South Shore Club too. To view the South Shore Club as a finished product and render an opinion on its effectiveness or beauty would be a mistake. While the grass is mowed well and the clubhouse finely appointed in the finest of materials, this is not a finished development. This morning, there are just six remaining lots listed on the open market. Of the 40 parcels, all but those sad six have been sold at least once. This is a market that, from the outside, looks to be established and as such should be either growing or shrinking. It should be moving forward and attracting buyers or it should be receding and shrinking from view, or at least from the attention of the market.
With the South Shore Club, this isn’t the case. There is still time for the SSC to fit into the market even though it could be argued it has failed to do so to date. As Colin Meloy once said, there’s plenty of men to die you don’t jump your turn. The mistake in reviewing a market like this one is in judging it too early, and I will try my best not to do exactly that. The SSC, while nearly all built, has yet to elbow its way into position in our lakefront market, which explains the fits and starts and awkward sales patterns that have ruled here since things turned sour in 2007.
There is still building, each and every year there are owners capturing their own slice of this gilded Lake Geneva pie, but there isn’t yet a steady flow of resales that have fully and finally determined where this market is and where it is going. I have a hunch I know what’s going to happen here, and that hunch isn’t all bad, unless you were one of the first 20 buyers to determine that you too needed hand hewn white oak mantles rescued from the Edmund Fitzgerald. To be clear, 2011 wasn’t a great year for the South Shore Club. But in fairness, 2010 wasn’t good either. 2009 pretty much stunk. And 2008 too. No big deal.
The MLS tells us that there was just one sale at the South Shore Club in 2011. That sale was a bank owned lot on Forest Hill that I sold to a smart buyer last spring for $300k. Yes, $300k. The price of admission has slipped at the SSC to such a significant degree. There were other lots on the market last year, as many as 7 at one time, and yet this was the only sale. There were homes for sale too, plenty of those, perhaps as many as six, and none of those reflect as sold in our MLS either. There is at least one spec home in the club currently on the market, and that home is remarkable in not just fit and finish but also in location. There are other homes on the market too, beautiful ones, each shinier and fancier than the next.
So what’s the problem here? It’s not necessarily a value problem, it’s a market problem. In order for a small volume market to absorb two of three $3MM+ homes in one development each year, the year would have to be quite good. The problem is with the SSC is that in order for the market to solidify and move forward we’re going to need a few years of a couple sales each year, and that volume is something that our historically small volume market cannot provide. This is the problem with the South Shore Club. The homes are beautiful, the lay of the land impressive, the amenities unrivaled, but in order for it all to work we’re going to need a steady supply of resale buyers, and those buyers have yet to show up.
That’s the philosophical way of looking at this market. The practical way is to look at it and measure the lack of sales and deem the prices to be too high. As a client recently reminded me, anything will sell if the purchase price is low enough, which explains why someone would ever buy something in Michigan. I see the existing inventory at the South Shore Club, most of it priced in the middle to upper $3MMs, and think that if the pricing came to the mid to upper $2MMs, we’d be onto something. From my desk this morning, that is an easy suggestion to make, as it costs me nothing. To those reading this with an all-in number of $3.5MM at the South Shore Club, I imagine that isn’t so easy to envision.
There is good news for the SSC as we move into 2012. I believe one dirt cheap lot is still available- one priced in the $300ks- though the MLS this morning doesn’t show it as active. That lot will ultimately sell, as it should, and the last few lots will likely be sold over the next several years at tremendous discounts. 50% off anyone? I believe one or two of the finer homes in the club will find buyers in this new year, and if just two sales can get on the books we’ll find some momentum moving forward. Sales beget sales, so a couple notches on the club’s belt will not only remove the skunk, but they’ll provide more encouragement for buyers who have been watching the SSC from afar. That’s the other thing about the SSC that is interesting- there are buyers for these homes. Each year sellers will come close with interested buyers, but each year as is the trend, those buyers slink back and wait for either the right timing or the right price adjustment. If you’re a buyer here, either for a vacant parcel or an existing home, we should probably be working together.
Since my Gingerbread House was so large, it had to be stored inside my screened in porch. And since the weather was warm last week, the candy that adorned my house melted. You wouldn’t think peppermint sticks would melt in 40 degree shade, but they do. And chocolate too. And so it went, another year of considerable effort, another year of an unexpected December warm spell, and another crumbled and destroyed Gingerbread House. The South Shore Club homes are built mostly of stucco and stone, neither of which will melt. Unless those Mayans are right.