South Shore Club Market Update

When I walked to the pool this late morning, a short, delightful little walk over crushed granite hemmed with cobbled stone, I was dismayed to find one other person already there. They had taken up a chair on the south end of the pool, directly in my line of sight, say, some 100′ away, as I positioned my chair on the north end. I angled my chair so that I might glimpse a bit of the pool but also the lake beyond, my view a hybrid of backyard sophistication and lakeside living. Even so, I was aware of this other person. They sat in their chair, reading, pretending that they weren’t annoying me. But they were.

Later, when I walked the same walk past the pool and a bit further to the pier, I found that the 282 Cobalt was already taken, so I was forced to take the Chris Craft Launch instead. It’s a handsome boat, this Chris Craft, but the shade of blue is a touch deeper than the Cobalt blue, and I feel more at home on the waves in the slightly lighter blue. Pushing on, playing nice, I agreed to the Chris Craft, and waited patiently, no, impatiently, as the dock hand lowered the boat off the lift and helped me into the boat. I noticed that the Diet Cokes in the cooler were not at 29 degrees as I specifically instructed, instead chilled only to a balmy 31. It’s the little things that get to me, and these things all, in concert, got to me.

I imagine a life where these are my problems. Surprisingly, these might be the first world problems of the residents of the South Shore Club. Allow me to correct myself, these are the problems of those South Shore Club residents who are not trying to sell their homes. For those residents who are trying to sell, their more pressing concern can be summed up in one inquisitive statement: Where on earth are the buyers?

This is a very important question, with one very specific answer. The buyers, as it relates to the South Shore Club, are no where to be found. They exist, in theory, but they have not made their presence felt. Sure people drive through the South Shore Club, with regularity in fact. Those people who drive through, many in fancy cars, are mistaken by most residents as buyers. “Looks like a lot of buyers through the development today, Jim Bob”. I imagine they say this to each other if one of their names were Jim Bob. But those fancy cars driven by fancy people are generally just gawkers, and true buyers for the South Shore Club have been few and far between. By few I mean none, and by far between I mean one since 2007.

Today, there are seven spectacular South Shore Club homes listed on the MLS. These are beautiful homes, perhaps the finest new construction most will ever lay eyes on. But they are missing the mark with lakefront buyers, and the culprit is less what the South Shore Club is and more how it fits into our broader lakefront market. I often say that if a buyer were to contact me in search of a $3.5MM lakefront home, I doubt she would ask to share a pool and a pier and a tennis court. She would expect, possibly anyway, her own pool and tennis court and pier. She would also expect her own boat. Given this, why would someone want to spend $3.5MM to live in the South Shore Club?

It comes down to lifestyle. If a buyer seeks the highest end of fit and finish on the lakefront, it can generally be found, but at a severe cost. The South Shore Club is a less expensive way to get all that luxury on the water, and I’m well aware that I just declared $3.5MM to be “less expensive”. Such is the curse of Geneva, a severe and impartial detachment from economic realities. But the pricing at the South Shore Club remains an issue, as sellers price based at least somewhat on their total investment and not based on the verdict the market has already arrived upon.

I sold a lot on Forest Hill within the SSC earlier this year for $300k. The lot immediately to the West is available today for $350k. The next cheapest lot is $999k. If we are to hope that this available lot sells for a price that reflects my previous sale, then such a sale would allow a buyer to build in the SSC for an all-in price somewhere between $1MM and $1.3MM. This is how you beat a difficult market, and this is how the South Shore Club can make oodles and oodles of sense.

The REO home that sold last fall for $1.75MM established a bottom in the SSC, proving that there are buyers for the club but the active buyers are the ones who wish to undercut the existing inventory by way of purchasing vacant land at a fraction of the prices that others paid. The prime lots, admittedly, on the north side of the pool, are all either sold or otherwise off the market. These prime lots do provide an owner to, at least theoretically, construct a home that might be valued in the range of the current list prices. But for someone looking to arrive a the South Shore Club for a price closer to $1MM, there is an opportunity to do so. This is how the SSC makes sense to me.

The vacant lot for $300k is the only land sale in the SSC during 2011. There hasn’t been a single built home sell during the year, even though I’m pretty sure at least two are worthy of a second and third look. The most economical home in the club is listed on Forest Hill in the low $2MMs, providing an opportunity for a buyer to test a seller to see if they’ll succumb to a previously set market bottom. The market here will continue to be difficult, even as the broader lakefront market finds buyers at all price points. The South Shore Club has a place in our market, but buyers have been pretty clear that the current list prices are not that place.