Sweeping 2010 Lake Geneva Review

There’s a slim chance that, if you read this blog dutifully throughout 2010, you may be under the impression that 2010 was all sunshine and roses and heart emoticons and smiley faces. While the sunshine part would be correct, the remainder where not entirely true as it applied to the Lake Geneva vacation home market. While I will review many associations and market segments in depth, as they deserve, today is a chance to review the broad vacation home market here, and see if it performed like I told you it would. It’s great to review markets- most anyone can do it- but to forecast them? Well, that’s best left to me and Mr. Schiller, and I’m right more than he is. Now I must, for the sake of research, quote myself in the third person…

What do these eagle eyes see for us in 2010? Well, I think it’s another mixed bag. I think the foreclosures that are looming (Cedar Point, Country Club… Abbey Ridge) will provide almost instant volume for us, while at the same time serving to temper any potential price increases this year. I think much of the year will look like 2009, but if we can avoid any catastrophic political and economic events, we should be able to see that volume increase that I’ve been looking for. I don’t think prices are going to rebound much, and think that ultimately, a certain percentage of the stale inventory currently weighing on the market will be sold at fairly significant reductions.

I’m wiping a tear from my proud eye. I think that paragraph, written by your humble real estate savant on January 5th, 2010, was pretty much dead on. I wasn’t proclaiming 2010 the time to buy based on low interest rates and rising prices, (as you found elsewhere on these internets), rather I was pointing out a very simple path that I thought the Lake Geneva vacation home market would follow this year. A quick note that I was wrong about- the foreclosure situation that I saw increasing during 2010 didn’t really escalate here like I thought it would. Serving as a poignant reminder as to the folly of the foreclosure world, the Abbey Ridge unit that was pending foreclosure on January 5th of 2010 still looks to be pending foreclosure in January of 2011. Find someone who thinks banks are mean and like to foreclose on innocent people and punch them on top of the head Three Stooges style, please.

The 65 lakefront and lake access sales (single family) this year combined for a total value of $57,560,160 (per MLS), give or take a few dollars. There were only 43 such sales during 2009, which further proves my initial thought that we’d have a volume increase during 2010, but not necessarily a price increase. My hesitancy to proclaim 2010 a year of price rebounds was based in my belief that many of the sellers who were unable to sell during 2009 would find motivation to sell during 2010. Buyers returned 2010, but there was a common theme- at least in the buyers that I represented- and that was that everyone wanted value. They wanted what they wanted, and no sales pitch would convince them otherwise. If someone wanted a lake access cottage with a slip and they had a $500k budget, chances are they ended 2010 owning a lake access cottage with slip for $500k. It was a year of precision, and buyers who actively sought value, generally found it. Inventory was ample, sellers were more motivated than they had been in the previous years, and a volume increase of roughly 50% was the reward.

I refuse to average prices for this broad year end review, simply because they’re not accurate. I could pick numbers that would show you a price increase for 2010, if I were so inclined, and I could pick numbers that would show you a price decrease for 2010. However, I am not so inclined. Market averages in a market where sales prices for 2010 ranged from $110k to $5.885MM, just aren’t reliable in the same way that they might be reliable for a community like Kenilworth were properties historically trade in a fairly narrow price range. If one year we sold more lakefront properties than entry level properties, the values would be skewed high. In the same way if more entry level homes sold, the number would reflect lower than accurate values. It’s best to leave numbers like this to pundits who have no other way of deciphering markets. Me? I have plenty of ways, including breaking down price trends in individual markets, which I will do for the lake access and lakefront markets later this week.

That’s 2010 in a high polished nutshell, now here’s 2011. Like 2010, this year will depend largely on national and world events that have a nasty tendency to shape our markets at home. If we can avoid any sensationalized incidents on a world stage (read: giant bombs blowing up), we’re one step closer to continuing our recovery. Likewise, the stock market has a huge influence on vacation home markets, and ours is no exception. To repeat how I felt about the Dow at the onset of 2010, if we can just maintain market values, we’ll be fine. We don’t need market growth to continue the rebound, we just need to avoid disastrous corrections. Dow 11,500 sounds nice, but it’s not necessary for our Lake Geneva vacation home market. If we can trade between Dow 10,500 and Dow 11,500, that would be plenty for me. If we go higher, great. Lower than Dow 10,000 would result in a hot mess for the Lake Geneva market, and by hot mess I mean cold funk.

2011 will also be highly dependent upon sellers willingness to receive the truths from the 2010 market- that liquidity was on the rise, but prices, by and large, were stable or declining (more on that and the Case Schiller numbers tomorrow). Buyers weren’t buying because they had to, they were buying because it felt right to. And that brings us to the question of 2010- was the increase in sales due to new buyers flooding the market, or established buyers that finally pulled the trigger? The answer is the latter, and most of the inflow into the market during last year was caused by buyers who simply didn’t like what they saw in 2008 and 2009 and found a little more confidence in 2010. The buying pool didn’t really grow, in fact, it may have actually shrunk. In case you were wondering, this is why everyone you know should work with me to buy a Lake Geneva vacation home. I’m busily cutting off my nose to spite my voluptuous face at the moment.

What if the buyers who bought in 2010 were part of a left over contingent who were picking at the market from 2008 and 2009, and not part of some new swell of buyer traffic? What if those buyers, now that they’re busily enjoying their purchases, aren’t going to be replaced with new ones? That’s an interesting angle, and one that might have quite a bit of solid reasoning behind it. It’s for that reason that I don’t see much of an increase on the way for 2011. In fact, I think we’ll end 2011 with similar numbers to those we saw in 2010. Interest rates rising doesn’t affect the Lake Geneva vacation home market as much as it will affect a primary market, as the majority of our lakefront transactions remain cash, and a large percentage of the lake access market is sold that way as well. Inventory will play a huge role in our continued recovery, and all signs point to an increase in listing activity that should begin sometime during the last week of January as sellers position themselves for the spring selling season. Much of the political uncertainty that ruled during 2010 appears to be stifled for now, as a wealth hating Administration and Senate have to deal with a riled up House that seems to have some fiscal restraint in mind. 2011 looks to be a solid year, but anyone spouting off about price and volume increases should be dealt with similarly as the bank haters.

2010 was a terrific year at the lake, but perhaps aside from all the statistical justifications, the real reason it was a terrific year is evidenced above. Personally, I’m going to enjoy the lake even more this year. I’m going to put more videos on the site during 2011, but I assure you they will not all be self serving. Actually, they all will be. Even so, the videos should help you get in a Lake Geneva state of mind, and realize that the statistics are fun, but the real fun is only available to those who take the plunge and join the most exclusive club in the Midwest. A warm welcome to the 64 (actually many more when you count condominiums and other associations) new Lake Geneva Vacation Home Club (LGVHC) members. My 2011 will depend solely on the support of my clients and my prized readers here. While I fell just 24 views short of my 60,000 page view goal for 2010, I still feel confident in setting my 2011 goal at 70,000 views. My sales and traffic goals can easily be accomplished if you’d humor me and pass along this site link to anyone who you know might be in the market to buy or sell a Lake Geneva vacation home this year. I promise to do my best to represent them in a way that will make your recommendation effortlessly reflect your individual genius.