Blog : Price Per Foot

Lake Geneva Price Per Foot

Lake Geneva Price Per Foot

There’s a problem with our market. A long standing problem, one that has been established by people who thought, at the time, that they were helping. It was the Realtors that initiated this problem, through well-intentioned averaging, and once the problem took hold into the psyche of the Lake Geneva real estate market, it quickly became deeply and thoroughly entrenched. The concept is the Price Per Foot, and if I had to tell you how many times over my 23 year career I’ve been asked where that magical number was currently residing, I couldn’t, for the life of me, come up with the tally. It’s a number everyone wants to know. Everyone needs to know. It’s a number that tells us whether or not the market is hot, whether it’s appreciating, whether it’s time to sell or time to buy. And the number, unfortunately for the followers of this religion, is almost always misleading. It turns out the most commonly cited number for lakefront value on Geneva Lake is, as a point of fact, irrelevant.

The reason for its irrelevance isn’t always understood. It’s not that the number isn’t a nice number to think about when you’re valuing, whether on the buy side or the sell side, a lakefront home. It is. It’s meaningful, but it’s not everything. That’s because in order to interpret the number with any real accuracy there needs to be a hefty dose of market knowledge added to the formula. Yet, when deals are being negotiated the price per foot barges into the negotiation, especially if that magical number advances your particular case. If the seller wants $30k a foot, you’ll happily and aggressively remind him that the average is $28,700 per foot. If you have the listing and the buyer wants to pay you $24k a foot, you’ll remind her that the price is, in actuality, much, much higher. This is how the game works, but the game is flawed.

And it’s too bad, really. Because it’s not the fault of the seller, or the fault of the buyer, it’s the fault of the long standing market tendency to hold this number up as the true market indicator. At this point, there’s nothing we can do about this tendency. It’s become part of the market, in good times and in bad, and for that we are all worse off. That’s because the magical number fails to take into account the single most important thing in the game of real estate: Location. We pretend to understand location, but we don’t. We pretend to understand how valuable it is to the market, but we don’t. We pretend that the entirety of Geneva Lake consists of equal and consistent shoreline, but it isn’t. The lakefront is nuanced, sometimes in such a subtle manner that the true definition of value is entirely subjective. But the lakefront is also blunt, a heavy hammer taken to different ideas and locations in such a way that there an be no mistaking a quality location for an inferior one. The market is both things, and yet this pesky price per foot insists on blending the good with the bad to come up with an indicator of value.

A lakefront property on Basswood recently sold. The price for 150′ of level frontage? Right around $30,000 per foot. There are several other large-ish lakefront properties for sale, including one on the South Shore of the lake that is listed closer to $10,000 per foot. Does this mean the lakefront is worth $30,000 per foot? Not really. Does it mean the lakefront is worth $10,000 per foot? Nope. Does it mean, as the longstanding measurement would dictate, that the lakefront is worth $20,000 per foot? Not even close.

What it means is that level feet on Basswood are worth more than sloped feet somewhere else. It means a street that’s capable of holding value up to and perhaps beyond $12,000,000 is going to command a higher dirt price than a street that might be hamstrung around $6,000,000. This shouldn’t be hard to understand, but throughout the myriad negotiations that I’ll captain this year I will continually and consistently run into either buyers or sellers who fail to grasp this most basic concept. The lakefront is not uniform. And as such, the pricing cannot be, either.

Next time you’re buying or selling Lake Geneva, use the Price Per Foot to your advantage. But know that it’s generally nothing more than one of three or four indicators that point to the value of a specific property. Also know that if you’re buying on Valley Park, where recent sale printed for around $16,000 per front foot or you’re buying in Indian Hills, where a recent sale went closer to $50,000 per front foot, both properties could represent a value, or both could be overpriced. The only way to know? Understand the market by working with an agent that understands it better than you do. (that’s me)

Park Drive Sells

Park Drive Sells

It’s tax day. There’s snow on the ground. If we look at those two conditions we could all agree that things are terrible. Except out West, they’d all be so happy with some freshie on the ground, but they’ve all lost their minds, a condition publicly proclaimed with little more than a flat brim hat. And I suppose except around here, too, because recent elections show that people love taxes. Crave taxes! They vote for them time and time again. For the children, they say. Yes, things could be terrible today if they weren’t so absurd.

But what was I trying to talk about? That’s right, the lakefront market. Last Friday I sold my listing on Park Drive on the South Shore. That’s a nice little sale for our market, at $2.1MM, a reasonable number for both buyer and seller. The sale came in at $26,582 per front foot, which is behind the 2018 average but close enough. And about that average, $27,994 for 2018. Does this mean this sale on Park was some outstanding value relative to the 2018 average? No, it doesn’t really mean that. Does it mean that the lakefront market has softened, as evidenced by this sale on Park? No, it doesn’t mean that, either. Further, this year there have been 18 YTD lakefront and lake access sales, up from 14 for YTD 2018, down from 25 YTD 2017. Does this mean the market is better than last year but worse than it was in 2017? Don’t be ridiculous.

That’s the problem with the metrics of real estate in a small volume market. They don’t really matter. Sure, there are places and properties where they matter, like a 100′ vacant lot with reasonably level frontage. That sort of property might be worth $2.5MM today. Why shouldn’t it be worth $2,799,400? After all, that’s what the data tells us it should be worth. The reason is simple. Each sale on Geneva is a unique situation, with no two parcels (excepting rare instances where platted lots are identical on a specific section of a specific roadway) being the same. That’s why the data is less a blending of the market’s uneven edges and more a collection of anecdote. What’s 100 feet of frontage worth? Somewhere between $2,000,000 and $3,000,000. Is that good enough?

I suppose I know the answer. It isn’t good enough. That’s why your choice in representation, be it sell or buy side, matters so much here. If you’re bopping around Phoenix and you’re just dying for a three bedroom cinder block ranch with a stone yard and a kidney shaped pool, you’re in luck. Zillow might sell you that house. Or Opendoor, or the real estate agent who works in the station next to your aunt in the Great Clips on Rattlesnake Way. You know, the one around the corner from Parched Parkway. But these are desert jokes, and they’re ridiculous, just like the thought that you need special care when you’re buying a ranch in Phoenix.

This isn’t Phoenix. It isn’t Naperville, either. It’s a dynamic market where numbers don’t always justify value, and where value isn’t always justified by comps. It’s a market where a $2MM house with 60 feet of frontage can be wildly overpriced, where another $2MM house with 60 feet of frontage, a half mile away, can be a screaming value. I used to sit at this desk and see this market as you see it. As other agents still see it. With a smirk that was a blended emotion of bemusement and confusion. Today I see it differently. It’s clear to me. And if you want it to be clear to you, we should be working together.

Geneva Lakefront 2016 Market Review

Geneva Lakefront 2016 Market Review

29. It might sound like a lot, or it might sound like nothing at all. If we have 29 quarters, we don’t really even have enough money to buy a lunch at Culver’s. But then again, I’m currently battling towards the world’s most amazing physical transformation, and so I’m unable to go to Culver’s. This is difficult. If we have 29 electoral college votes, we still have nothing. But if we have 29 cars, we’d be considered to be a collector, because who, if not a collector, has so many? If we have 29 children, we’d have lots of children and we’d have a television show. But if we have 29 cousins, no one would really care. A show called “29 Cousins” wouldn’t really raise an eyebrow. But we don’t have 29 of any of those things, we have 29 lakefront sales on Geneva Lake in 2016 and we should all be very proud of that total.

Those 29 sales (that link won’t include the vacant land sales) represent a slight decrease from the remarkable 2015 tally of 31, but the reality is that both years represent about as much volume as this market can potentially muster. The 29 sales from 2016 included one home in the South Shore Club ($2.75MM), and three vacant lots. For the purposes of this morning, we’ll include the vacant lots as we average out the increasingly antiquated Price Per Foot metric. I dislike this method of valuing properties, but that’s only because I feel it fails to properly account for the compression that exists when frontage increases beyond 100 feet. The results are skewed by a larger number of entry level sales as those properties with 50 or so feel tend to sell $25-30k per front foot, while 100′ lots with barebones homes tend to sell around $20k per foot. Even so, let’s consider the PPF.

In total, 2919 feet of lakefront sold this year. That’s roughly 2.5% of the entire frontage on Geneva Lake. That’s no small number. We sold a total of 2713 feet of frontage in 2015.  During 2016, we sold $72,372,000 worth of lakefront proper, bringing our price per foot to a whopping $27,193, or an 8% increase over the 2015 average of $25,161. That number is high, but it’s not reflective of the actual value of a foot of raw frontage. The number is bloated this year for two reasons. First off, we sold seven lakefronts under $1.55MM, and those entry level properties tend to sell at a higher PPF. Secondly, we sold four properties over $4.25MM this year, and those four properties alone averaged $40,298 per front foot. They averaged this lofty number because three of those four were fantastically beautiful homes that carried a premium for their quality.  If you were to ask me for the value of a 100′ lot of reasonable size, I’d point you to the two sales on Lackey that prove out a value closer to $20k per foot than $27k per foot.

Of the 29 sales, I closed 10 of them. To put it a different way, of the $73,172,000 worth of lakefront that changed hands this year, I was directly involved in nearly 50% of that volume. I bring that up as I see some other agents’ advertising and it seems as though there’s still some confusion as to who leads the lakefront market. Anyway, the simple reality of 2016 is that it was a complete and utter success for the lakefront market. Most notable in the volume is the activity at the very top end of our market. The two sales, both my listings, that closed for $9.950MM and $7.35MM, proved that we have strength in our upper bracket, but it also proved that in order to find those buyers the product must match an incredible home on an estate sized parcel of land.

I also found the existence of entry level inventory to be curious. After several years of strong sales in this segment, we printed another six sales under $1.55MM. The lake proves that just as soon as we think we’re going to run out of a particular type of inventory, we don’t. When we think the last 100′ lot with a junky house has been sold, we see more 100′ lots with junky houses come to market. When we think the last 50′ lot for $1.25MM has sold, we sell another 50′ lot for $1.25MM. The market has a way of letting people catch up to it, so long as the buyers are patient and wait for the inventory that matches their desire. 2016 was a terrific year, but it wasn’t necessarily unexpected. I thought the year would be solid as long as inventory presented, and that’s exactly what happened.

For 2017, we’re facing higher interest rates and severely limited inventory. The rates should have some negative drag, but gains or stability in the stock market will offset that. Inventory will be the problem of 2017, as we start the year with just 13 true lakefront homes for sale. Of those, I have an offer being negotiated on one of them.  The result of this low inventory will be higher priced listings, as sellers who don’t really care to sell will likely price their homes at prices that reflect their lack of motivation. This could be a problem for 2017, but I’m guessing we’ll add enough inventory to see volume totals in a  reasonable range once this year ends. Will we sell 28 lakefronts again? Not likely. But can we get to 20?  You bet. The key in this market is for buyers to understand that even though prices have escalated, there is still value to be found. Much of the inventory that remains is now aged and buyers may have the ability to negotiate sold value. That is, assuming, they’re working with the right agent, and if you’ve just finished reading this, then you already know who that is.