Several of our vacation home segments finished 2017 without a particular narrative. They were nice markets that had a nice year. Nothing more, nothing less. No major breakthroughs, no particular oddities. The other markets have been on a roll, and we have no choice but to pat them on the back and tell them they did well. The lakefront market, too, had a nice year. It built on volume and built on price as inventory disappeared. But this is where the lakefront market says goodbye to the other markets and wishes them well. The lakefront market is on to bigger and better things. The lakefront market has a different story to tell.
That story, in case you’re new to this blog or new to the Lake Geneva media mentions, is a dramatic increase in upper bracket sales activity. This is the story that needs to be told. This is the difference between Lake Geneva and all other Midwestern vacation home markets. If this sounds like a common refrain coming from this site, that’s because the refrain is historically rare and is worthy of this praise. Consider the prior market peak. That peak was between January of 2007 and January of 2009. During those months the lakefront market on Geneva printed three sales in excess of $4MM. The top sale for that period closed for $4.95MM. Now consider the current market cycle and the sales that have occurred between January 2016 and January 2018. For those 24 months, the lakefront market printed 10 sales in excess of $4MM and three sales over $7MM. The top sale was $9.95MM. For my part, I represented either the buyer or seller in seven of those ten sales, and each of the top three sales.
Currently we have five more properties pending sale over $4MM and one pending sale over $12MM. This is no longer a market that struggles to provide one or two sales over $4MM annually. That’s the old Lake Geneva, and this is the new Lake Geneva. Increased upper bracket activity, a stronger overall buyer, and a top end that has been completely and thoroughly redefined. While there are questions about the long term strength of this particular segment, I think there is one nagging question that has been answered. Can Lake Geneva provide liquidity to owners who have homes justifiably valued in the $10-15MM range? Yes. A follow up question with more devastating results: Are buyers buying lakefront houses for too much money, in part because they don’t seek qualified counsel in the decision? Also yes.
For the year just ended the lakefront market closed 26 single family properties (MLS). These sales registered $27,578 per front foot, up a bit from the $27, 193 from 2016. In total we sold 2455 front feet on Geneva, down from the 2882 front feet sold in 2016. I’m finding the traditional price per front foot metric to be increasingly antiquated, even though the market still likes to point to that number as the best and easiest way to identify value. I’ve started to add in a price per square foot of structure ($560.96) and price per square foot of land ($58.09) so that buyers have additional means by which to understand the value of a particular property. There is no particular means to measure value, but these three metrics combined with nuanced understanding of desirable locations and attributes can help narrow down the valuation range.
Entry level lakefront traded with some vigor in 2017, and I did find it curious that this segment offered strong value even as the broad market accelerated. Five lakefronts traded under $1.325MM last year, including two under $926k. Those sales represented a nice entry point into this lakefront scene, and I continue to believe that we will find ourselves in a position where the market runs out of sub $1MM homes. These sort of basic cottages only exist on the lake is certain areas, and with each sale these are properties that are typically transformed via renovation or reconstruction. If you’re an entry level lakefront buyer, you’d be wise to move on properties and not miss out on purchases over small negotiation points and percentages.
The story for 2018 will be inventory. Today, there are just ten Geneva lakefront homes available (private frontage, without offer). If the stock market maintains this incredible level (note, it doesn’t need to keep moving higher, just not correct significantly), Geneva will see another terrific year. Heck, the way buyers are buying in January, maybe we don’t even care about the stock market anymore. New construction is rampant at the moment, and while the upper end values currently support these builds, it’ll be interesting to see if this upper bracket market hits resistance in the coming years.
For now, expect inventory to remain low, and cary-over sales from 2017 to close during the first quarter 2018. The market is clamoring for inventory in each segment, including that lofty $6MM+ range. New construction in any price segment will be of interest to current buyers, so long as the parcels match up with the price. That’s a key. I’m expecting inventory to build over the coming months, as opportunistic sellers see a market rife with activity. Some brokers are telling sellers to name their price, but that’s ridiculous. The market is hot, but buyers and sellers still need to understand basic fundamentals of market valuations. If you want an agent to tell you every house is the right house, then I’m not your guy. If you want an agent to help guide you through this increasingly active and competitive market, I’m here to help.
Above, the lakefront at my Loramoor listing. Pending sale at $5,950,000