Five different buyers. Twenty-one different properties. It was a dizzying weekend at the lake, and I was pleased to show those buyers that many different properties. I showed everything from a condominium at Abbey Hill priced at $188k, all the way up to an entry level lakefront in Cedar Point for $1.35MM. As night fell, and I stood with buyers looking at the lake from high atop the Cedar Point bluff, I realized how incredibly different each of these individual markets that I had shown over the previous 36 hours really are.
I’ve talked plenty about the mythical market bottom, and have been fairly outspoken on the reality that they’re impossible to identify until they’ve already happened. The market bottom on a national level, when viewed simply as a median price, may have already occurred. There are lots of positive housing reports out there, reports that fail to realize the affect of the delinquency rates and how those elevated rates will affect the 2010 market. In between showings on Saturday I caught a few minutes of an incredibly annoying radio show. No, I wasn’t listening to Air America, rather it was good old WLS on my dial, and the fellas on the radio where fevered in their sales pitch. They wanted you to buy now. Buy like crazy. The interest rates… the tax credit…the ample inventory… Actually, in order to more correctly relay the tone of their show, I should add three or four exclamation points behind each term. I found their “buy now” pitch embarrassing, and quickly dismissed what they were saying as blind buy now rhetoric that is easily spewed, but not so easily justified.
Radio talk show hosts aren’t alone in this newfound optimism, as the National Association of Realtor’s own chief economist Lawrence Yun recenty said he thought home values would appreciate 3-5% during 2010. Larry, Larry, Larry. You’re so naive. I don’t see that sort of appreciation happening next year, but I’m just a lowly Realtor and Larry, well, Larry’s an economist. He’s the same economist who predicted that housing values would recover during the second half of the year. Of course at the time it was early 2008, and he was referring to the second half of that year, not this year. Oh Larry.
As I stood on that hill in the chill of a pre-dusk Lake Geneva evening, I talked with my buyers about what I see happening with the lakefront housing market. In the broader Lake Geneva real estate market, the entry level lakefront market is its own unique, individual market- don’t forget that. It’s a market that for years required roughly $1.5MM for membership to the club, but now, it seems the memberships have been discounted for the first time in a long time. Entry level lakefront on Geneva would have run you around $1.5MM just last year, just last spring, but this year, this fall, after a $1.25MM sale, entry level looks to be closer to $1.2MM, even $1.1MM. Controversial I know, but I think if you can buy a bad house in a decent lakefront location for $1.25MM, then you should certainly be able to buy a bad house in a lesser location for $1.1MM, or even, $1MM (gasp). The entry level lakefront market, in my increasingly less humble opinion, is going to embrace a market bottom over the next three months.
I showed property this weekend in Abbey Springs, Abbey Hill, The Loch Vista Club, Abbey Villas, Geneva National, Cedar Point Park, The Lake Geneva Club, Indian Hills, and Country Club Estates. Yes, I’m tired. Thanks for asking. What is interesting to note is that I see the market bottoms for most of those associations happening at a different time. While entry level lakefront may be bottoming, or close to it, right now, Abbey Springs appears to have already experienced the market bottom for this cycle. The last two quarters of 2008 and the first quarter of 2009 saw very light sales volume in Abbey Springs, and lower sales prices. Towards the end of this summer, we saw high volume and fairly robust sales prices. Abbey Springs seems to have weathered their market bottom, as deals that were available during the winter of 08/09 are largely absent from the market now.
Abbey Hill, a little known condominium development in Fontana, has seen a run on prices that has lopped as much as 35% off the market highs. As I see with entry level lakefront, I also see a market bottom for Abbey Hill playing out over the next several months. Without going through each individual association, the lesson here is an important one. I believe we’re in a bottom trough, and as I’ve said before, I think we’ll bump through this trough well into 2010 and perhaps beyond. What’s imporant to realize is that within an individual market, like the Lake Geneva vacation home market, there are dozens of hyper-local markets that make up the broader market. What represents a bottom for the national market may not represent a bottom for regional and municipal markets. What buyers need to realize is that within these smaller markets, there are dozens of individual, association and price range specific markets that might all bottom at different times. Like within the Lake Geneva vacation home market, how we probably weathered a market bottom for Abbey Springs a year ago, and we’re just now approaching a bottom for entry level lakefront.
Buyers, as you circle the earth on your white unicorns, scanning the horizon for the market bottom, brushing your steed’s long flowing hair, I need you to look more closely at the market you’re following. If you’re not paying attention, it can be incredibly easy to miss the market bottom of the individual market that you’re trying to buy into. Buyers in Abbey Springs, if looking to buy at absolute bottom, probably missed that mark already, while buyers of entry level lakefronts would do well to be active during the off season that we’ve just now entered. If you take nothing out of this confusing post, just remember that individual markets are made up of myriad smaller markets, and those hyper-local markets may very well all bottom at different times.
How is a buyer to know when that bottom is approaching? Well, truthfully, he can’t. Neither can she. But by paying attention to market trends and signs, and aligning yourself with the best agent you can find (ahem), you can probably come pretty darn close. Ignore Larry Yun. Ignore the guys on the bought air time at WLS. Just get your ear close to the ground and your eyes firmly on this blog, and you’ll come as close to identifying that individual market bottom as is humanly possible.