I rarely play the lottery. That’s not because I once won a huge sum of money via the lottery and now I don’t need to play the lottery, it’s just because I don’t ever win. If the lottery makes the news, and everyone is saying that everyone is buying tickets, then I, too, will buy some tickets. Usually five dollars worth, however many tickets that buys. That’s what I play, and when I do play, after I receive the computer generated combination of numbers, I am quite confident that I will be winning this lottery. I wonder why others even bother playing, given that their purchase will only serve to drive up my winning purse. I appreciate the other ticket buyers, I think, because of this. But when the numbers are drawn I rarely think about checking my paper stub. That’s because I know I’ll never, ever win.
But between the time that I buy the tickets and the time that the actual winner finds out that he has won, I speculate what I’ll do with my riches. I’ll buy a few houses, in a few different spots. I’ll buy some cars and some watches, and flocks of bald eagles. I’ll give plenty of money away to organizations that deserve some money, and I’ll give at least a taste to my family members. How much I’ll give them depends on how much money is left after I buy all those miniature giraffes.
I think about which house I’ll buy, and I’ve generally decided that if Pat Ryan won’t sell me his house in the woods, I’ll just buy the next big thing out there. Will I care about the price? Very, very little. After all, I received that giant cardboard check and took the lump sum. I’ll find the best house with the best land in the best spot on the lake, and I’ll strike. I’ll buy other houses elsewhere in the country, too, and perhaps one in the Bahamas or Caymans where I’ll keep most of my gold bars. The houses I’ll buy in other places will be houses, but my lakefront masterpiece here will be my home. That’s what I’ll do with my money, when I win that lottery that I hardly ever play.
Aside from me winning the lottery, what else is there to move the epic estates on Geneva Lake? A drive around this lake on a boat will reveal stupendous amounts of wealth, and the cherished, manicured prizes that this wealth brings. There are estates that should be valued in the $20MM range, or higher. There are other estates where the investments into the property total near those numbers, regardless of what the actual market value is. There is tremendous wealth here, and the houses prove that. But are these homes liquid? Are the investments able to be traded as other investments? Are these high end properties conventional investments at all, where the return is measured in dollars and not in quality of life?
The upper bracket market on Geneva operates best through a series of smoke and mirrors. We have existing homes aplenty with valuations over $8MM. We have lots over $10MM and more over $15MM. Some are so impressive that they compete with the finest estates the global real estate market has to offer. Yet, for all the wealth and all the improved real estate, our market is at its best when this inventory never hits the MLS. Our market shows best when a drive around the lake showcases the homes themselves, not the gaudy real estate signs proclaiming FOR SALE on the piers and in the lawns. The market hosts huge properties worth huge sums of money, but the market operates most smoothly when these homes stay off the market.
There is weakness exposed when many marquee lakefronts hit the market during the same year, and that is the case today. We have a long history of success at Lake Geneva, of printing high dollar volume sales and spinning large tracts of land from own rich owner to another. What we do not have is any history that proves the properties priced in the $10MM range are liquid. We have, in the history of Lake Geneva, one sale that has printed over $8MM. That’s the Pritzker purchase of Casa Del Sueno ($9.7MM). That tells me that properties in the $10MM range are indeed liquid, assuming we have billionaires in the market at all times, which, of course, we do not.
So what of the current state of the high end Lake Geneva market? We have plenty of inventory, indeed more so than we have ever had in my lifetime. Yet, for the quality inventory and the overall strength of the lakefront market, we have yet to trade one of these large properties. Why? Is there a problem here? Is the market overheated, and thus the uber-rich are aware of that and are sitting on the sidelines? Is there something fundamentally wrong with Lake Geneva real estate? No, on all counts.
There’s a very simple reason why none of these elite listings have sold, as of yet. That reason, truly and profoundly, is because the upper bracket buyer has not yet presented himself (herself). In an exactingly precise, low volume market like ours, there are marquee buyers for marquee properties. If there weren’t, we wouldn’t have a situation like we have had recently at Alta Vista. A few years ago, a buyer bought a vacant lot for $6MM. Then built a house for untold sums of money, then bought the neighboring lakefront house for $3.8MM (give or take), and tore it down. Then purchased a small off-water home behind his estate for $880k (or thereabouts). This investment is likely approaching $20MM. This is the sort of buyer that buys high end property on Lake Geneva, but this is the sort of buyer that only presents every now and then. This is not a standard issue buyer, and those properties looking for this caliber of client must simply wait for the buyer to appear.
That sounds simple, but it’s actually the key to understanding the high end market on Lake Geneva. If a house is listed at $7MM and it hasn’t sold, what does that tell us? Well, if the house is at all in the price range it should be, and that’s always a big if, and if the broker representing the property is somewhat competent (again, a big if), then what’s the reason that it hasn’t sold? Should we reduce the price, from $7MM to $6.9MM? Will that attract the buyer we seek? Nah, instead we should stay the course and realize that these upper bracket buyers are rare, with an average of one coming to this market per year, and we must simply wait for the timing to be right. If we advertise in China’s top newspaper, will that yield a $7MM buyer for Lake Geneva real estate? Not likely. That $7MM home will sell when a family with a Lake Geneva connection sells their family business for a couple hundred mil and decides that the time is right to put down roots on these shores. Or when a buyer has admired Lake Geneva from afar for years, and then finds the financial ability to make a big splash and enter the market in style. That’s when an upper bracket lakefront sells. In the mean time? Crickets.