I very well may end up being right in my identification of a developing trend involving some of the most basic market conditions at Lake Geneva. This much should not come as a tremendous surprise. I’ve written at great length about my opinions on the upper tier lake access market- those lake access homes priced from $750k to $1MM. I’ve complained about their list prices, and have made my best argument as to how their prices should be correlating with those list prices of entry level lakefront homes. If entry level lakefront is off as much as 30% now, there should be reason to expect the market that bumps up against it should also decline commensurate. If an entry level lakefront home cost $1.8MM in 2007, and that same home costs $1.3MM now, it’s only logical to expect the lake access home that was $1.1MM in 2007 to be more like $750k now. I’ve been hurling this reasoning at anyone who will listen for nearly two years, and after a long lag of price adjustments, there may be proof that I should add savant behind the usual idiot nomenclature.
It’s important to first understand that I think entry level lakefront homes are going to ultimately be had in the $1.15MM to $1.35MM price range. There has been the anticipated seller resistance to this market trend, but ultimately lakefront sellers who own smallish homes in some form of disrepair are going to have to accept this range if they feel like selling anytime soon. There was a lakefront that sold at sheriff’s sale last month for around $900k, but that was a tear down and the location of the lot wasn’t one that I would have felt comfortable encouraging a buyer to purchase (too close to a condominium development). I’m closing on the lakefront at 556 Sauk Trail in Fontana within the week, and when I tell you that sales price for a solid little cottage in need of relatively little work, you’ll see what I’m talking about in regards to the pricing trend in this segment of the market. While these entry level, basic lakefront homes have dropped in price, only recently have the lake access homes in the adjacent price range followed suit.
As of this morning, the MLS shows three lake access homes pending sale with list prices ranging from $785k to $895k. This flurry of sales activity in this price range is a huge positive for the market, and a sign to me that some of the middle money has returned to the market. The big money has always been here, even if it has been a little shy, and the lower range of the lake access market (sub $500k) has experienced a bit of a resurgence this year, but the upper tier lake access market has been quiet. The return of this sort of buyer is a great step in our journey to a new form of market, and I’d argue that this buyer never really left, he was just waiting on prices to come in line with the rest of the market and even more importantly- his expectations.
The three properties that are pending explain what’s happening in this market far better than I have in several hundred words. The first property with a list price of $785k is a listing of mind on Hunt Club Lane. This home will sell for an extremely buyer pleasing price later this month, though the original list price last year(with another broker) was $865k. When you see the sales price, you’ll understand that this was negotiated down enough to where it made sense in this market given the changes in the lakefront price structure. The same can be said for another pending listing on Pine Tree Lane. Priced at $890k, this home originally hit the market for $1.299MM last year, and has since been reduced to the current asking price. Stay tuned for this sales price as well. The third pending sale in this group is at Wildwood Lane priced at $895k. This listing doesn’t help me with my theory, as it was listed for the current asking price back in 2009, and the list price has held firm even while others around it have dropped in order to attract that buyer. Since I’m a fan of disclosure, I figured I’d throw this property in the mix even though it doesn’t support my previous claims.
While there will still be buyers paying stiff prices for homes in this price range, I think the overall trend continues downward. Until entry level lakefront prices stabilize, which I believe they will at some point this winter if they haven’t already, prices in this upper tier access market will continue to fall. I think most of the homes that were potentially valued in the $900k to $1.2MM range at the height of our market will ultimately sell in the $625k to $825k range moving forward. This drop in price is a bummer for sellers, but a boon for buyers. There will always be exceptions to this pricing rule, particularly those homes that might ooze charm or possess otherwise unique features. As a buyer, please just be sure to recognize the difference between unique properties worthy of a premium and giant ranch homes on boring lots thousands of feet off the lake.