Someday, I won’t write about the wealth effect. I’ll just write about trees, or fish, or about life and death, probably one or the other, but likely both, on alternating days. Since that day isn’t today, let’s talk about wealth. Long before it was popular and obvious, I wrote about the effect that stock market indices have on the Lake Geneva vacation home market. While joblessness, interest rates, and time of year all play some roll in determining the health of our market, they really don’t matter much at all. Put the jobless rate at 20% (not far from where it really is now, though the number sounds hyperbolic), set interest rates at 10%, and bury us in the deepest, darkest January Tuesday. Then tell me the stock market was up 30% over the prior year and I’ll show you a Lake Geneva market alive and buzzing with activity.
More than a pay increase, more than perfect job stability, and more than a sunny summer afternoon, Lake Geneva’s vacation home market is fueled by paper wealth. I admit to checking the balances of the seventeen dollars that I have saved, and I feel better on days when that balance has jumped to $17.26. On those days, I might go out to dinner, just because. On days when that seventeen falls to $16.84 I feel down, my mood reflecting a loss of wealth that I never see except on a screen of a magical tube that sits atop my desk. Given all of this, it shouldn’t come as a surprise that the Wall Street Journal wrote a feature on the Vacation Home Market yesterday, and they told us the same things that I have been telling you for a rather long time: Stock markets drive vacation home purchases more than anything, ever.
The piece in the Wall Street Journal comes on the heels of two other real estate tidbits from yesterday. Housing statistics on a national level are subject to extremely fuzzy math, and so one study or another cannot be viewed and considered in a vacuum, Dyson or otherwise. This is why Realtors who place propaganda, err, advertising, that tout one cherry-picked statistic should not really be trusted. If housing starts nationwide are up, who cares? If pending sales are down, who cares? If California is doing swell, remind me why that matters to my home in Lake Geneva? I once had a client tell me, in a most self-confident way, that what happens in California happens in Lake Geneva a short time later. He was wrong. If he was right, where’s our most recent earthquake, or mudslide? See what I mean? National bits and pieces only matter when viewed against a number of different considerations, so let’s consider.
Pending home sales are down, but this doesn’t matter. They’re down because they were, before, up. Fewer pending sales over the winter months could have been a product of the weather, or of the weather, or possibly the weather. Vacation home sales are up, and Manhattan real estate is up too, which must mean the Lake Geneva market is on absolute fire! I heard a Russian billionaire just bought a penthouse in NYC for as much as $55MM, and this means my cottage in Knollwood is absolutely, 100% in demand! Did you see some heiress just bought a house in Beverly Hills for $100MM? I did too, but your home on Aspen Lane isn’t worth more now. Vacation home sales nationwide are up, but have you looked at the numbers? No?
Did you know that the median sales price of vacation home sales in this country is $168,700? Did you know that $168,700 in Lake Geneva buys you very, very little? Did you realize that most vacation home sales are timeshares, or small condos at resorts, or little cabins on muddy lakes just to the East of East Nowhere, Somestate? Did you know that vacation home sales are up 30% over the past year, but they’re still down 40% from the peak? Did you know that while interest rates don’t matter much at Lake Geneva, they do matter a whole lot to the vacation home market in Clearwater, Florida?
Crain’s told us yesterday that 20% of real estate transactions in Chicago, which likely means the city and the entirety of the suburban markets, sold at or above the asking price. Did you know that some prince from Sandyville, Dubai bought a house in Southampton for $16MM, a price that was $2MM over the asking price? I mean, he didn’t, but if he did, I wouldn’t care about that either. Because Southampton is not Beverly Hills and Beverly Hills is a long ways from Clearwater, and Clearwater is a long ways from Kishwauketoe, which I believe may or may not mean Clear waters. I don’t care about any of these things, because they don’t remind me of anything.
Lake Geneva’s market is doing well, and it’s nice to know that we’re not alone. YTD we’ve had 18 total lakefront and lake access sales, five of which were lakefront, five of which were priced under $200k. Lest you think we’re on hallowed volume ground, consider that the same period in 2013 printed 16 such sales, six of which were lakefront. The volume is high, but it is not so high that it’s without precedent. While we lack lakefront inventory in all segments (we have plenty at the top end, and if severely overpriced tear downs appeal to you, we have that market absolutely cornered), the lake access market is adding inventory at a very steady clip. The lakefront condo market is doing its best to quash its own recovery, as a few sales just begot too much new inventory.
Take nothing from this post except this: One little national statistic means nothing to me, and it should mean nothing to you. If a house on your block in Lincoln Park just sold over ask, don’t listen to an agent that tells you to do the same thing on any old property here. Also, if you know any Russian billionaires, any LA heiresses, or any princes from Dubai, I’d like an introduction.