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Old Lakefront Homes

Old Lakefront Homes

I wanted to think of a better title. Something clever. Something snappy. Maybe something a little less descriptive and a little more simple. But alas, this really is about old lakefront homes. Not regular old homes, mind you, as an old lakefront home with a 70′ lot that wants to sell for $2MM can do so. An old lakefront home anywhere on this lake can, will, and has sold. There’s a market for the old lakefront home, so long as the lot is reasonable and the setting acceptable. But not all old lakefront homes fit into our market without a time consuming, expensive, depressing effort.

Allow me to explain. Pricing is everything on the lake, and if pricing finds an older home on that aforementioned 70 foot lot, the price should be in line with market expectations. Older homes on lots like this will sell for land value. Newer homes on lots like this will sell for a premium. This isn’t the sort of older lakefront home I’m talking about.

Legacy estates exist on Geneva in magnificent numbers. These are the estates that get talked up on boat tours. The sort that people pause in front of on the shore path and frame in their selfies. These are the Wrigley’s and the Ryan’s and the names that no one knows but the names that sometime, some long while ago, made a fortune doing something that people valued. They took that fortune to these shores and established their lakefront space. Their retreat. Their legacy.

These legacy homes traded with some regularity up until the very early 2000s. Since then, I wouldn’t describe any of the sold lakefronts with this title. Was Hillcroft, those 19 acres along Snake Road that sold in 2018, a legacy estate? Well, maybe. The property certainly fit the description, but this is a post about old lakefront homes, not old dirt, and the home itself was no longer P.K. Wrigley’s manse, but instead a modern manse built in the 1980s. Surely no structure built within my lifetime could be adorned with this lofty descriptor.

The only true legacy estate to sell in the last twenty years is Alta Vista, that Van Doren Shaw home on the North Shore that closed in the year 2000 for a paltry $3.45MM. I’d argue that we need a new legacy listing. Something on this lake that has history that even the most modern among us could not bear to tear down. The trend, in case you’ve missed it, is for Lake Geneva to loudly pay homage to history but then, once history comes to market, we just knock it down and build something shiny. I’d love to represent a true legacy estate someday soon. Everything I’ve sold on this lake is nice, but I’d like to set my aim at selling something that can be preserved and restored, rather than demolished and rebuilt. But today isn’t about the legacy estates, just as it isn’t about the 70 foot lot with an old home on it. It’s about old lakefront homes with large lots that fit somewhere in between these two stated examples.

The market, while light on legacy offerings, has been historically heavy on another sort of offering. The old lakefront home on a large lot offering. The sellers know what they want. They want lots of money and they want you to see the value in their home. It was built in the 1980s, after all, or the 1970s for that matter. Maybe even the 1950s or earlier. These are the homes that aren’t new enough to substantially remodel (as would be the case with 1990s or newer construction), and they aren’t old enough to be considered architecturally meaningful. These are the in between. The large lot having, no architectural pedigree sporting, big old lakefront homes.

And the market doesn’t like them. Not. One. Bit. The sellers force feed the market, saying, come look at my big old home on a reasonably large but not overly impressive lot! And the market yawns. That’s because the market either respects a home or it doesn’t, and as soon as it doesn’t, it’s land value, and land value only. The gulf between land value and a number that shows value for the structure is the issue. Sellers fight this. They scratch and they claw and they switch brokers and they beg you to appreciate their Reagan administration raised ranch. It’s big, after all, and the lot is, too. Look at me! I have two Sub-Zero refrigerators from 1981!

This isn’t a new issue for our market, but it is an issue that’s presenting more frequently as prices increase and large lots because more and more rare. Expect this trend to continue, and the battle between buyers and sellers will persist. As for me, I’ll be here, stuck in the middle, wondering if those old Sub-Zeros might work better if we just get the vents vacuumed.

Walworth County Development Update

Walworth County Development Update

A few weeks ago I received an email from the Wisconsin Realtors Association.  The email asked that I, as a member, contact my representative in the state legislature and ask him or her to vote in favor of an upcoming bill. The bill was like all bills. Some good, some bad, lots of extras. But the primary crux of this bill is that it would make it easier for developers to develop land.  The bill was aimed at “increasing the amount of housing inventory by reforming the residential real estate development process.”  Since Realtors sell real estate, it was only fitting that the WRA pushed the passage of this bill.  Realtors, never claiming to be a group that likes to question the management, likely went along with the initial request and contacted their local legislatures and urged them to vote yes.

When I read that initial email, I replied and told the sender that I would be asking my representatives to vote down this bill.  The reply I then received asked me why. I asked a better question: How many vacant lots exist in the state of Wisconsin? How many future developments are already approved, with tidy re-zone requests granted, but have yet to begin construction?  My questions were met with silence. And this is the problem with development in the state of Wisconsin.

The market today is healthy. There is a veritable construction boom around Lake Geneva, Walworth County, and elsewhere in this fine state of ours. FoxConn is brining jobs, Amazon is adding more, and Uline can’t seem to hire fast enough.  The market is expanding, and with it, an increased demand for housing. Add in a hot re-sale market, which is usually the most under appreciated asset of any market rebound, and you’ve got some serious liquidity.  Call a contractor in Lake Geneva today and ask him to come out and build you a deck. Wait a few months for him to show up. That’ll give you a taste of how active the construction trades are at this moment. All in all, it’s a fantastic thing.

Those in power at the state and municipal level see this growth and feel as though they must react to it. Let’s Make More Housing!, they cry.   And they set to writing legislation to make it easier to develop land. After all, with all of these pesky zoning laws in place how can Joe Developer strip out a farm field to build 200 vinyl ranches?  The legislators drive around their small home towns and see construction. They see cranes in the sky over Milwaukee. They see businesses moving from the North Suburbs of Chicago to those South Suburbs of Milwaukee. They see the demand and they want to feed it.  They think they’re doing the right thing.

But they aren’t. Because what they’re all failing to realize is that this current building boom comes on the heels of a building bust. The vacant inventory that was created during the last boom (2000-2008) is still there. The platted but unbuilt developments might look like farm fields to the naked eye, but to the GIS Map they show their true identity. These are sleeping giants. Huge sections of  residential development is ready to go, but yet it sits idle.  Realtors and Legislators think the solution is to add more development on top of this old product. I say finish your plate before you ask for seconds.

Today there are 676 vacant lots listed for sale in Walworth County.  There are likely at least two thousand more lots approved to be built on but remain in undeveloped subdivisions.  That estimate is likely low. Last year there were 216 vacant lots sold in the county (per MLS).  Long after the term Zombie Foreclosures left our lexicon, consider these the Zombie Developments of 2018. If we consider briefly that we have 2500 or so lots approved and ready for roads/shovels/permits, and we sold 216 lots during the strongest housing market in a decade, then we have roughly 12 years worth of inventory ready for construction. Is that not enough? To the developers and their minions on county and township boards, are you not entertained?

Yes, the housing market today is vibrant. Yes, the near future looks just as bright. But markets never expand forever. What happens when the current round of zoning changes are finalized and we add another thousand or more lots to the Walworth County plat map, and that additional inventory coincides with an inevitable future market downturn? What happens to Joe Homeowner in his $199k cornfield ranch then?  I remain firm in my opposition to large scale redevelopment of vacant land not because I hate development, but because of whose side I’m on. In the battle between the existing homeowner who would love to add a few percent of appreciation to his house every year and the developer who wishes to flood a market with product for people that may or may not some day move there, I choose to root for the current homeowner every. single. time.

Lake Geneva Liquidity

Lake Geneva Liquidity

Increasingly, I’m a fan of all things Wisconsin. This has been difficult on one of my sporting allegiances. I’ve been a Bears fan since birth, but how can I actively root against the team that means so much to the economy of the state I call home? In this, I find myself pulling for a team I used to aggressively hate, for the benefit of my state.  This state has been winning lately, in case you haven’t noticed. Our budget crisis was circumvented by a willingness to tackle the problem head on. Our job numbers continue to increase as our Governor lobbies for, and on behalf of the working people of Wisconsin. Business is growing, the state is thriving and the leaves are turning. In Wisconsin, life is pretty, pretty, pretty, good.

While I root for Wisconsin at all times, unless the Brewers are playing, I find it obvious that the real estate market in this great state is not at all uniform. There are hot markets here, to be sure. Milwaukee’s Third Ward is growing. The collar communities of Brookfield, New Berlin, Elm Grove, etc, are bustling.  Things are good here, but things being good in the state have very little to do with things being good in the lofty segments of the Wisconsin vacation home market. The upper bracket real estate market in Lake Geneva is on fire, so I decided this morning to do a quick check of how that particular segment is faring in the rest of our wonderful state.

I only have access to the MetroMLS, which is not necessarily the MLS that the entire state uses, so my statistics here are more representative than they are bulletproof.  Today in the MLS, excluding Walworth County, there are 27 homes for sale in Wisconsin priced in excess of $3,000,000.  The only home in that segment under contract is on Crooked Lake, listed just over $3MM. To be fair, that is a very nice looking house that someone is buying. Good for them, and good for Crooked Lake, wherever it may be. Over the past 12 months, there are two MLS sales over $3MM in the entirety of the state, again excluding Walworth County. Of those two, one was an off-market direct sale that was entered into the MLS after the fact. If we’re going to be super basic here, 26 available homes and two sales over the past year means we have 13 years worth of upper bracket inventory in the state.

Now consider Walworth County, home to the reigning king of luxury real estate, Geneva Lake.  On Geneva Lake, we currently have 15 available lakefront homes priced over $3MM. Of those, nine are under contract this morning. Looking back over the past 12 months, we’ve closed nine lakefront sales over $3MM. That means while the rest of the state has 13 years worth of upper bracket inventory on the books, Geneva has just 12 months worth. Geneva Lake, take a bow.

Other markets in Wisconsin (and Michigan, for that matter), will gladly sell you a house in excess of $3MM.  That’s really not that difficult. The trick is, can you ever sell that house you just bought? Geneva will sell you that upper bracket house, and then when you’re ready to upgrade or simplify, Geneva will sell it for you again. It’s called liquidity, and while our water clarity and our lakeside scene is what we like to think sets us apart, it’s actually upper bracket liquidity that is our best, and most unique attribute. We like to seek out liquidity in most of our investments. Shouldn’t our vacation home investments demand the same?

Above, my lakefront sale from last fall. $9,950,000, closed.
Housing Affordability

Housing Affordability

In a meaningful way, the housing market in these United States is driven by policy that is pushed by the National Association of Realtors (NAR), and various state and local associations that operate as ground troops. The local associations take their marching orders from the state associations in the form of campaign endorsements, bill endorsements, these sorts of things. As the housing market in the great State of Wisconsin continues to outperform, there is much talk at these associations of one thing: Affordability.

A simpleton might assume that increasing prices are good for people. After all, if you own a house in Wisconsin, there’s a terrific chance that it has appreciated in value over the last five years. This should be a positive, something to be praised and hoped for, something that policy should be driven to assist. But rather that rejoice over increasing prices, the powers that be have taken to wishing for more affordability. Affordability, they say, that’s the key to everything. Without it we have nothing.

But what about the guy making $48k per year living in the $199k ranch in Elkhorn? Does he matter at all?  Where does housing affordability rank in his list of concerns? Is he worried that his house he paid $197k for ten years ago is now, finally, mercifully, worth $219k? Is he upset that his value has increased, finally, after that lost decade?  Does he wish for his local Realtor and the state board to do something about this recent increase in price? Is he sad that the new buyer can no longer find a home in his neighborhood under $197k?  Of course not. Joe Homeowner is finally happy, because he’s finally building some semblance of wealth.

Why knock him down now?

This is the strange thing about real estate. National types want to push for affordability. State types, the same. Local governments, affordability. County Master Plans, largely engineered to foster affordability. NEWSFLASH:  Affordability is for the birds. It’s a way to keep a market, a county, a municipality, stuck in the mud. I’ve heard often this year that there’s nothing to buy. Nothing cheap, nothing sort-of-cheap, nothing sort-of-expensive. The markets have gone mad, and this is a bad thing, or so those in charge say. We need to make Walworth County affordable again (MWCAA never caught on, in spite of the red hats).  But why? Why must we remain more concerned for future residents than for the financial well-being of our current residents? What’s so great about cheap housing markets?

Does a housing market need to be uniform at all times? Do we always need to have 10 homes for sale under $100k and 10 homes for sale over $1MM?  Do we need to avoid imbalance? We had a significant imbalance from 2009 through 2015- where were the housing affordability stalwarts then, when affordability reigned?  Were they concerned over too much inventory, just as they’re concerned over too-little inventory today? Why can’t we allow normal housing cycles to exist, without the need to stifle the upswing with added inventory? I fought off bad development over recent years by making market based arguments as to why we didn’t need them. The market today is more healthy, more robust, with inventory being absorbed at a wonderful clip. Why stymie the growth with a wet blanket soaked to the core with $199k vinyl ranch homes?

You’ll be reading much more about housing affordability in the coming weeks and months, perhaps  years. Pundits and housing analysts will bemoan rising prices. Go ahead and let them be sad, but if you’re a homeowner, enjoy the ride. You deserve it. At the end of the day, why do you suppose Realtor Associations want more inventory? To aid in prices? To assist the needy? Try again. It’s so Realtors have more houses to sell, and they’re in the business of helping Realtors. That’s fine, but don’t ever mistake association policy for something that seeks to benefit Joe Homeowner.

Lake Geneva Buyers

Lake Geneva Buyers

I had never written a blog post from the day I was born in 1978 through March 28th, 2007. Then, on March 29th. I wrote one. It wasn’t really a post, it was more of an introduction. But every blog since the beginning of time has started with an introduction. And so that introduction and then some fits and starts and lack of commitment to the idea. Since then, 1531 blog posts have been published here, which is meaningful, I think. If you’re a Lake Geneva buyer and you’d like to know about a certain association at the lake, you could search that association on Google, or you could skip that step and just come to this Lake Geneva real estate blog and search the association. The blog has been somewhat important to my career.

There have been common themes written here.  The first theme is that you’re wasting your life if you’re affluent enough to have a Lake Geneva vacation home and yet you don’t have one. That’s the first and most important theme. The next theme is that if you’re wealthy enough to have a vacation home and you don’t have one in Lake Geneva, then you’re just being ridiculous. The other themes are all sort of spun around those two most important themes. The third theme is that if you are indeed looking at Lake Geneva, then you should be working with me. That’s actually the most important theme, so the other themes are somewhat less important, assuming you care about my children and their future.

Another theme that I’ve often touched on is the desire of sellers to find buyers, and to find them in all the places that they live, the places that they work, the places that they think about Lake Geneva real estate. I’ve oft wished for a new medium, a new place where the buyers hang out, where I might enter and meet them all and them sell them all properties at the lake. But this secret location, this secret medium, it doesn’t exist. I’ve given sellers extreme exposure at times, and yet, when a buyer does materialize the buyer hails from places we already know. The buyer for a Lake Geneva property is usually already in Lake Geneva.

Not that he or she lives here, but that buyer is usually already somehow connected to the lake. Rarely, if ever, has a buyer found an ad in a magazine and decided, based on that introduction to this market, that indeed Lake Geneva sounds like a nice place to spend several million dollars.  The buyer may be aware of the lake, aware of the market, aware of the need to transform his weekends, and that ad may push him over the top, but that ad was rarely, if ever, the initial catalyst for the purchase. I deal with this often.

And it got me thinking, where do these buyers come from? Who are these buyers? Where do they live? Why are they here? Thankfully, these are questions that I can answer. I wouldn’t have asked them if I couldn’t. In the past 36 months, there have been 60 (MLS)  Geneva lakefront and lake access sales over $1MM. There have been another 12 lakefront and lake access lots (several in the South Shore Club) closed over $500k. That’s 72 sales in 36 months, and that’s a pretty large sample size. So where do these Lake Geneva buyers call home?

That’s kind of a tricky question, as I can only look at the address where the tax bills is mailed, which is, more times than not, the location of the new owners primary home. Sometimes the tax bill goes to an attorney or an accountant, but rarely. 11 of the 72 times the tax bill is being sent to the Lake Geneva address of the home they bought here, but does that mean 11 of the 72 buyers are primary owners? Of course not. Of those 11, I would estimate just three are actually calling their Lake Geneva address their primary. So what of the other 61?

Eight are in Chicago proper. Four in Barrington. Four in Hinsdale. Two in Wilmette, two in Winnetka.  Three in Naperville, two in Lake Forest, two in River Forest.  Three buyers call Texas home, four are from Florida, one from Hermosa Beach, California.  Of the 61 properties that don’t list the property address on the tax bill, two are from other parts of Wisconsin, eight are from Florida, Texas, and California, and the remainder, the overwhelming majority, are from Illinois. None of this should be a surprise.

Then again, there is one tax bill sent to Marseilles. That’s by Ottawa. In Illinois.


Lakefront Nuance

Lakefront Nuance

It seems to me that all exclusive markets- those of art, of real estate, of antique automobiles- all find the task of identifying outliers to be a difficult one. In the art world, Ken Griffen made recent headlines for purchasing two paintings at a total sum of $500MM. Seems reasonable to me, but was the next closest bidder at $499MM? Or was there no other bidder, just the threat of another bidder?  Or was it simply that the price was $400MM and this billionaire with a penchant for irrational purchases thought he’d distance himself from the nearest would-be-bidder for the sake of legend building? Only the art dealer knows. In the automobile auction, some bidders are present and others are on the phone, others still are connected to the event only through this series of pipes and tubes.  When the gavel drops and someone pays $5MM for a rare Ferrari, was there another bidder? The car was supposed to fetch $2MM, but it sold at $5MM. The other bidders must have been in hot pursuit, or maybe they weren’t. Only Dana Mecum knows.

There’s a company in Arizona called Opendoor. They are seeking to revolutionize the home selling process, which makes them the latest in a very long line of other revolutionaries who have, to present, failed to disrupt anything but their own lives, and those of their investors. Opendoor works like this. You go to their scroll-down website. You scroll down. You type in some information. They buy your house. You’re happy! Or so goes the narrative. This model is heretofore working for two very important reasons. First, it’s working in a market where nuance isn’t prevalent. If I own a 3 bedroom 1700 square foot ranch on Cactus Lane with a small pool and a yard that’s really just a bunch of small red rocks, that’s good for me. But my red-rocked-ranch on Cactus is the same as your red-rocked-ranch on Scorpion Avenue, so figuring out the prices of the two isn’t very difficult. Extrapolate this out over massive sections of cookie-cutterness and you’ll see how Opendoor can succeed here. Algorythms struggle with nuance, but there is no nuance in a red-rocked-ranch.

The other important aspect of this business model is that the market has been gradually improving over the last four years. Opendoor has never known a depressed market. They know only increasing prices, only easily quantifiable markets. The business says they’ll revolutionize real estate. They won’t.  They need to re-sell the homes they buy, so as soon as things get sideways the model will fail. They’ll be heavily levered and they’ll sit on inventory, which means they’ll likely transform into a landlord once the next downturn rears its annoying head. Outliers aren’t difficult to spot on Red Rock Lane. If every ranch is $219k and one is $389k, the expensive one better be remarkably different, uniquely better.  This is obvious, but the red-rocked-ranch market where Opendoor is weaving their VC funded tapestry has nothing in common with our Lake Geneva market, just as the art that Ken Griffen buys has nothing to do with the “art” I hang on the walls of my office.  Outliers only present an obstacle in heavily nuanced markets that appeal to a very small segment of the population.

This week, a lakefront sale. Bonnie Brae for $1.65MM. This home was previously listed over $4MM. It was an outlier at $4MM, and it’s an outlier now at $1.65MM. It’s a terrific buy for a savvy purchaser, but is it a trend setter on Geneva? Does it somehow matter to anyone but that buyer and that seller? Earlier this year, a lakefront sold for $800k. This was a skinny little lakefront with a gutted cottage on it, but it was still lakefront. If we rely on data, as our new marketing campaigns command us to, does this mean something? Does it mean that the average lakefront price on Geneva is $1.2MM? Does it mean that lakefront is now selling at $16,500 per front foot? Does it mean that prices are in decline, and that we’ve already started our next housing bear?

In the same way, when a lakefront on the side of a cliff sells for $5MM+, does this mean that all Geneva lakefronts on the side of cliffs are worth $5MM? Does it mean that a new house on a cliff will always sell for $5MM? Will Opendoor pay us $4.9MM and then resell that cliff residence for $5.5MM? These are the questions of the unserious, the questions of those who cannot fathom how small volume, exclusive markets operate.  If we see three more sales in a row that print at $16,500 per front foot of lakefront, we can then make an adjustment in our thinking and presume that yes, the price for lakefront has fallen to that level. But this won’t happen, because while deals exist on this lake they generally exist because of unique circumstances. If a seller wishes to cut his or her nose off, this slightly impacts everyone in the market. But mostly it impacts the buyer that secured value for knowing that an opportunity was about to present itself.

The admonition today is to be aware of each sale within the market you’re studying, but know the difference between a trend and an outlier. Better yet, just ask me, because I already know and I’m happy to share my opinions. All you need to do is ask. Or you could move to Arizona, because there’s a dynamite red-rocked-ranch on Scorched Earth Boulevard, and it’s just $219k.

Lake Geneva Market Pricing

Lake Geneva Market Pricing

One easy way to gauge the strength of a market is to look at those homes that are under contract and consider their market history. Some would look only to the active listings, then to the pending listings, then to the sold listings, and they’d add up the numbers for each segment, divide by 12, carry the 1, and tell you, definitively, that the market is either healthy or weak. This is how Case Schiller works. Look at the active listings, add them up. Look at the sold listings, add them up. Compare those numbers to the year or the quarter before, and proclaim a market on the rise or in decline. This is fine for national sorts, but this isn’t acceptable for those who wish to know more about a local market and to understand it on a deeper level.

This morning, the MLS shows eight lake access or lakefront properties listed as under contract (a few more under pending), though I know it to be nine because I have one under contract that isn’t on the open market. Of those marketed eight, the prices range from $149,000 to $4,575,000. If we’re market glancers, we’ll see this spread and assume that the entire breadth of the market is active, but we’re not glancers, we’re diggers. Let’s consider that $149k house in Cedar Point Park. That’s a a price that seems to me to be reasonable no matter the condition of the house, which is a good thing, because this condition is not terrific.  Did the house just hit the market at $149k and then sell immediately? Nope. It actually came to market in October of 2015 for $189k, and was subsquently reduced until it found its buyer.

The other pending sale in Cedar Point Park is of a lake view home on Bayview. Listed at $825k, it’s a nice looking cottage style home with some significant upgrades, located just one house off the lake with a pleasing water view. It’s a good house, and I like it quite a bit. It’s just to the South of that ridiculously lovely home on Wilmette that I sold a few years ago. This $825k home is pending, but what path did it take to get there? It sold for $1,150,000 in 2007, during our market peak. It came to market in March of 2015 for $995k, and the market yawned. The price was dropped to $825k and there’s a buyer.  This property is important because it proves my burgeoning point about market pricing, and it should serve as a reminder that 2007 pricing is not 2016 pricing. If you were thinking it was, shame on you.

Oriole Lane has an odd little lakefront just East of the Knollwood Park. Listed at $1,125,000, it’s a cheap entry level lakefront. Did it present to the market and sell quickly, without hesitation, because it was cheap and the frontage level and the quirks of the house easily overlooked? Don’t be so naive. It came to market in 2013 for $1,495,000, before facing systematic reductions and settling at the new asking price of $1,125,000 last fall. Now it’s under contract. An entry level in Dartmouth Woods listed at $1,450,000 was brought on in the winter of 2015. It didn’t sell. Then the price dropped to $1,350,000 and the charming lake house is pending sale.

There’s a lakefront pending sale on LaGrange listed at$2,125,000. It’s a nice, newer home, even if it’s in the shadow of Vista Del Lago, and it’s under contract and that’s fine. It came to market in January of 2015 for $2,149,000. The lakefront on Bonnie Brae is pending with an ask of $2,431,000. It came to market in March of 2014 for an absurd $4,300,000.  The large brick lakefront on Conference Point is pending sale at $3,850,000. It first appeared in January of 2015 for $3,950,000.

The Lackey Lane lakefront that I have pending with a buyer whom I’m super happy to represent came to market for $5,275,000 in August of 2015. It’s now priced at $4,575,000 and pending sale. It’s a nice lakefront, pending around replacement value, and it makes sense. Did it make sense at $5,275,000? Did the Bonnie Brae house make sense at $4,300,000? Did Oriole at $1,495,000 look appetizing? Did the little cottage in Cedar Point for $189k interest the market? These are the rhetorical questions that prove our market loves price reductions. There’s a theory floating that says if you list cheap you’ll sell quickly. This is true, but who wishes to list cheap and blow their house out the door within a few days of listing it? Some people do, depending on circumstance and motivation, but this is not the norm in a luxury market. Houses hit the market, then the market responds. Smart sellers listen to what the market is telling them and they adjust their prices accordingly. At Geneva, these eight pending sales offer the proof: If you want to sell you’ll list, listen, reduce, then close.

Geneva Lakefront Values

Geneva Lakefront Values

I put a new graph on this new site, on the home page down at the bottom. It aims to smooth out the rough edges of our lakefront pricing by calculating the very simplistic, very popular Price Per Foot. For those who don’t yet know, that’s a very common way of determining lakefront value. It supposes that at the end of each year a collection of lakefront properties will have sold. They’ll be very different, some super expensive others only moderately so. It totals sales prices and divides that number by the total number of lakefront width sold, and voila, Price Per Foot. This year we’re trending at $25,161 per foot. This would take a 50′ lot and assume it’s worth around $1.25MM. It would take a 100′ lot and assume it’s worth $2.5MM. And if you’re light on math skills, it would take a 200′ lot and come to a $5MM valuation. Even though this is a remarkably unsophisticated way of determine value, it often holds up.  This is the case for 2015.

But the price per foot bothers me, because it’s so simplistic. The nuances of valuation here cannot be wiped away by some basic fourth grade math. This is why I prefer a formula that includes price per foot, price per square foot of overall land mass, price per foot of the residence, and adjustments for location and market conditions. Of course this algorithm is proprietary, at least until I sell it to Zillow for $50MM and retire. Once I bank that $50MM, I’ll consult with agents, telling them, usually, that their problem is that they’re too nice, too sweet, too understanding. Then I’ll double that $50MM and look to buy some hot biotech stock so I can destroy my newly created wealth. I’ll be like the Andrew Mason of real estate. Anyway, lakefronts.

What this valuation formula does is identify a narrow range of value, and this is the goal. The range can be tweaked up or down, depending on the market conditions at the precise time of the listing. The formula isn’t fool proof, but it allows us to dismiss outliers and identify obvious value. But no matter how many words I’ve spent to get to this point, this day isn’t about valuations or about my desire to sell something to Zillow. It’s about gauging the health of the lakefront market. It’s about the inventory and the sales, the averages and the predictions. The good news is that we have some data to help us in our measurements.  A common refrain among agents is to declare the market hot, no matter if it’s scalding or tepid, no matter if it’s just smoldering or fully ablaze.  Ashes are hot, too, but they don’t point to much continued heat.

It’s easy to look at our price per foot (PPF) and assume that points us in the right direction. It’s easy to look at sold totals, and guess how things are going. But beyond all of those stats is the actual dollar volume of transacted properties. This isn’t a number you see often, so it’s a number you’ll see today. Consider, at this late date in 2015 we’ve had $68,262,140 worth of lakefront properties change hands. This excludes South Shore Club listings, because I can’t measure their frontage due to the communal ownership of the lakefront. That’s a high number, right?  Yes, it’s high, but how high? If I were Josh Flagg I’d screech at you that these numbers don’t lie, but I’m not wearing my bedazzled leather vest today so I am most definitely not Josh Flagg. $68,262,140.

Last year was a terrific year for the lakefront market. I had my best year ever, which was nice. But the lakefront printed only $35,375,000 worth of sales. 2013 was a good year, but not as good as 2014, yet $45,495,000 in lakefronts traded. 2012 was a down year for values, likely representing the bottom of the recent recovery cycle, yet value hunters were common and the market pushed out $53,800,500 worth of sellers. 2011 was the pit of despair, with late year prices crumbling, and $33,580,500 traded. 2010 was a year where no one knew what was going to happen and only the die hard bought- $33,573,000 sold.  2009 had $24,659,999 in total. 2008 was the last great year of the prior great run, and yet just $36,732,134 printed. Even 2007, when things were not yet even hinting at a wind down, just $45,666,600 closed.

Looking at the numbers from here, they make complete sense.  When the market was hot, the inventory was low, fueling more appreciation. When the market went south, buyers were scared, and volume plummeted, along with prices. As the recovery progressed from 2010 through 2014, there were fits and starts, but mostly volume consistency. The anomaly in this is the 2015 total. $68,262,140. That’s an incredible number, especially because it has occurred in conjunction with rising prices. It’s mostly owned to some top end sales, and it’s especially significant when you consider that those totals didn’t include two auction properties that would have pushed the number to $75MM, and even more impressive when you consider it didn’t include the South Shore Club volume.

With that stunning absorption of both aged and new inventory, the market is heading into 2016 in terrific shape. Inventory is low, but not stagnant. Buyers are plentiful.  The stock market threw us for a loop this year, and returns will be mostly flat. Yet the market continued its march. To understand why, just remember that even this elevated volume represents a tiny, narrow market.  The entire lakefront market revolves around 20-30 sales annually, and I’d guess at least 40% of those sales are made up of players already in the market. If that’s the case, then Lake Geneva needs scarcely 10-15 new buyers annually to keep this whole thing moving forward.  It’s no wonder the market is as exclusive as it is, and no wonder it chugs along in years good and in years bad.

November Again

November Again

We all engage in it. A very common mistake. It’s not a mistake like it would be to pay someone to tattoo barbed wire around our biceps, but it’s a mistake nonetheless. I write to you from this desk every other day, and I write to you as if I know the entire lake. As if I know every nook and cranny and every point and bay and every gravel road and paved street. I write like I know, as it comes to Geneva, it all. You listen, you read, and you, too, explore. You think about the lake and you think about what it is and how it looks and you think that you know it all too, and if not all of it, well then certainly most of it. The truth today is that none of us know the lake as well as we think. It’s a big lake. Our minds are small.

20101012-20091023-Fall Road Pic.JPG
And this is why November is so important. In December, we can get to know the lake. The lake is still then, the activity gone excepting a few brave fishermen that drag lures slowly through the depths, the piers out and the lake a glassy reflection of everything we think it should be. We can explore then. We can hike the shore path and legally trespass through front lawns and peek behind houses and see things that we didn’t know were there. We could do these things in December, but December has but one fatal flaw. It can be very cold in December. Like freezing cold. Like Manitoba cold. If you’ve never been there, trust me on this one, it’s a cold you don’t ever want. December is to exploring what bicycles are to fishing, carbon fiber frame or not.

November on the other hand, November is a month where even a soft guy like me can do some exploring. November isn’t like October and it’s nothing like December, but it’s so much better than August if you’re looking to actually accomplish something. August is a show. It’s busy here then, the lake is busy and pretty and between pretty boats and pretty girls and pretty big fish it’s nearly impossible to focus on the lake. November is free from distraction. There’s nothing going on, and no fisherman in a Lund could ever distract someone from their goal if their goal is to discover what they cannot see during summer.

A goal of mine here, on this site, and in my every day work is to educate. Any agent can be reactionary and make fancy fonted proclamations, but is that some sort of valuable advice? I don’t think it is. I think it’s lame. So while I educate here and educate if you’ll take a ride in my car with me around the lake, there is an education that I cannot give you. That education is one of personal preference. If you’re going to buy a car, it’s nice to know what Dan Neil thinks of that particular car. The gas mileage is sort of important. The size of the engine matters some. But what really matters is how the color looks under the sun and how it takes a corner. Personal preference is what matters far beyond the nuts and bolts, and even though I’d love to shape your preferences for you this is something I cannot do. In order to understand this market and this lake, you must explore.

Vacationing here during August for a week is not the time to explore. That’s a time to be captivated. There isn’t must subjectivity to a summer day at the lake. It’s impossible to resist it. And with this, people give in and they buy a house on a Saturday that they first learned about on a Tuesday. To be a buyer in August is to act quickly and sometimes irrationally, but to be a November leaf kicker and a December buyer? Well that’s pure genius.

So for now it’s November. It’s time to explore. It’s time to learn about little bays and small points that you never knew existed because in August they were masked with piers and shiny objects. On a gray day in November, with some boots and gloves on, you can learn more about the lake in a three hour walk than you every could during a 7 day summer vacation. If you’re here doing this work it’s obvious you already like the lake. The goal here, on this blog and on that shore path, is to find what you love. Whether that’s an association home or a stretch of the lake that fits your eye, now is precisely the time to find that spot.Nove

Lake Geneva Data

Lake Geneva Data

It bothers me that I so fondly look back at years that have only recently passed. When the market was scary and difficult, I enjoyed leafing through the local Realtor’s Association materials month to month, watching the brokerage rosters to see which agents were no longer agents. During that difficult time, one older lady Realtor remarked to that she had apparently retired, but no one had told her yet. I heard agents screaming UNCLE often in those years, and how I relished the opportunities that these holes in the market were creating for me. Pardon me while I wipe these nostalgic tears from my eyes.

Today, things are entirely and totally different. The roster pages now bloat each month, with smiling faces of agents who just started yesterday. Signs in lawns are changing, with new companies and bigger companies, signs plastering the names of people that I’ve never heard of. There are new agents and there are revitalized agents, those who think that now it’s time to try hard, now that the market has improved and the test for extreme real estate success involves breathing closely into a pane of glass to see if the candidate can fog it. As a special bonus to the consumer, you’ll be pleased to note that everyone of these new agents are experts in their field.

But how can we know that? How can we be certain that, even in spite of any demonstrable record of proficiency, let alone success, these agents are indeed experts? Well, silly, in real estate as in politics there is no need to back up a claim to prove its worth, you must only find the microphone and make that claim. If our culture has provided that we can now self-identify as whatever it is we feel like being, perhaps it’s only natural that Realtors who fogged the glass yesterday are the experts of today.

But some take further measures to convince you of their worth, and while I just write here and try to maintain a professional level of success to prove my worth, in an effort to differentiate there is an old theme making new appearances: The compilation of data to prove a point.

Real estate is a data intensive business, this everyone knows. But unless we are Case Schiller and we’re only looking to smooth out the rough edges of the largest asset class in these United States, we have very little use for macro numbers. Last week, as I do many weeks, I wrote a market analysis for a lakefront home on the north shore. In preparing this report, I could have used broad MLS generated data to prove a point. I could have used a year’s worth of data that involved every segment of the lakefront market. I could have done these things, but the numbers, while factual, would have been misleading. Geneva is a segment specific market, where a 50′ lakefront home in Lake Geneva Beach Association has absolutely nothing in common with a 100′ lakefront lot in Fontana. To compare the two and present a statistic that says one has anything at all to do with the other is disingenuous at best, ignorant at worst.

There is a new angle out, one that aims to convince sellers that the goal of selling is to actually sell. The intent of the effort is correct. The application of the numbers is absurd. That’s because one of the numbers is not at all objective. You cannot contrast the right way against the wrong way, unless you identify the criteria for the differentiation. If I say that my listings are the right way, and your listings are the wrong way, this is fine. But that is subjective opinion, not objective fact gleamed solely from the collection of data.

The lakefront market on Geneva is one that behaves irrationally at times. It is a market that prints sales that should have no business printing. It will reward one seller with a huge gain just as it saddles another seller with a huge loss. It will flood a segment with buyers ($2.5-5MM right now) and skew many of those print prices higher, just as it will vacate a market (entry level lakefront) and cause sellers to sell at prices that are below the 2012 market lows. This market makes very little sense at times, and to attempt to reason with it can lead to futility.

That’s why this market is best approached with highly precise, highly segments comparable statistics. If we’re measuring a 200′ lakefront lot based on its price per foot, then we should be smart enough to ignore 50′ lots. If we’re going to proclaim something a value because it’s our listing, then we should back that up with narrow proof. We should do this, but any explanation of value here should include a highly articulate narrative that defines the nuance that leads to true value. Without the ability to detail these nuances, the collection of data and the blurring of objective and subjective statistics is called marketing, not research.

Development Locations

Much can be learned from looking at previously approved developments. We already know that the County 2035 Master Plan and the Walworth County website encourage development that has full access to city water and sewer, is walkable to town centers, walkable to school, and generally in place with the density surrounding it. These criteria alone dictate the dismissal of Kane County Shodeen’s development proposal on North Walworth Road, but let’s look at the precedent that Walworth County has already set.

By now we know that the municipalities and the county have made egregious errors in their haphazard zoning approvals, and we know this because we can see the results of their actions. Empty subdivisions, roads to no-where, constant pressure on the existing housing supply and stifled home values (you’ll be given a terrific example of this tomorrow). These are the hallmarks of their mistakes. But we can also see a pattern in most of the development approvals, and in that pattern lies the precedent.  Consider the following development snapshots.

City of Lake Geneva, two images. Showing some of the larger developments approved in the last 15  years (note the empty lots that prove there is no demand, and no need to destroy more farm land):


Lake Geneva Dev 1


Above, Lake Geneva Golf Hills (we haven’t discussed or counted this one yet), and Pollard’s coming Southland Farms/Symphony development (551 units). Below, Stone Ridge (note the empty lots). What do you notice when looking at these development images? Note where the city center is (shopping, schools), and note adjacent densities. The densities surrounding are all densities owned by the municipality in control of the lands.


Lake Geneva Dev 2

Below, an aerial of Fontana and a portion of the town of Walworth. Note the location of the Cliffs  (we haven’t counted it yet), and the Highlands of Fontana (100+ all empty), and Whitetail Ridge. See where the municipal center is relative to the development? See how the path for development moves from the denser, city center and outward? Notice how it’s not the other way around?


Fontana Dev 1


Below, Delavan and the general location of the never-started Green Isle project. Note the city location, the density, the access to primary roadways.


Delavan City Dev 1



Below is the West side of Delavan. Glen Oaks, adjacent Whispering Pines. Ellis Farms, adjacent Whispering Pines. Both less than a half mile to school, both near city center, both near state highways. Both developments wishing for buyers.


Delavan City Dev 2


Below is Elkhorn and its giant south side mistake. Re-zoned, approved, ready to develop. 693 total units in Elk Creek Alone. Note the location of Elkhorn’s downtown, the locate of state roadways, the adjacent density. These developments might be gross mistakes, but both make sense relative to their location.


Elkhorn City Dev 1


Below,  the Northeast side of Elkhorn, Harvest Point and Fair Meadows. Note the location of the school (south), the proximity to state roads, the adjacent density and the nearby town center. This is how responsible development happens.

Elkhorn City Dev 2


Closer to home, below is Walworth.  Note Windmill Prairie. Vacant and neglected, sure, but look at how smart the location is. Adjacent to density, near the school, walkable to all of Walworth. Library Square and (LSN), both with handfuls of vacant lots, but both in the right location. In-fill subdivisions make the best use of a municipality’s land because they use up land not well suited for other purposes (like farming). The Pines of Big Foot isn’t something I like, but the 180 housing units are adjacent similar density, have both city water and sewer, and are close to town and school. The development makes complete sense.

Walworth Dev 1


And finally, below is the development location on North Walworth Road in Walworth Township. In case you can’t differentiate the 123+ unit development proposal from the mass of farm land in the image, I labeled it for you. A-2 Farm Field. As a reminder, the Walworth County Zoning Ordinance reads as follows:

A-2 Agricultural Land District. The primary purchase of this district is to maintain, preserve, and enhance agricultural lands historically utilized for crop production.

Walworth Dev 2


Let’s not be the township that sets a precedent for misplaced development. Let’s respect our town density, respect our town values, and respect the will of the people. Tell Shodeen No. Tell him next time he wants to develop land he should buy land in a location that wants to be developed. Remember, developer ownership of land has nothing to do with the suitability of that land for development.


Information deemed reliable but not guaranteed.