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Lakeman's News & Views
Blog by Terry Carpenter
Richland,, Michigan
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Lakeman's News & Views
Sep. 21, 2009
In my last article I advised that possible seller's of waterfront property should not expect success if they have visions of an extraordinary sale price premium. I also warned "buyers" to be very cautious. My predictions regarding the recreational property market have proven to be quite accurate, except that most sellers and their Brokers are holding-out longer than I expected. Asking prices have remained too high relative to other market trends and apparent demand. Most sale transactions involved new sellers with appropriate pricing or protracted market-time offerings involving significant concessions from recent perceived values. The axiom that Buyers of recreational property really don't "have to buy" and that most Sellers probably don't "have to sell" has been an obvious factor during the lackluster and unimpressive market we are experiencing in Southwest Michigan during the current 2009 season.
Sales of Lake-front properties on the ten premier lakes (that I track) have not been adequate for an unqualified conclusion regarding the extent of the decline of "intrinsic value" being experienced by this real estate market segment. The lack of sales of higher dollar valued properties makes it especially difficult to rationalize what a single highly valued unit might ultimately sell for. I note that the demand for these properties was non-existent relative to prior periods. Because of our government's bashing and apparent over-kill of the financial and mortgage lending industry, loans for "second" homes became next to impossible to find. Most of the high dollar (>$500K) sales transactions occuring in 2009 have apparently been purchased as primary residences by people with extraordinary financial ability.
Sales activity during June, July and August were especially weak. Only 17 transactions (per M.L.S. data) were reported during the period. This was a miniscule showing compared to the 42 transactions that occurred in 2006; and the 26/28 during the same months in 2007/2008. The respective Median Sale Price was only $470,000 compared with $670,000 for the same period in 2006.
For the first eight months of 2009 only 30 transactions were reported on the ten lakes. These sales yielded a Median Sale Price of $ 496,250. This compares with 73 transactions and a Median Sale Price of $ 435,000 in 2006. 63 sales yielded a median sale price of $449,000 in 2007 and 41 yielded $515,000 in 2008. The noted changes occurred as the number of lower valued transactions since 2006 relative to highly valued deals declined through 2008, followed by a reversal of the relationship and a long running trend in 2009.
Our office is experiencing continued good demand for properties associated with southern portion of Lake Michigan, (the "big" lake) with very nominal demand relative to those associated with Michigan's inland lakes. The difference is because the features of the Lake Michigan shoreline tend to be more consistent and attractive to a different segment of admirers. Because its shoreline is what it is and because it does attract a unique market segment, it typically commands higher dollar pricing than does the lakefront of most inland lakes. Its owners tend to universally be financially affluent people and/or those with above average discretionary income. Its proximity to Chicago's highly populated metropolitan area has historically caused this portion of the lake's shoreline to command higher dollar sale prices than do other waterfront venues.
I also observe that the relative change in demand for parcels associated with Lake Michigan tend to react more slowly to economic recession than does the demand for recreational property more distant from Chicago. It is no less of a surprise that the demographic class that supports this market tends to also covet more expensive things, including more luxury and scare resources such the Lake Michigan shoreline. Like everyone else however, those of it think it is finally time that they should be able to purchase any lake or water-front property well below the prices realized or paid in recent years. Most report their belief that the market became much "over-heated" and a decline was due. I tend to agree with them.
Current transaction being reported as "pending" increased slightly in August. As final closing prices are disclosed I expect further confirmation of the obvious. Based on several sales in which my office is involved I am confident that actual sale prices being realized support my conclusions that a proximate 15-20% decline in market value for the general recreational real estate market segment has occurred since 2006.
A noteworthy sale transaction closed this past week when one of Gull Lake's outstanding properties was reportedly sold at a meager 71% of its original (3/24/08) $2.6M-plus price tag. This seller's results were well below the general market experience. Such sellers have cause to fault their market assessment and sales strategies. Overpricing of a property frequently prompts non-typical and poor results. This is especially true for sellers hoping to achieve top-dollar results from a million dollar plus property that is associated with a body of water. It is unfortunate that so many Seller's who seek excessive premiums often miss willing and able market participants who might have paid more than is realized at closing. After concluding that the sellers are unrealistic and stubborn these prospective buyers simply look beyond as they conclude that a fair-market valued transaction involving the seller is unlikely. I personally represented such a prospective buyer for this very property. Although a $100,000+/- price swing may be small relative to the sale price the amount is significant to most people.
The marketing and purchase of lake front property requires different skill-sets and special product knowledge. If you are a potential Seller of a water-front property and you hope to optimize your value, or if you are a prospective Buyer, it is more critical than ever that you use a recreational property specialist such as myself or one of my colleagues. As the above example depicts, having a reasonably accurate value assessment and a good marketing plan or acquisition strategy before offering a property for sale or making a deal is essential. We note that there are many desperate folks in the real estate business who hope to make extraordinary commissions and will say and do whatever it takes, right or wrong, to list or sell a highly valued property. Be "realistic" and be "cautious". Insist that whomever you entrust your money to does the same.
I expect a modest elevation of demand for water related properties to persist through October. And, without significant price reductions from a huge supply of would-be sellers, the market will be flat and very sensitive to general economic conditions for an indefinite period.
Open www.GullLakeRealty.com or www.BeachGlassProperties.com for the straight scoop and come back to www.lakemanblog.com often.
Terry R. Carpenter, Real Estate Broker & Lakefront Property Specialist
Jun. 11, 2009
Who says the graph lines for Supply and Demand converge with Price? Here is my Update for the 1st. 5 months of 2009: When compared with prior years, the number of lake-front sales closed that involved the ten larger Southwest Michigan lakes (we track) was off substantially. Based on present pricing strategies and sale results there is an approximate 16 year inventory of saleable lake-front real estate on the market. A meager twelve sales were reportedly closed since 1/1/2009, of which four involved Pine Lake (Kalamazoo/Barry counties Michigan) shoreline. As to the entire ten-lake sample, only four additional sales were reported as “pending” at the end of May. The number of days on the market for most active listings have protracted extensively. Although our office has a sale pending on Gun Lake, only one sale was closed involving Gull, Gun and Diamond - the three larger, more populous lakes in the sample. Of all sales studied, most involved value concessions relative to prior periods. The majority of the pending sales involve more recent market listings and buyers who have likely been in the market for some time. There is a record approximate 190 lake-front parcels being actively listed for sale on the ten lakes studied. nearly twice recent norms. Gull Lake has its record with a reported 39 lake-front parcels being listed for sale.
In my recent report of sales activity for this same sample for 2000-2008, I indicated that I expected a short-lived robust market as the 2009 lake frontage selling season approached. I expected this market to be fueled by pent-up (latent) demand and reduced offering prices. This simply did not occur as sellers continued to hold out for that top-dollar sale. As I note sizeable demand, there are very few apparent motivated sellers. I guess I missed something in Economics 101.
Since the begining of the year there has been only one million-dollar-plus closing reported that involved real estate on the ten lakes. The subject is a nicely located, and sizeable 1.3+ acre parcel with 225 feet of Gull Lake shoreline. The reported selling price was just over $1.3 million and matched its “bank owned” offering price. The sale occurred only eight days after it was placed (back) on the market. This property, with its 5 Bedroom, 5 Bath 3,700+ sq. ft. dwelling was once offered at $2.6 million. It was sporadically offered for sale since 2003.
Simply put, the sale-ability of Southwest Michigan lake-front property has declined precipitously since 2007. If you are an owner and a would-be seller you should let your motivation be known with your pricing. List close to your property’s actual market value or prospective buyers won’t waste their time. There are many buyers still looking, especially for good to high quality lake-front property that is reasonably priced. We are experiencing continued strong demand, especially in the $300K to $750K price range.
The spread between Lake-front property prices and their intrinsic value, relative to traditional housing alternatives has never been greater. If you purchased your lake related property between 2005 and 2008 you are not likely to profit from its sale, at least in the foreseeable future. Hold and enjoy. If you must sell, you must reduce your profit expectations. And, you may have to incur a loss.
When lake property is involved, the axiom “buyer beware” is more applicable today than ever. Buyers should use extra caution when discussing a property with listing brokers and agents, especially those who boast having "lots of listings". There is probably a reason for their purported success. There are many very good opportunities and realistic sellers out there. The market favors you. Take advantage of the fact.
And sellers, don't be fooled by the typical "list high and wait for an offer" pricing model. If you are serious about selling, the strategy will probably not work. The same-ole marketing plans will probably not work either. Insist that your broker provide a reasonable estimate of your property's "fair market value" and back up his/her conclusion. Also insist on a marketing plan that is customized to your property. Successfull sales experiences are prompted only by extra sales effort and hard work.
Whether buying or selling water related real estate it is especially important that you seek the assistance of a “Professional”, one who is familiar with the body of water involving your interest. He/she should be able to provide and substantiate an opinion regarding its "fair market value". If your adviser cannot provide a reasonable and believable case for his/her pricing recommendations, find another. If you don’t know any, call me or one of my lake-front specialist Associates at www.BeachGlassProperties.com or www.GullLakeRealty.com . We are highly qualified and will gladly assist you.
Feb. 27, 2009
Michigan Lakefront and Recreational Real Estate Sales reflect national trend. View Summary by LakeMan - Terry Carpenter of Gull Lake Realty.
Oct. 29, 2008
Lakes, Lakefront Property and Lakefront Lifestyles discussed by Southwest Michigan's Lake Property Expert and his Associates.
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