It would be easy for me to start thinking that the real estate market has been healed. This is a very, very common thought these days. I hear it from Realtors, I see it on TV, I read about it in papers. No matter what those grumps at Case Schiller say, the general mood of the real estate market is obviously positive. Some Realtors who I know seem to think the market is "back". It's back, and it's hot, and that's what they are telling their clients: Buy now, because soon it will be far too late.
There is some reason to believe this. Buying now is better than buying later, but only sometimes. To buy today is to lock in a price that is known, while buying tomorrow is to theoretically buy at a price that no one knows. Not even you, Mr. Case Schiller. If looking back over the past several years can help us to look forward, I think there are prices now and properties now that are incredible deals now. There are also some properties that will be better deals tomorrow, after they languish on the market for a while longer and the seller has cause to call her broker to complain about this hot market passing over her hot property.
But whenever I start to think the market is warming so much that it feels hot, I remember the foreclosure market. Foreclosures can and will continue, even as markets heal and slowly become "hot" some day far off into the future. There are programs out there now to smooth out the rough spots created by nasty foreclosures. Bank of America will let you give back your deed and rent from them, for some time into the future. I can only imagine how wonderful this would be. If banks are difficult to deal with when attempting to secure a loan, just think how fun they'll be to deal with when the sink leaks and the roof needs replacing. They are, after all, the landlord. I'm guessing this experiment, like all experiments intended to stem the crushing tide of foreclosures will fail, and likely miserably.
I do not follow the Lake Geneva foreclosure market closely. I do not draw charts and graphs, and if I did I wouldn't make some graph bars one color and other bars a different color. I have no baselines. I only follow the market to gauge the sentiment within in it- to know what is happening on a macro level. Of course this macro description applies only because I'm aware just how detailed such a foreclosure study could be. My studies are not that involved, but they do shed just enough light on the situation here. What's the situation? Not terrible. Not great. Pretty much the same.
For every agent spewing nonsense about some unheralded broad market recovery, I must point to foreclosures to douse their personally fanned flames. With foreclosures occurring at what appears to be a steady rate, and defaults piling up at similar speeds, I see no way that a broad market recovery can gain much momentum. Foreclosures will continue, and the dance will alternate between two steps forward and one step back. The larger trend will be recovery, but how soon and how strong that recovery is will depend upon the tendency toward default, strategic or otherwise, by those with negative equity and financial hardship.
Notice that I've been using the term broad when describing a nascent recovery. There are individual recoveries well underway, but these recoveries are targeting specific niches within narrow market segments. If the lakefront market featuring large lakefront estates priced at vacant land values between $2.5MM and $2.8MM is obscenely hot, does this too make some lakefront priced at $9MM similarly exciting? Of course not. Individual segments recover at different times, but if we're looking to get a sense of the broad market then foreclosure activity must be weighed as a serious and lasting deterrent.
The Lake Geneva real estate market seems to be featuring fewer foreclosures of late, and I see just a few trouble spots in Country Club Estates, Geneva National, and some of the less desirable condotel projects (Cove, I'm looking at you). There isn't anything brewing on the lake, which is quite amazing in and of itself. The financial stability of this ownership group is a marvelous thing, and it's just another reason Lake Geneva is the king of vacation home markets.
Lake Geneva: A bastion of foreclosure hating, vacation loving owners since John Kinzie ate his first fish fry lakeside in 1831.
Photo by Matt Mason Photography. www.mattmasonphotography.com