In 1992, a nice couple whom I have never met, bought a small condominium in Geneva National. Geneva National was new, shiny, and full of promise. Buyers found this product on their own or through Realtors, or they responded to floods of advertisements that promised the new and the shiny and the promise. These buyers bought, and for $115k they owned a small piece of Geneva National. The condo was small, sure, but it was never intended to be a Thanksgiving Dinner space. It was intended to be as I presumed they used it for those first exciting years, and then for all of the years that followed; as a small place to hang their hat while they launched into all that both GN and the greater Lake Geneva area had to offer. I imagine times were good.
Today, some 23 years later, that condominium is under contract. The time, even though I don’t know them, must be right to move on. The current asking price, after all those years of steady and slow appreciation? $107k. While we cannot know the contract price, it doesn’t really matter. The price could be full or it could be low, either way, it’s sad. Geneva National, for all of that time, enduring both boom and bust and both over again, has failed to return a single nickel to this seller. In that, we can all feel bad.
Today, Geneva National is just like that. Sort of sad. The property befuddles me, admittedly, as there appears to be no reason whatsoever that this property should struggle as it does. The scenery and the topography- the one combination that cannot be changed in any development, at least not with any meaningful adjustment- is both beautiful and rare. The golf outstanding, the amenities full. The location, relative to both the lake and downtown Lake Geneva is ideal, providing close proximity to both without being too close to either. The price points are cheap, in fact, it would be easy to pay more for a condominium unit somewhere in the city of Delavan than it would be to buy a similar condo in the gated confines of Geneva National.
Today, there are several homes and condominiums pending sale. I think the most important fact is that the MLS shows four single family homes pending, priced from $324k to $675k. The single family market has struggled right alongside the condominium market, so whenever I see a spurt of volume I find reason to rejoice in it. But I do not see any spectacular trend here. I see no influx of buyers, no changing of attitudes, no reversal of two decades of tumult. The reason for this is purely based on the numbers. To put it simply, perhaps Geneva National is simply too big to succeed.
This doesn’t mean there won’t be pockets of success, intermixed with great paths of failure. There will be enclaves that sell well, investments that are made that return both capital and interest. There will be moments of good. But I fear that there will always be an underlying tone of bad. I fear Geneva National is built not on bad soil, and not of poor quality, but rather it is built in too great of size. The units number more than 1100, perhaps that number is now 1200, maybe 1300, who but the condo association ledger could know? The absorption rate of the condominium units there hasn’t been remarkably healthy since the huge run up in global real estate prices during the early 2000s, and the absorption rate will continue to be the forever problem that GN can’t outgrow, can’t out-advertise, and can’t out-manuever.
There are solutions to this GN problem, but they won’t be considered. There is still too much land there, too much product to be built, too much money to be possibly made. There is too much inventory already, but the developers that exist will continue to introduce more of it, trying to figure out what the market is lacking and attempting to plug that void with a shiny faucet or a marble floor. In attempting to solve the market, the market will continue to be deflated, weighed down by old inventory that’s part of a normal sales cycle and new inventory that keeps coming, no matter the market conditions. This problem has endured since the mid 1990s, and GN shows no sign of making the problem disappear.
A few months ago, I had a successful Chicago developer contact me in hopes of securing a thousand acres of land to build things on. The idea was to build something large, something high end, something that the market has never seen before. He wanted to build lots of units, lots of houses, lots of lots. But instead of going to work on the project, I decided there was no room for such a product in our market. Perhaps this was a mistake, but I see 25 years of example spread out over the grounds called Geneva National, and I know that our market simply cannot absorb new product in any significant way. New developments will come and they will succeed, but only if they predicate their success on a small volume model, where scarcity drives desirability which, in turn, drives the success both of the developer and of the future owners.
For now, Geneva National will remain, and it will fill a meaningful void in our market. It will provide beautiful scenery, beautiful homes, and rather wonderful condominium units for vacation seekers that wish to spend anywhere from $100k to $1MM, and all points in between. It will be a valuable member of our resort market, and sales will occur at the same clip as they’ve been occurring over recent years. Inventory is down right now, and inventory, in case you haven’t been actually reading these words, is the number one problem in GN. If inventory can stay down, and developers can resist the urge to fill every single crack with more condominiums and more new houses, then things will stabilize and perhaps thrive. But as long as the inventory is bolstered with more and more new, it’s going to be a long couple of decades for Geneva National.