Consumer Confidence, Existing Home Sales, Market Insight

CATAWAMPUS! What’s Gone Wrong With The Our Lakefront Homes?

September 22, 2011 by · 1 Comment 

Party Like It’s 2005!

That’s to say, party on, if you live on the beach. And you have deep enough pockets to hold on through thick and thin.

LongBeachHome_BySteveCardwellA few isolated pockets of  Lake County Indiana, and Porter County Indiana must not have gotten the memo that we are in a real estate recession. With all our sophisticated communications devices and 24 hour news, we should all be on the same page on these things. Still, some people stubbornly refuse to face the reality that their homes are not as valuable as they used to be. The Lake Michigan waterfront seems to be one of the places where “the bubble” still lives, at least in people’s minds.

Economists like to discuss “orderly” markets where buyers and sellers can negotiate win/win deals by making small trimming adjustments until both sides have reached agreement. But some lakefront sellers are dug-in. And since lenders and buyers must adhere to more stringent rules now, than in the past, deals are simply not happening. The market has hit the wall.  When sellers dig in; buyers can only borrow so much. If buyers don’t have their own cash to waste on an overpriced home, the mortgage lending system will not allow them to overpay using other people’s money.

But those who MUST sell learn a hard dose of reality when they finally must cross the line back into the real world. Because when their appraisal reveals an inflated price, they discover that banks are not rolling out the red carpets for Jumbo loans like they used to.

I ran an analysis of the various lakefront communities to see where the disconnects have been most severe. Some of these results are fairly predictable from talking with local REALTOR’s. Others are surprising, because some Lakefront communities do have quite orderly markets.

Remember our discussion about Price-Per-Square Foot? If you are not familiar with this measurement, this is a common denominator which allows us to compare a large home versus a small one. Regardless of the size, a higher number means a “better” home (better location, higher quality of construction, larger lot, nicer architecture, fixtures and amenities) while a lower number means a less desirable property. How close you are to the water; on the beach versus across the street, or a block away, are big factors which will spike up or down the PPSF of one house versus another when comparing two similar homes.

OD_Sunset_BySteveCardwellIn most NWI communities, average homes range from about $80 to $140 per square foot. And a home that is priced accurately for the local market can be expected to sell in 6 to 9 months. But in the rarefied air of the beach, it’s a wide open scenario.  Here is the list of of what you can expect to see in each of these markets, and how stagnated things become when sellers dig-in.

BEVERLY SHORES, INDIANA:

We will start here, the most egregious disconnect between buyers and sellers, Beverly Shores. This sparsely populated community has some magnificent unspoiled views of the lake from Lakefront Road. But the disparity between the prices folks want for their properties and what buyers are willing to pay is the most extremely out-of-sync.

Active Listings Average PPSF:  $267   Homes SOLD PPSF:  $188   Difference:  -30%

Time needed to sell existing inventory at current Absorption Rate:  3 years, 7 months.

SHOREWOOD FOREST, VALPARAISO, INDIANA:

There are some fantastic buys here for a savvy negotiator who has good credit and  is willing to make make low-ball offers. Prices have already dropped some, but as the statistics show, there is still more room to come down before the market comes into harmony.

Active Listings Average PPSF:  $139  Homes SOLD PPSF:  $109  Difference:  -22%

Time needed to sell existing inventory at current Absorption Rate:  4 years, 5 months.

MILLER BEACH, GARY, INDIANA  (From Maple Ave to the beach):

Active Listings Average PPSF:  $144  Homes SOLD PPSF:  $115   Difference:  -20%

Time needed to sell existing inventory at current Absorption Rate:  3 years.

OGDEN DUNES, PORTAGE, INDIANA:

There are many homes here from the 1950’s and ’60’s which need major rehabs, yet many sellers with pink fixtures still regard them as made from gold. Regardless of where the location is, when rehab needs $100,000 in work, it should be priced accordingly. Some of the sellers in OD need more than just the “tough love” conversation about their asking price, but a swift kick for being so blatantly greedy, (IMHO, of course).

Active Listings Average PPSF:  $190  Homes SOLD PPSF:  $152    Difference:  -20%

Time needed to sell existing inventory at current Absorption Rate:  3 years, 7 months.

DUNE ACRES, PORTER,  INDIANA:

This is a special case since many of the homes are opulent and have legitimately high price tags. And there is simply not much turnover. So although the prices are close, there are simply few transactions. But with 10 homes for sale and only one sold within the past year, a seller will need to be very patient waiting for his number to come up.

Active Listings Average PPSF:  $242   Homes SOLD PPSF:  $230   Difference:  -5%

Time needed to sell existing inventory at current Absorption rate:  10 years

BRIGHT SPOTS OF SENSIBILITY:

It is not all doom and gloom in this market study. Several lakefront communities have found buyers and seller expectations matching up well to make an orderly and “normal” real estate market.

LONG BEACH, MICHIGAN CITY, INDIANA:

Recent sales in this posh community have actually been HIGHER per square foot than the current crop of homes for sale.

Active Listings Average PPSF:  $228   Homes SOLD PPSF:  $252   Difference:  +11%

Time needed to sell existing inventory at current Absorption Rate:  1 years, 9 months

LAKE OF THE FOUR SEASONS, WINFIELD, INDIANA:

Winfield gets the prize for the being most affordable lakefront community as well as having the most “normal” juxtaposition between buyers and sellers. Sure, it’s not Lake Michigan; but it’s still the beach.  Here again, SOLD homes went for higher prices (on per square foot basis) than the current Active inventory.  Sweet!

Active Listings Average PPSF:  $83   Homes SOLD PPSF:  $89  Difference:  +7%

Time needed to sell existing inventory at current Absorption rate:  10 months

CONSULT YOUR LAKEFRONT AUTHORITY:

For anyone needing a reality check in today’s shifted market, contact me for the market facts. If someone you know needs the “tough love” conversation about their dormant property, I am here as your consultant as well as your negotiator.  Let’s kick into gear! For both Buyers and Sellers alike, I make house calls with the ice water ready for those sleepy listings. 2005 is over; it is time to wake-up and drink the espresso  if you want to make a deal. Volunteer yourself, or turn in a friend you care about! My two-step program is available now.

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Steve Cardwell

Steve Cardwell is an Indiana Realtor working with residential buyers and sellers throughout Northwest Indiana. He likes to stay current on the housing market by analyzing real estate trends with a focus on the towns of Highland and Munster Indiana. His broker affiliation is Red Key Realty Leaders in St John, Indiana. Learn more about Steve and visit www.SteveCardwell.com.

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  1. […] CATAWAMPUS!: What's Gone Wrong With The Our Lakefront Homes? | WelcomeHomeNWI.com I touched on some of these issues in a recent blog post "Catawampus: Whats Wrong With Our Lakefront Homes". In contains a survey on the various hamlets on the Lake and the stagnant absorbtion rate of homes; the wide disparity between LISTING prices and actual SELLING prices of ready-and-willing buyers. If people are interested I can do a follow-up piece on statistics in some other NWI communities. Goto WELCOMEHOMENWI.COM for regular mortgage and real estate news from across the region. […]



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