Housing Market Slowdown
 

Lots of articles this last week about a slowdown in the housing market. Many identify "500k more sellers than buyers" and that "the real estate market is finally starting to listen."

I've gotta think that second home locations would show trends like this before primary home areas—anyone seeing a slowdown in the Lakes Region?

I know that here at Arcadia, properties are still selling without hitting the market, but that might be a reflection of the cost-of-entry becoming a better value with high interest rates and prices.

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Can you explain? Not sure i understand that statement.

In any case, i agree some properties are spending more time on the market. Seems like only the most “perfect”properties are still moving quickly.

The cost-of-entry at Arcadia is ~$200k these days. That includes a private beach, private boat ramp, rentable boat poles, docks (separate ownership), tennis/pickleball courts, laundry and shower facilities, a rec. hall with patio overlooking the lake and performer stage, playground, sports field and boat storage, etc. etc.

As the prices for lake properties have skyrocketed, Arcadia has become a better and better value. That I know, the lowest selling price for a home on Hanson Cove this last couple years is just under $1M, almost five times higher.

Though it's certainly not for everyone—seasonal, an association, etc.—it's a bargain for lake access in a gated community.

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It was bound to happen sooner or later. I know a guy who put his home on the market a few weeks ago, an entry level lake access home. A year ago, that home would have had multiple offers, now it sits on the market for who knows how long.
The second home market is usually the first to slow down.
Other parts of the country are already in a decline, New England overall has held up better than most.
In my hometown of Waltham Ma. a 1000 sq ft entry level home on a slab in need of remodeling listed for 650K, had multiple offers over list at an open house last week.

Arcadia sounds great!

On lake properties in general, I do not think values will fall significantly, for two reasons. First--waterfront, like other super premium land, has skyrocketed away from the rest of the market, and everybody knows the supply is finite, it has become a distinct market without connection to normal buying and selling. Second, almost all of the recent waterfront transactions have gone to people who are rich, not stretching to afford it (no one stretches to afford a $2MM second home). So financially, it's just one piece of their overall portfolio.

But of course, I do not have a crystal ball...

An outsider coming here and reading 50+ post threads on the low lake level, water quality/cyanobacteria, loud music from wake boats, ever increasing ad volarem-based property taxes, etc., may very well think twice about dropping multimillions on lakefront property...

I think that's part of it, sure, but I also think a lot of today's younger generation no longer wants the "baggage" of extras in their life, nor can they afford them.

So, even though there's "only so much waterfront to go around," as Flying mentions above, if there's less demand from younger generations, it's a simple formula.
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I think you are on to something: my children are in their late 20's... before I sold my lakefront house in Raoul Cove I offered it to them... they declined!

They're waiting for the cash instead!

I am sorry…what is Arcadia?
Trailers?
Condos?
HOA?

Thank you,
Bill

This.
Many of the younger generations have ruled out ever owning a primary home, never mind second home. So they just move on to other things in life, like travel. They are more about “experience” than they are “baggage”.

That is ok-i understand. But I wonder how that will shake out as they age.

Arcadia Campground Association is a former campground-turned-condo Campground where the residents own the sites with, mostly, park model trailers and stick-built porches and decks, patios, etc.

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The internet version of the lake always seems to be more negative than the in person. No one posts about clean water, beautiful sunsets or the 50 people that shared a friendly wave. Captain Bonehead, however, gets lots of traction. 🙂

Inventory is up in my seacoast town. Past few years there were never more than 3 or 4 listings available at any given time. 16 today. Lots of homes selling though so it's just more supply but still good demand. Waterfront here in lakes region still seems to have very limited inventory. Articles about home sales can be misleading as nationwide stats don't always apply to our local areas. (at least right now they don't)

Since this is a broad real estate thread, i will throw this out for comments. If not appropriate to the OP please let me know.

I’ll note that DW and I were both licensed real estate agents years back, so we know a little bit about real estate.

Friend of ours looking to relocate to northeast from Chicago. Has a “private showing” yesterday.
Customer offers $50k > listing. (You think she’d be dancing…)
Our friend’s agent suggests she counters by asking for $10k more!?

I say that is crazy! Take the offer and be happy. I think she risks losing the sale for a lousy $10k. She was already offered $50k over list.

I dont know the Chicago market, i dont know if there are any contingencies.

I think her agent is:
* trying to cover up a poor original listing price
* greedy

In any case, I have never heard of a seller counter offering an over list price offer by asking for more!?

What say you?

It seems like we are missing some of the story here. Unless there is a competitive process going on, on unless the house is not yet on the market and they are expecting a competitive process, this does not make sense from either direction:

Why list for less than you'd accept?

Why offer more than asking price?

Except the Forum this year is no more negative than in the past, so these things should not drive prices down.

Of course, the other way to look at this is to turn the question on its head. I cannot remember of you own waterfront property. If yes, would you sell it today for what's listed on Zillow, or your own estimate of market value, or even 20% above that?

I sold my Winnipesaukee properties and built on acreage with waterfront on a smaller lake. when you are selling/buying at the same time, equivalent market forces operate on both ends of the transaction, so the anxiety/timing on the best time to pull the trigger is lessened.

No idea why the agent is pushing them to list at less than they accepted. That is the crazy part and i would think puts the agent’s license at risk (as well as this sale). Countering an over asking price by asking for more is bewildering. I would not be surprised if the offer blows up because of this response.

Offers over asking has been the norm since rona and during the last real estate bubble (early 2000’s) in many, many markets. Nothing unusual about that.

This is very true. Can be seen in more than housing purchases as well.

Continued high interest rates have a chilling effect, as I suspect does the "aging out" of the boomers who now own most of the lake front properties.

There simply are not as many younger folk with the resources to buy as there are boomer sellers, and this will likely worsen over time.

It's a numbers game.

Whether it be $10K or $50K, we would have a better persdpective if we kew the asking price ranfe. I doubt the RE Agent was being greedy--his/her share of the $10K would only be a few hundred in most cases. Special conditions would justify the $10K ask, such as-- furnshed? Occupancy wutrhin 20 days, etc.

Very hard to get quiet on the lake(s) now, and much less of a focus on hunting and fishing for those that are.

Smaller lakes and ponds are offering a better outlet.

It seems like listings on Winni are lasting longer and price cuts are happening. They are still almost double what they were 5 years ago, but at least some are moving down. Most of the island places I have been watching have had some fairly significant reductions (25-50K) over the last month, but 650-750K for an island property while still needing to purchase a slip is still not that appealing unfortunately.

List price = $450k (small house, suburb of Chicago).
Ever.
It is the only offer they have to date.

At $50k over asking, you either accept the offer or not. But to counter by asking more? Crazy.

Anyone else ever counter offer an over asking bid by looking for more $?
I thinks its the best way to lose the sale.

I watch the island market very closely and often hear of things coming before they are listed (I cast a wide net!). The inventory in general has been low this season. Rattlesnake listings haven’t been moving at all. It seems many of the listings are still priced for the Covid market and will sit.

My friends kids are doing this now. Two of them sold a house and are spending every available minute traveling. Good for them but mid 30s is time to be planning for the future, even if it's not the main focus. Time will tell.

Meantime, I think buyers are sitting on their hands waiting to see if there is a rate cut eventually.

That's the time to do it, before babies come along, still plenty of time to settle down and save. Although it gets tougher to save when you have a family.
I was always thinking about retirement from the time I started working full time at 19, now 71, I'm glad I did.

Interest rates?
 

I agree that prices are inflated. I expect more of a leveling off rather than significant drops. I do see a lot of price drops in areas where folks bought rental/investment properties and now want to sell. In the long term a 7% mortgage isn't so bad, and there are a bunch of low down payment programs. I recall the edarly 80's when mortgages were 18% and word was that you'd never see single digits again. Whether you live-in or are a landlord, deducting expenses and leverage in real estate are a strong favorable argument to have RE as part of a diversified portfolio.

I see a lot of properties listed as contingent, curious to what those contingencies could be.
I'm wondering if some are waiting for mortgage appraisals that might not qualify for a mortgage unless the buyers come up with more of a down payment?
I've seen a few marked contingent, only to go back on the market weeks later.

Most are probably in the mortgage process, but it can also be done on a cash deal if it is subject to inspections (or any other hurdle built into the deal to overcome). Home sale contingencies (waiting to close on the new purchase until your present property sells) used to be a common thing, but when covid hit, they seemed to fall out of grace. Things were selling so fast that there was no need to wait. You will probably see those making a comeback as the market slows.

Covid really messed up the housing Market, especially for second home properties, in remote areas..... Because there was an exodus of people trying to get out of the cities, and into more desirable full time locations where they could have fun, prices on lake properties sky rocketed. People where getting top dollar, now some of the "new" owners, want back out of what they bought into... The problem is they can't get out, unless they get top dollar. Hence properties are sitting on the Market longer, until someone comes along that has the money to waste..... Its a vicious cycle.....

Add on that the problems that are being seen on Winnipesaukee, indicating that the lake health is declining.....Honestly if I was going to invest knowing what I know about the lake, I would be looking else where.... if someone asked me about buying on the Lake, I would also advise them to be cautious...... I have a friend who's parents just decided to sell, and I am waiting to see how it goes for them.... As many have they built a home that would house all the kids and Grandkids..... of course they where never all up there... and now that the Grandkids are in college and no longer have time for Grandma and Grandpas lake house it isn't getting used.....

I think your first paragraph about RE prices spiking due to the 'Vid is spot on. It was a feeding frenzy 5 yrs ago, with many stories of folks selling everything to move to the lake and pay cash for waterfront properties because, "now we can work from anywhere". And waterfront properties are definitely sitting longer and people are loathe to lower the price for the reasons you pointed out. There's a waterfront rental near me that has been a rental forever...big groups every week for years. The place is old and tired, yet it was listed for over $3M and has been on the market for months.

On the other end of the spectrum, however, is another waterfront near me...very large high-end house...never a rental. That sold for $6M relatively quickly at the end of last year and then the buyers had workers in there for 6 months or so. I assume they gutted it head to toe, as there was a huge roll-off dumpster in the driveway all that time that was regularly filled and emptied.

A friend who is a RE agent who only sells waterfront described the current market as "unpredictable".

Certain locations on the lake are better than others.

So, Should I Jump on It?
 

Definitely a numbers game.

Washington is pressuring "The Fed" to lower interest rates; when that happens, the dam will break.

BTW: I have an opportunity to buy into a Florida house with an assumable 3.5% interest rate. I'm considering it.

:look:

It's a complex game.

Interest rates are still a bit high. The best rates require a high credit score.

Since prices are still up, down payments are higher, requiring more cash on hand.

The interested buyers already grabbed theirs during the last few years and the pool of buyers may be reduced. This is a normal cycle.

Since many people put their houses on the market as prices rose, there may be less people willing to sell for a while. This reduces choice; again a normal cycle.

The change in federal government has put many people in doom & gloom mode and there is certainly enough change going on to make people cautious about a large purchase.

Plus a lot of the issues already mentioned.

Each potential seller and buyer has their own reasons for acting or not acting.

Fun to talk about and speculate, almost impossible to conclude anything.

Real estate is always a tug of war between supply and demand. It's beginning to balance out, supply slowly increasing and demand slowly decreasing.
I think the stock market rising has made wealthy people wealthier, so the high-end properties are still moving. It's much easier to take some profits when the market is sky high.
Being 71 gives me a different perspective, rates don't look that high to me.

Interesting that you found a very rare assumable loan. Is that a VA loan?

For the younger Forum readers, most every home loan written was assumable up until the late 1960's or early 1970's. It was then that the lenders woke up and realized that they could make a lot more money by writing a higher priced fresh loan (charging "points" and closing costs). Assumable loans all but disappeared.

Profits always seem to rule the day.......

I agree with you. Rates used to be much higher. In the late 80s we had a business loan at 21% I have no idea how we managed it, looking back.

This is key - the wealth gap continues to grow which has a huge impact on waterfront/second home purchases. Prices are never going to be affordable for "regular" (create your own definition!) people like was the case 30 years ago. The divide will grow. Those who own waterfront property may get priced out due to taxes/upkeep but there will continue to be buyers that will cause prices to steadily rise over time.