By Jade Goodhue Are you relying on Zillow's Zestimate to gauge your home's worth? Buckle up, because you're in for a rollercoaster ride of surprises! Zestimates, often seen as the North Star in
A Thawing of the Real Estate Market in the Geneva Lakes WI Area???
Dated: November 24 2023
By Jade Goodhue
The real estate market in Geneva Lakes, Wisconsin, is as dynamic and intriguing as the picturesque landscapes that define this stunning area. The end of the 3rd quarter foreshadowed a pretty chilly winter in real estate, however, October has turned a corner! If you're curious about the current trends, recent shifts, and future predictions for property dealings here, you've landed in the right place. Let's dive into the depths of Geneva Lakes' real estate scene to uncover what's really going on!
A Soft Landing In Sight with Target 2% Inflation in Spitting Distance
Inflation’s broad slowdown extended through October, putting us in spitting distance of the Federal Reserve’s target of 2% which could very likely end the Federal Reserve’s historic interest-rate increases.
The big drop happened while employers continued to add jobs and without any obvious sign that economic growth was petering out. In September, the Fed expected core inflation as measured by the PCE price index to end the year at 3.7%. Now, it appears it could fall to 3.4%, according to Omair Sharif, president of Inflation Insights. This bodes well as no one wants to see the Feds hike rates going into the holiday season.
Still, a soft landing isn’t guaranteed. Inflation hasn’t made it all the way to 2%. We’re still yet to see the long-term, delayed impact of higher interest rates. Moreover, the American consumer, whose spending has sustained recent growth, may be running out of steam. Outside forces like energy prices or a financial crisis could intervene. Moreover, we’re seeing some signs of cooling.
Signs of cooling
Americans spent a healthy amount over the summer (on concerts, travel, and expensive gasoline), however, retail sales fell in October for the first time since March. Retail sales comprise about two-thirds of overall economic activity, thus, the strong summer spending propelled the economy to accelerate to near a 5% growth rate. Now, there are signs of a sharp slowing.
One of the nation’s largest retailers, Target, said that consumers continue to pull back on discretionary items that make up much of its annual revenue. “Consumers are feeling the weight of multiple economic pressures and discretionary retail has borne the brunt of this,” said Target Chief Growth Officer Christina Hennington. With high interest rates, households are facing several barriers to continuing to spend at a fast rate. The cost of borrowing for mortgages, car loans, and credit card balances has all climbed this year. Not to mention the return of student loan payments.
Will There Be an Economic Slowdown Ahead?
Forecasters expect overall economic growth to ease in the final months of the year. In addition to the downturn in consumer spending, a number of small firms reported that it was harder to access credit increased in a September survey from the National Federation of Independent Business. Thus, economists at S&P Global Market Intelligence estimated that the economy will slow to a 1% growth rate in the 4th quarter. A slower pace of revenue growth could make companies even less willing to hire and increase their business investments. Business investment in items such as buildings and equipment was already essentially flat over the summer. “It would be very surprising if consumption growth remains this strong in the fourth quarter,” said Andrew Hunter, deputy chief U.S. economist at Capital Economics. “There’s room for higher rates and various other headwinds to start taking a bit more of a toll.”
Labor Markets Remain Strong
Our saving grace is that the share of workforce participation remains at and around near 10-year highs.
Is the Probability of a Recession Still Low?
Thus, despite the declines in consumer spending, optimism is still high that we’ll avoid a recession is being fueled are 3 key factors: inflation continuing to decline, a growing sentiment that the Federal Reserve is done raising interest rates, and a robust labor market and economic growth that have outperformed expectations.
Optimism like this in the face of the 30-year average mortgage rate being 7.29% as of November 22nd, a level we haven’t seen since December of 2000, bodes well. However, because of these strong economic indicators, we likely won’t see the Federal Reserve lowering rates until about the 2nd quarter of 2024.
Is There Going to be a Surge of Foreclosures in Southeast Wisconsin?
The graph below from ICE Mortgage Monitor shows that we’re sitting at near historic lows in terms of delinquency rates across the US. Thus, finding a foreclosure is going to be extremely difficult.
Another way to examine the health of the mortgage and real estate market is the volume of negative equity shares or homes underwater. As you can see from the chart below, underwater mortgages are at historic lows as well.
How is the SE Wisconsin Real Estate Market Appreciating Compared to the Rest of the Nation?
According to ICE, home prices have grown annually by 9.4% which is rather strong compared to both the eastern and western coasts. The month-over-month grew by 0.5% which is on par with the rest of the nation. Thus, the real estate market is strong throughout the nation, and pretty hot here in the midwest.
What’s the Worst Case Scenario for the Real Estate Market?
In terms of residential real estate, the biggest at-risk group is those who purchased a home for 20% or less down in this high-interest rate environment, particularly those with FHA loans. Why? Because costs of borrowing (whether it be for a mortgage, new car, credit card, or student loan), all have squeezed consumers. The payment-to-income ratio well exceeds levels prior to the housing crisis. From a mortgage standpoint, lenders like to see payment-to-income ratios of no more than 30%. The good news is that lending standards have tightened dramatically. Thus, we won’t be seeing mortgage default rates like it was during the subprime lending fiasco during the 2008 Housing Crisis. But if there is a chink in the armor, borrowers with a high payment-to-income ratio who have less than 10% in equity in their home would be my best guess.
The silver lining is that if there is a recession, homeowner equity on residential properties nearly doubled what it was during the 2008 housing crisis, so the majority of homeowners can and will weather the storm.
What’s Going On In the Real Estate Market in the Geneva Lakes Area?
We had a slowdown or weakening in buyer demand in September, but an equally dramatic increase or strengthening in buyer demand in October. Continuous Day on Market (CDOM) is the number of days from the listing beginning date until their status was changed to pending, meaning it had an accepted offer. The longer the CDOM, the weaker the demand, and conversely the fewer the CDOM the stronger the demand. It could be an anomaly, but if the trend continues we could see a relatively active winter market!
During a time when listings typically decrease as we approach the winter months, the number of listings surprisingly increased, especially after 4 straight months of declining listings. If both the buyer demand and listing trend continue, this could bode well for a toasty winter market, which could mean the spring market could be pretty balmy!
Is It a Buyer’s Market or a Seller’s Market in the Geneva Lakes WI Area in the 4th Quarter of 2023?
Based on the graph below, technically we’re in a seller’s market. Technically... Anything less than 4 months of inventory is a seller's market. However, we’re right on the cusp of being in a balanced market. This means that sellers in general have an edge, but there are nuances that are tipping the balance of power back in favor of buyers.
If you’re a seller, you’ll experience the full benefits of a seller’s market if you have ALL 3 of these items:
A well-maintained home,
A reasonably priced home,
A home in a popular price range.
If any of those elements are missing, especially the first two, you’ll feel more like you’re in a balanced market where the buyer gets back some of their power.
If you’re a buyer:
If you’re looking for a well-maintained and/or newer home, be prepared to make a strong offer. If you intend to submit a lowball offer on a well-maintained home, I have a few competitors I’d love to refer you to.
If you’ve been looking for a while and have not had any success, I’d suggest:
looking at older homes that will likely have outdated high-ticket items such as roofs, water heaters, furnaces, or septic systems for example. People in general would rather not deal with big-ticket issues.
Have your agent show you homes that fit your criteria and that have been sitting on the market for some time. This would be an appropriate time to make a lower-than-listed offer.
Is the Real Estate Market in the SE Wisconsin Area Softening?
Yes, but it’s not crashing. The softening is due to normal, annual winter seasonality. The graph below shows the Sold-to-List Price Ratio. If this is above 100%, then the market is hot and homes are selling for more than asking. If it’s below 100%, then homes on average are selling for below asking. As with last year, we may see this drop to as low as 92% again, but it will rebound as soon as the spring market hits.
The real estate market in Geneva Lakes, WI, is a complex yet fascinating landscape. From luxury homes to vacation properties, the area is experiencing a surge in demand, creating both opportunities and challenges. Whether you're a buyer, seller, or simply an enthusiast, keeping a close eye on this market is sure to be a rewarding experience. Stay tuned to this space for more updates on what's really going on in the Geneva Lakes real estate market!
If you’re looking to buy or sell a home in SE Wisconsin, contact me at Jade@LegendaryRealEstateServices.com or call 2622045534.
Jade and Chris co-founded Legendary Real Estates Services during the start of the 2020 pandemic. With Chris’s background as a real estate agent and broker since 1990, and Jade’s background....
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