This is my 40th year in real estate, and I can honestly say that nothing has surprised me as much as the lake market since the onset of the COVID-19 pandemic. Those who follow this column may recall how I have noted that the market greatly surprised to the upside over the last year with off-the-chart headlines over the last 12 months ending on Jan. 31, 2021.
Gross sales volume for lakefront residential volume was up 58.6 percent over the same period last year. The number of sales was up 62.1 percent over the same period. The average waterfront residential sales price increased 19.4 percent,and the residential sales volume of $340,507,562 easily surpassed any year prior to 2020.
If that is not impressive enough, the sales volume for lakefront lots notched very impressive gains as well. Gross sales volume for waterfront lots increased 247.2 percent over the same period last year, and the total unit count for waterfront lots increased 176.2 percent.This impressive result was due to the rapidly dwindling supply of existing home inventory.
In fact, even with the increased number of lot sales, the addition of newly developed property and new home construction, inventory of all types is at an all-time low.
Inventory at historic low levels
Last year, an increase in property values was predicted, due to what were, at the time, historically low inventory levels. This time last year, there were 160 residential properties on the market. Given the pace of sales last year, that meant there was just a 5.3-month supply of available inventory. Current inventory levels make last year’s inventory look like a Thanksgiving feast.
As of this writing, there were just 50 residential properties on the market – roughly 12 of which were under contract awaiting clearance of due diligence activity. That is just a 1.25-month supply. In other words, without any newly listed property, there will not be any available homes for sale on Lake Martin by mid-April. Condos are also scarce with just a two-week supply, and the supply of waterfront lots shrank to a 3.33-month supply.
Demand remains at high levels
While the lake is just emerging from the low winter pool levels, demand for waterfront property remains at a high summertime level. Since the onset of the pandemic, new contracts are tracking each month. January’s sales, even with low inventory, have been very impressive. Last January, 10 residential properties went under contract. The average list price for the residential properties last year was $523,548.
This January, 44 residential propertieswent under contract. That is on pace for 528 properties for the year, which would surpass last year’s brisk 481 units. The average list price for the properties placed under contract is 51 percent higherthan those in January of 2020 at $787,928. Clearly, the increase in property values is continuing at a double-digit pace.
What to look for
Lake Martin is headed into what could be a record-setting year in every metric, were it not for one problem. There is not enough property coming onto the market to satisfy the still–robust demand. The numbers are pretty clear – lake property values are headed up, and with reduced inventory, the pace is not likely to change any time soon.
This year will be a new experience for everyone in the real estate business. There is strong demand for all lake property, especially for Lake Martin. With the ongoing limited supply, there will likely be anxiety for potential buyers due to limited supply coupled with higher prices.
Some have asked when prices are likely to decrease. My answer is that prices are unlikely to decrease. The better question is, “When will the rate of increase return to single-digit levels?” I think there are three fundamental changes that will have to occur before we will see normal appreciation rates. They are: a 2- to 3-point increase in interest rates; dramatic increases in available properties for sale; a shift in the national trend for people to return to urban locations.
Of the three required scenarios listed above, it is unlikely that all three will occur simultaneously. Interest rates are fairly unpredictable, but they seem stable for the foreseeable future. Development and construction are long-lead-time activities, and the demographic trends for lake life that are driving increased demand seem to be generational.
While the market is headed to uncharted water, it looks like fairly smooth sailing for property values.
Steve Arnberg is Vice President Real Estate Sales for Russell Lands On Lake Martin.