Articles & News
Lake home values notch double-digit gains
The price of residential waterfront property continues a steep trajectory on Lake Martin. Our most recent review of year-over-year sales metrics for the 12-month period** ending on October 31, 2020, reveals a very robust increase in average and median sales prices.
Both median and average prices increased year over year. Median prices increased 13.2% to $577,500. The average price increased 18.6% to $702,129 or $109,932 higher than that of last year. The price increase was not limited to just residential property. Waterfront lots increased as well, with the average price increasing 53.5% over last year.
The higher prices did not occur in a stagnant market. In fact, gross residential sales increased 54.7% to $321,574,999. The total number of units sold also increased by 30.5% to 458 total units. Lot sales volume was even more impressive, increasing 214.7% year over year.
Shifting fundamentals drive the market
In early March, with the onset of the COVID-19 virus, it did not appear that real estate would equal 2019 metrics, much less blow them out of the water as noted above. Instead, the way people used lake property changed significantly. Social distancing, working from home, and moving to the lake full-time from the city became key driving factors for the market.
Infrastructure in key lake neighborhoods, like The Ridge or The Willows, with high-speed internet, sewer systems, city water, proximity to shopping, and medical care proved to be viable options to urban environments.
Reduced inventory (now just a 1.91-month supply) drove prices higher as more buyers were vying for fewer properties. Larger demand with lower supply usually drives prices higher, especially when lake property is seen as a safe and attractive alternative to urban property.
Usually, prices reach a point where affordability becomes an issue. Governmental support to the economy, especially low interest rates, has provided needed purchasing firepower. This time last year, rates were roughly 4.25%, and a mortgage of $600,000 amortized over 30 years would have a $2,951 monthly payment. Today’s rates (3% is the national average) for a $700,000 mortgage, roughly the annual increase in average price, would net the exact same payment amortized for 30 years. In short, the monthly payment is the same, even for a higher price.
Predicting the future
Given the very low inventory, the shift in demand toward rural lake property, and the likely continuation of low interest rates, there is little reason to expect prices to decrease. There is every reason to think that prices could, in fact, continue to increase. Pressure to add additional lot inventory is great; but land development takes time, as does home construction.
Recent activity reported by our sales group remains strong, especially during the winter season. We think that those looking for waterfront property for the summer of 2021 should stay actively engaged with one of our Realtors®. Many properties are sold well before they are listed with the MLS or placed on the internet, many times above asking price.
While properties have gained value, on average 18.6%, this increase does not hold true for every property. Some properties have smaller increases; some have greater increases. Our sales team has the best market data available and can provide you an up-to-date market value if you have an interest in selling. We think that properties that enter the market in January and February will attract a lot of interest from prospective buyers.
As the weather warms up, more property will come on the market increasing supply and giving prospective buyers more options—potentially reducing the trend for double-digit increases. For buyers, we recommend you stay tuned and act quickly to get your lake home lined up before summer. For potential sellers, we recommend you list in January to gain the maximum selling time and allow potential buyers to focus on your property.
** As always, we pull sales reports from the local MLS system for a 12-month period and compare that with the sales report from the same 12-month period from the prior year. In this case, the 12 months ending October 31, 2020, versus the 12 months ending October 31, 2019.