Patience seems to have paid off for Gary and Wanda Lockwood.
The Crystal Lake couple spent more than two years shopping the Lake Geneva, Wis., area for a second home. They closed last month on a two-bedroom, two-bath condo that has a den and an updated kitchen with granite countertops in Fontana, Wis.
“Two-and-a-half years ago, we would not have been able to get as nice of place as we have now,” says Wanda Lockwood.
But as the real estate market went into a slump and the inventory of homes increased, the Lockwoods saw prices easing. “I watched our place go down for six months,” she says.
The seller originally listed the condo at $329,000 and refused a cash offer of $310,000, Lockwood says. Eventually, the list price dropped to $279,000, and “we scooped it up for a good price,” she says.
If a destination home is in your plans and you have a large enough cash down payment, spotless credit and a long-term outlook, now may be a good time to shop. The same economic forces that have beaten down primary home prices are at work in the second-home market too.
“There are opportunities that haven’t been around for a long time,” says Rick Stein, broker owner of Re/Max Bayshore Properties in Traverse City, Mich..
“This is an excellent time to buy. The No. 1 reason is low interest rates, and No. 2, there’s a good inventory and things are priced correctly,” says Scott Bader, owner of Coldwell Banker Door County Horizons in Fish Creek, Wis.
Buyers, however, shouldn’t expect huge discounts. While vacation-home sales dropped 30.6 percent nationally between 2006 and 2007, median prices were down just 2.5 percent, to $195,000, according to the National Association of Realtors.
“People are expecting a steal, but they won’t find it,” Stein says. “Although properties are not selling as fast as they used to and there’s more to choose from, prices are holding. It’s a discretionary market, and most people don’t have to sell.”
Sam Salchenberger of Elmhurst says he made two offers on second homes before he bought a four-bedroom, 21/2-bath house in Fontana this year as a weekend getaway. Salchenberger says he was surprised when the sellers were unwilling to go $10,000 below their asking price; both properties remain on the market.
“There seems to be a lack of appreciation from the buyer of what the market is really like,” he says.
Indeed, most Midwest destination markets have been insulated from the double-digit price declines in speculator-driven places such as Florida and Las Vegas, according to sales statistics from various Realtor associations.
In Door County, home-sales volume fell 18.5 percent in 2007 from the previous year and the median price dropped 7 percent, to $219,200. In Lake County, Ind., sales fell 13.3 percent, but the median price rose 2.9 percent, to $123,500. In Fontana, sales slid 12.6 percent in 2007, and the average price dropped 4.2 percent, to $444,796.
In March, home sales in southwest Michigan, which includes Union Pier and New Buffalo, dropped 21.2 percent and the average price fell 5.36 percent, to $167,364 from a year earlier; the Traverse City area saw a 21 percent drop in sales but with an average price increase of 9.8 percent, to $190,447.
However, these figures include all homes for sale in the area and real estate agents say prices for second homes in prime locations on a lake or with lake access or views are stable.
There are exceptions. For example, a hillside ranch home with a lake view in Long Beach, Ind., sold in August 2004 for $840,000 and in May 2005 for $909,000, says Ed Merrion, principal broker of Merrion and Associates Realtors in Michigan City, Ind. The owners fixed up the property to flip it, listing it in April 2006 at $1.1 million. The house sold this March for $820,000, he says.
Jim Graham of Cedarburg, Wis., says he was feeling out the Door County market when his real estate agent told him about a foreclosure property, a bank-owned two-bedroom, 2 1/2-bath townhouse in Sister Bay, Wis.
“We were originally looking at a bigger place, but when this fell into our lap, we were a little taken aback. We realized this was a deal,” Graham says.
The unit was listed for $189,000 though identical properties sold for more than $200,000 two years ago, Graham says. Graham, his wife, Torey, and his wife’s sister and husband, Tobey and Mike Neuberger, also of Cedarburg, bought the townhouse this spring as an income property. They plan to use a management company to rent it out.
With speculators all but gone, would-be buyers can take their time before signing on the dotted line, says Christine Karpinski, with HomeAway.com and author of “How to Rent Vacation Properties By Owner: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment.”
“Speculators inflate market prices and make for more competition. That’s not the best situation for the market. Today more people are in for the long haul,” she says.
