A Lake Martin Voice reader submitted these questions to me about the Lake Martin real estate market in general. They were so good that I thought we all would benefit from my attempts to answer. Do you disagree? Then reply below and let me hear about it. The RIQ (reader in question) purchased a Lake Martin waterfront home in 2006. Here are my OPINIONS, for what they are worth, I am neither an appraiser nor soothsayer:
1. We arent looking to sell, but gosh, in this environment, is seems like we just bought at the wrong time. What do you think?
I think that 2006 was the peak of the bull market in Lake Martin waterfront property.
2. Will Lake Martin property values ever come back?
I don’t think they have gone anywhere to warrant a “come back.” In other words, I don’t see evidence that prices have dropped, only evidence that they have ended a scorching run of yearly gains. So if by “come back” you mean will prices someday start going up again? Of course. It’s all about supply and demand. In my estimations property values in the period of 2000 - 2006 climbed 30% PER YEAR. No product, not even oil, or bottled water, can sustain that. Since then I think we have had 0% gain for 2 years. Yet, if you average that gain over 8 (2000 - 2008) instead of 6 (2000 - 2006) you still average 22.5% gain per year. I realize you bought in 06, but still you need to know that over the long term (40 years), history has shown us that Lake Martin averages 12 - 15 % per year gain.
3. Do you think our decision on this house will prove to be an œok decision for long term financial objectives?
Don’t mean to sound like a smart Alec, but let me know of another investment that has averaged 12 - 15% per year for the last 40 years. I will start selling it instead of Lake Martin real estate. I am too conservative (and cash poor) 
of an investor to hop in and out of real estate on the short term. But for the long term, it’s hard to beat. Remember, unlike Tampa or Atlanta or whatever, Lake Martin is not growing geographically. Waterfront footage is fixed. Furthermore, practically every inch of undeveloped (450+ miles) shoreline is owned by either Russell Lands or Alabama Power. It’s not like you have 100 different landowners or developers that potentially flood the market. I believe that Russell Lands is committed to measured growth. The last thing they want to do is flood the market with supply (which is why I think they have pulled back in the last 18 months). Alabama Power isn’t even in the real estate business. About every 5 years they release 15 new lots to lease. On the grand scheme of things, that is not a material amount of supply injection.
4. Do you think we could move our Lake Martin house if we had to?
Absolutely. Even though market wide, the Lake Martin market is still lukewarm, I have been blessed to have sold more real estate so far in 08 than all of 07. That’s not bragging because 07 was pretty pitiful. But an interesting point is that about half of the Lake Martin homes that I transacted this year had already been for sale before, some since 06. So did I sprinkle magic dust on their roofs? Did I go to the back yard and bury 6 statues instead of merely 1 statue of St. Whomever, patron saint of the desperate? No. I concentrated on the holy trinity of real estate: pricing, staging, and marketing. In a buyer’s market, things are still selling, it just takes a longer time. In 2005, it might take 20 days. in 2008, it might take 100. But it will sell. Sure, there is a lot of stuff on the market that is sitting for over 200 days. But, I am highly confident your home can be sold if properly priced, staged, and marketed. Will you make money? Who knows. I don’t know what you paid for it nor what you owe on it. But rest assured, if your goal is simply to “move” it, absolutely it can be done.
Does anyone else have an opinion? Help us all out and comment below. If you can’t see the “Leave a Reply” box below, click the “Continue” button then scroll to the bottom.
Good morning John:
I am always impressed by your deep and broad knowledge of Lake Martin real estate market. But, on this post, I feel that you are overly optimistic:
1) You do not see any evidence of prices dropping? If you need evidence: it is just in front of you with this guy asking you these questions. If he felt he could sell at the price he paid in 2006, he would not be asking these questions.
2) Your averaging over time (22.5% gain ), while correct for a buyer BEFORE 2002/2003 is wrong for a prospective buyer. I do not think that this average of 22.5 would be correct for anyone who bought AFTER 2004 or would like to buy now.
Come on! You do not see evidence of price drop? This is funny, but a friend living all year long on Lake Martin left me the last edition of “Lake Martin Homes…” with the following hand written note: “Dr. Freeman, I think prices are continuing to fall”.
Two years ago, you could not see any deeded house/cabin below $200K…Is it still true?
Sam
Sam- as always thanks for your comments. An attempt to respond:
1. By evidence, I mean homes that sold at or before 2006, selling for less now. I mean the EXACT home or lot or condo. I haven’t seen that yet. Not saying it won’t happen, just haven’t seen it yet. I am not talking about ASKING or LIST prices, yes, those are (thankfully) dropping. I am talking about selling prices. Nor I am I basing my comments on people’s “feelings.” Just because one person “felt” something, doesn’t affect the market. Just because I “feel” gas is worth $1.50 a gallon, do you think anyone will sell to me at that rate today?
2. Correct, someone that bought in 2004 would have experienced 2 years at about 30% and 2 years at 0%, which would average to less than 22.5% - more like 15%. But I make the point that over the long term, say 40 or 50 years, it has averaged 12 to 15 % per year. I think that his question was geared to long term appreciation rates. Not short (2 year) terms. I agree with you that it is highly unlikely to find a place to buy now that would appreciate more than 6% in the next 12 months. But, in just about any other time frame, I like your chances. It is just like the stock market, if you are a long term investor, then pick investments based on their LONG TERM track record. If you’re short term, then look at the last 12 months and the next likely 12 months.
Note from your friend - does he mean list prices? If so I agree, and I for one am glad of it. Does he mean sales prices? Maybe he’s right, but show me the numbers. Trust me, if I see evidence, I will call it, just like I called the end of the sellers’ market over a year ago. I caught a lot of flak about it, but I calls em as I sees em.
Your last question - I just ran a search on the MLS, on homes (not trailers) on deeded (not leased) waterfront lots that sold on Lake Martin (not Yates Lake or anything else) in the last 12 months. The least expensive was $256k. So to answer your question, yes, that is still true.
Thanks as always for your comments and kind words.
John,
I believe that we are experiencing a natural correction. We all knew that the bubble had to pop sooner or later, we just didn’t know when and how bad.
With the Mortgage Mess and the overal economy, we have on our hands the perfect storm. We will come out of it, and yes, over time we will see the Real Estate market come back in my opinion. Depending on how well you bought into your investments, will depend on how long you will have to wait or even have to wait at all to get a return on your investment. We all know that you make your money n Real Estate when you buy, ot when you sell.
Great Job John, keep up the great work. You are a great asset to those looking to buy or sell in the Lake Martin Area.
Chad
John,
I usually agree with most everythin you say regarding lake real estate. I would have to guess that 1992-2005 would have been the best 13 years ever in the real estate market. For what it’s worth, people should look to buy at the lake (or anywhere else)because of the personal enjoyment. You can’t put a pricetag on that! People have bought for all the wrong reasons (greed) and now are paying the price. As for 12-15% returns no way. At 12%, the average lake home 500k will be worth 46,000,000 in 40 years. Who believes that is likely?
ACE
ACE- I agree with you that some buyers let greed creep in there.
When looking at things in perspective, I always like to compare LM real estate to the stock market. Don’t you agree that before the tech bubble burst, that there were “greedy” buyers out there? Then again, one man’s “greed” might be another’s acceptable risk tolerence. Without getting into a sidebar on the definition, why don’t we just refer to buyers in both markets as ones who didn’t put as much weight in the fundamentals of investing, be it tech stocks or LM real estate.
To extend the analogy to the “beleivability” of 12% long term returns - consider the most recent example of a lot that was sold in Willow Point for the upper 700s. They originally sold those for about $9,000 in 1970. So what was the gain, if you assume a person bought the lot in 1970 and sold now? You guessed it, 12%. How many people would have guessed that lot would one day be worth that much? Next to zero, including many in the RE profession. I could quote you example after example. Yes, 46 million sounds ridiculous in 40 years. But so did Dow 10,000.
Will it be 12% for the next 40 years? Who knows? Will the S&P be 11% for the next 100? Who knows? No one can guarantee either. But I do think it wise, if one is investing over the long term, to study long term trends. While LM RE is not as liquid as an S&P spider, it does have other things going for it, like inelastic supply. So I would pose the question to you, whether predicting LM real estate, or the S&P, where do you think it will be in 40 years? More importantly, where do you get the facts to make that estimation? Do you base both decisions on facts, or one on emotion and the other on facts?
Further, if you own LM real estate, would you be willing to sell “futures” (the right to buy from you in the future at a certain time and price) to that? If so, what time frame and what assumed rate of return?!?!? HA!
Thanks for the great comments. I love a good discussion.
John,
Your analysis and point of view on Lake Martin properties is right on target with the sales analysis that I have done over the last 4 years, including 2007. It’s hard for some to understand that the actual ‘values’ on the lake haven’t fallen. Sure, the number of transactions have dropped, but the values are holding firm.
Nice article….
Thanks