Chicago area folks are giving more than a second thought to second homes, fueling a surge of construction of cottages and contributing to the price runup of any property with a water view.
That affordable cabin in the woods is pretty much a thing of the past, especially if it is within reasonable driving distance of Chicago.
But, area residents also are playing a sizable role in second-home booms in Naples, Fla., and Phoenix, according to real estate agents in those cities, which have been popular with Midwesterners for decades.
Here’s a rundown of the second-home markets favored by Chicagoans, whether they are seeking a place to vacation, to retire or for investment.
First stop, Lake Geneva
This popular Wisconsin getaway “continues to be very vibrant and strong not only from a demand standpoint, but also . . . appreciation is still very significant,” says Steve Beers, president of Keefe Real Estate in Lake Geneva.
Appreciation has been “a solid 10 percent a year for the last three or four years,” he says. And, sometimes it has been 15 percent annually.
If you don’t have at least $2 million to spend, though, forget about living on Lake Geneva, Beers says.
“In Delavan, Lauderdale and Beulah, you might be able to find something that’s $750,000 to $1 million that is decent with 80 or 100 feet of [lake] frontage,” he advises.
But, “some people don’t need [to live on a lake]. They just want to be out on a couple or 5 acres.”
“You can go north of Lake Geneva, north of Elkhorn and between here and East Troy, there are beautiful pieces of property that have privacy but also have access to things.
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“A very comfortable home will average in the upper $200,000s to middle $300,000s, Beers says.
Best sellers: “Properties ranging from $200,000 to $450,000 are in demand the most,” in Lake Geneva, Delavan, Lauderdale, Beulah and Twin Lakes.
North to Door County
Real estate prices are quite a bit warmer than the chilly Lake Michigan waters on either side of this peninsula, where appreciation has been 5 to 8 percent a year, according to Scott Bader, owner of Coldwell Banker Door County Horizons in Sturgeon Bay and Fish Creek.
On the high end, condos with a water view are more than $1 million, he says. But you can “still get a condo [without a lake view] for $150,000 to $200,000 at resale,” he adds. “Any new condos are $225,000 and up.
“The most active [market] is $200,000 to $275,000 for condos,” Bader says. “For $275,000, you can buy a very nice three-bedroom, 2 1/2-bath [condo] with a garage.”
How about that cabin with a view?
“In northern Door County on the bay side for around $500,000, [you can get] a really nice log cabin with a nice water view,” says Bader.
“A lot of people have been investing [in Door County real estate] because of the stock market [performance],” he says. So, if you rent a condo now, you’ll have to do it for one month minimum versus one week in the past, he says.
Bargains? “You can still buy a hotel condo,” says Bader for $55,000 to $250,000. “That market is so saturated.”
Head for the `Hamptons’
What has become known as Harbor Country is Michigan’s answer to Long Island.
And the prices are high if you want to see water from your home.
“We had a very cold and snowy winter, so things didn’t start to pick up until the end of March,” says Gail Lowrie, associate broker with Rubloff in New Buffalo, Mich.
“We are very weather-driven” with people potential buyers having to drive from Chicago.
“There are more and more cottage developments going on, 10-, 15 or 20 cottages every place you look. They are not close to the lake. But because of the [high] price points, some people have decided to give up easy access” to Lake Michigan in exchange for these cottages.
Appreciation is healthy but not out of sight — 10 to 15 percent near the lake and 10 to 15 percent farther inland, both over two years, Lowrie reports.
Those new cottages are less than $500,000, Lowrie says. But “when you get to the lakefront proper, you are looking at $2.5 million to $3 million.”
What will $300,000 buy? Not much, Lowrie says, and it will be “very small and not that nice. People know that they need to start at $500,000, $800,000 or $900,000 and still not have private beach rights.”
If you want less costly property, go inland, she advises, but while the prices will be lower, the houses often need to be fixed up.
Lowrie touts Three Oaks, Mich., about 8 miles from the lake.
“It’s an area that was never viewed as a second-home location. It has a lot of little Queen Annes for under $200,000,” she says, “but under $150,000, they need a lot of work.”
Across the border in Indiana, “Michigan City has a lot of things in the wind for them,” Lowrie says. “There’s fair amount of urban renewal. Things are going to be cheaper there.
“There’s a marina, and it’s a little closer to Chicago. There are investment opportunities where you don’t have to pay the big bucks.”
Westward, ho
The Phoenix housing market is arguably hotter than the summer weather in the Valley of the Sun.
“The market is wild — very little out there to buy,” reports Carol Dennis of Coldwell Banker Success Realty in Phoenix.
“Prices have almost doubled in the second-home market. We’re seeing multiple offers, above list. Unbelievable.”
She cites one condominium that was built in 1974 and has seen some updating. It has 1,700 square feet on one floor and a two-car garage.
“Last year that unit, if they were lucky, would have gotten $250,000 They could probably get $375,000 today.”
More typical of what Chicagoans will find are units in northern Scottsdale with homes in the $900,000s and the smaller units selling in the $700,000s, she says.
What’s driving the market? “Investors who are coming out of Vegas,” says Dennis. “They’ve made money there and now they’re coming here.
“But there are a lot of investors, and the rental market is not wonderful because of that. Some builders are restricting” sales, barring investors. The property must be a primary residence and some discourage selling before two years pass, Dennis adds.
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While prices have skyrocketed, Dennis cites an age-restricted community in Scottsdale built in the 1960s.
It’s “a very nice development done in 10 stages. They are attached housing. Most people are redoing them. It’s located close to Scottsdale Fashion Square,” she says, and they’re going from $250,000 to $320,000. “One in the high range would probably have been redone.”
Sultry breezes
A couple of thousand miles to the southeast and many points higher in humidity is Naples, Fla., where Mike Hughes, managing broker at Downing Frye Realty Inc., says that “last year was the best ever,” for his firm.
“We’ve known for a while that the Baby Boomer impact was coming, and this past year was the first time we really felt it.
“Demand is vast. What’s interesting is when four hurricanes hit [Florida] last summer, some thought it would have a devastating impact. But the exact opposite has happened.”
What’s selling the most? “Over the last five years the $250,000 to $500,000 range has been red hot — and still is,” Hughes says. “The $1 million to $2 million [market] has become very active.”
According to Hughes, Chicagoans remain a force in his market.
What will they find?
If they’re after a two-bedroom, two-bath condo, they “won’t find anything under $500,000 that has any decent view. For a good water view with amenities, you’re looking at $1 million.”
“The bargains are there but you have to do a lot of hunting to find them,” Hughes emphasizes. “Prices certainly have increased to the point where you aren’t going to find that $200,000 place on the water. . . . “
In new construction, “when a developer releases a project it is not unusual to have four to five times as many buyers as units. Most of the projects are going to a lottery system” on who will get a chance to buy.
“In five years I believe you will look back at Naples prices and say, `I should have bought back then.’ Between Marco [Island] and Tampa in the next 10 years, it’s all going to fill in.”
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Wayne Faulkner is editor of Real Estate. You can contact him at [email protected], or write to him at baiduhai, 435 N. Michigan Ave., Chicago, IL 60611.