State of the Waterfront Property Market

Part 1 of 2

Hello everyone,

TEAM MIKE here with a follow-up to last weekís blog, ìState of the Market Address, Fourth Quarter, 2007,î taking a closer look specifically at waterfront property in our area, based upon a response from one of the Ask the Realtors readers, Susan from Wisconsin.

The waterfront property market in the Grand Traverse area mirrors the Traverse City real estate market as a whole. The sellerís market is ìsoft,î with years of inventory currently listed, and only the best properties for a buyerís dollar are selling. Sale prices are anywhere from 5 percent to 35 percent below asking prices. While equity gain has recently slowed, particularly as bank foreclosures rapidly rise, supply remains ever-fixed.

We are in a buyerís market, but it will not last forever.

We identified Seven Significant Factors affecting the Grand Traverse area real estate market last week, the two biggest differences relative to waterfront properties are:

Money is not as cheap
Property supply is not as deep
The five other factors identified last week are as applicable to Traverse City waterfront property as they are to the real estate market as a whole. Namely:

TC is gorgeous and people want to live here
There are more people every day
Itís a buyerís market
Realtorsí value to sellers is rising
Realtors are FREE to buyers
ìWhy,î you might ask, ìis money not cheap for waterfront properties? I thought the wealthier you are, the easier it is to borrow money?î The answer is hidden in the way residential mortgages are designed, classified, and sold by the lending market, and its current health, or lack thereof.

Whether we are talking about a cabin along the Boardman River, a year-round residence on gorgeous Grand Traverse Bay, or a vacation home on crystal-clear Torch Lake, if a buyer is seeking a loan to finance some, or all, of the purchase price, that loan amount falls into what the lending world calls a ìjumbo loan.î

Although the exact dollar amounts vary by lender and lending product guidelines, any loan for more than $420,000 is considered a ìjumbo loan.î Rules and rates differ from those that govern the vast majority of residential loans written, underwritten, and borrowed in this country, and not in the favor of the ìjumbo borrower.î As foreclosure rates continue to skyrocket, and the sellerís market remains soft, there is greater perceived risk with a larger amount loaned, and so the money is more expensive to borrow.

Most waterfront property in the Grand Traverse area is worth $400,000 or more, oftentimes much more. While Michigan waterfront real estate is historically an outstanding investment, unless a buyer has the ability to pay for that property without financing a ìjumbo loan,î they will generally pay more than the average borrower in rate, fees, and possibly even receive a shorter loan term.

The other significant difference between waterfront property and non-waterfront property in the Grand Traverse area is the supply, or rather the lack of it. While there are LOTS of properties for sale all over the country, including here in the Traverse City area, there is only so much beach in Northern Michigan. Add the fact that there are more people every day, and the Baby Boomer generation is beginning to retire, and Traverse City waterfront property values will continue to rise over time.

Check back soon for Part 2 of Traverse City-area Waterfront Property report.

Take good care,


Last Updated: October 24, 2007