Inventory, sales up in Detroit Lakes area this year
Four years into the real estate business, Kevin Cummings laments that he missed the heyday of selling seasonal homes in Minnesota when hungry buyers lined up for lakeside digs that seemed to sell themselves, even as property values climbed year after year.
"I'm actually having to work for a living," he joked last week.
A cruise around Minnesota's Lakes Country reveals why; "for sale" signs dot the lakeshore at levels not seen in recent years.
"We have probably more listings on the market now than we've ever had," said Steve Larson, president-elect of the Lakes County Association of Realtors.
Buyers are out there looking, but they're wary of the uncertain economy and slow to jump on a purchase, said Cummings and Jack Chivers, whose real estate agency has specialized in lake home sales in the Detroit Lakes area since 1966.
High-end homes, in particular, are sitting on the market longer. Chivers said his agency has sold only one $1 million home this year. Last year's total was two. In 2008, it was 11, and two of those were for $2 million-plus.
"It doesn't seem to be moving as fast," he said.
Recently, one potential buyer looked at a Pelican Lake home six times - an example of buyer apprehension Chivers refers to as "paralysis by analysis."
"I'm not used to that," he said.
Realtors and other observers of lake homes say several factors are to blame for the flooded market, including higher property taxes, the economy, foreclosures and downsizing by owners of multiple homes.
"There's really no one reason," Chivers said.
The result, they say, is a buyer's market, where some homes are being sold for less than the county's appraised market value.
"There are definitely some jewels and some deals to be had out there," said Cummings, of Coldwell Banker at the Lakes. "It's just a question of wanting to put in the time and effort to find them."
On the five main lakes in and around the city of Detroit Lakes - Detroit, Sallie, Melissa, Floyd and Little Floyd - lakeshore property sales were down more than 25 percent from 2005 to 2009, according to records from the Becker County Assessor's Office.
"We just don't have as much sales activity," Assessor Steve Skoog said.
However, sales appear to be rebounding in the area this year.
The Lakes Country Association of Realtors has seen an increase in both listings and sales of lake homes this year in roughly a 30-mile radius around Detroit Lakes.
As of Thursday, listings numbered 248, up from 230 at the same time last year, said Marti Wermager, the association's executive officer.
Sixty-two homes had sold so far this year, up 21 percent over the same period last year. Homes under contract for sale stood at 75, up from 38 a year ago.
Larson, who owns Coldwell Banker at the Lakes, attributed the increases in part to tax breaks offered to homebuyers through the federal stimulus package.
The wide selection of available homes and the recession also have played roles, he said.
"People have decided to move money from other sources like (the) stock market to something a little bit more stable," he said. "They've been able to buy a little bit more property for their dollar now than they were probably a year ago."
Chivers said it's an "incredible time to buy," with interest rates low and financing more available than it was last year. Home values also are flattening out, putting buyers in a better negotiating position.
"The difference is the sellers will pay attention to offers right now, where they haven't in the past," he said. "In the past, it's almost like they had next year's prices on everything because they were seeing all this appreciation."
Prices flatten out
As of Thursday, the average sale price of lakeshore homes in the Lakes Country area this year was $323,760 - down slightly from $333,100 at the same time last year, but basically flat for comparison purposes, as the figure fluctuates from day to day, Wermager said.
A slowdown in property value increases is reflected in the county's market values, Skoog said.
"I think overall, for the most part, values had been pretty flat last year, particularly on lakeshore," he said. "We didn't make a lot of changes."
In 2005, buyers on the five lakes in and around Detroit Lakes were paying on average about 15 percent more for lakeshore property than the county's assessed market value.
The tide turned by 2009, with buyers paying about 1.5 percent less than the county's market value, according to a Forum analysis. Through April of this year, the average sales ratio was 115, meaning the county's market value was 15 percent higher than what sellers received for their properties.
Some agents are using that as a sales pitch, advertising lake homes for sale for thousands of dollars under market value.
Reasons to sell vary
Larson said many owners cite property taxes as their primary reason for selling.
"They feel that the taxes are so high, and so many people that are retired don't have the incomes anymore to afford the taxes," he said.
Many lakeshore owners still feel the pinch of higher property taxes from the demise of Minnesota's "limited market value" system two years ago.
The system capped annual increases in taxable value on seasonal homes starting in 1993, resulting in artificially lower property taxes.
The state Legislature voted in 2001 to phase out the system by 2008.
"It came off right as the economy tanked, so they're seeing their values go through the roof right as they know the real estate market is collapsing," said Jeff Forester, executive director of the Minnesota Seasonal Recreational Property Owners Coalition.
Forester said he receives e-mails "every day" from cabin owners unable to keep up with property tax increases and forced to sell.
"It's crazy," he said. "They're paying taxes on value that never existed and no longer exists. It's a phantom value that we're being forced to pay taxes on. It's shocking and infuriating, really."
Foreclosures also are playing a role in the glut of lake homes for sale.
According to the National Association of Realtors, one of every 10 vacation homes bought nationally in 2009 was in foreclosure, the highest rate in five years, the St. Paul Pioneer Press reported last month.
Becker, Clay and Otter Tail counties all saw record numbers of foreclosures in 2009.
Chivers said foreclosures haven't been a big factor for his agency, which has about 175 lake properties listed and had only one foreclosure listing in the past year, he said.
Of course, not all homes with "for sale" signs are being actively marketed by their owners.
"A lot of people have got them on the market with, 'Well, if it sells, great, but I don't really need to,' " Cummings said.
With interest rates continuing at all-time lows, Larson expects sales to be brisk through 2010.
"We're all very optimistic on what fall will bring," he said.
Readers can reach Forum reporter Mike Nowatzki at (701) 241-5528