Huey Real Estate, LLC
PO Box 146
Marquette, MI 49855
UP Real Estate Market|
Looking back at the fifteen years I've been involved in U.P. real estate, it has been quite a run. This has been a seller's market, a market in which good property has sold at constantly increasing prices. The local MAI's (the best appraisers) tell me waterfront real estate prices across the market have been averaging about 15% a year, compound. Depending on when you start counting I'd say it has been a buyer's market for seven to ten years.
The last few including 2006 have been extremely strong years for us, and we are holding our breath to see if this run will slow down...or speed up. It is unclear right now what the future holds. When no one knows what markets will do there are always opportunities. My opinion is that the increase in prices here is sustainable and will continue.
The Fed decided that there are real estate markets around the country that need to be cooled off. Stories from Florida, California, and a dozen other places around the country tell of markets where quality real estate prices have been doubling and redoubling. In some markets 50% of the market has been speculation with investors buying houses, not even occupying them, holding them for a few years, and selling them at a multiple of the purchase price. Cooling off those markets has got to be a good idea.
The U.P. has not seen that kind of speculation. Prices have risen steadily, but from an extremely low base. It could be argued that the market will now pause for a while as the Fed talks down the speculation, but it can also be argued that we are still under-priced compared to everywhere else. With the stock market up one day and down the next, investors have been looking for other places to put their money. Since 9/11 vast amounts of money have been pumped into the economy. I was an economics minor, and unless they have changed the rules of economics massive increases in the money supply will inevitably lead to inflation sooner or later. Real estate is the traditional hedge against inflation.
My conclusion, after a very busy year, is that this will continue to be an excellent time and place to own larger properties of the best quality. The nice thing about owning that kind of real estate is that there is always someone who wants the best, and they can usually afford it in good times or bad.
There will be opportunities - perhaps historic ones -- for both buyers and sellers. Interest rates remain at historically low levels, and it remains attractive to buy real estate and hold it with a fixed mortgage.
There has been a sea change in the U.P. timberland market. The big timber companies have been divesting themselves of their timberland and this may shake loose some properties that have been held by big companies for a long time, perhaps just in time to meet a surge in demand for quality waterfront which has been increasingly hard to find. I expect timberland prices to fall as the supply increases. Unfortunately too many of these parcels are cut hard before they are put up for sale. It will be a long time before they recover.
I periodically find myself thinking, "All the best waterfront is gone." Then I remember that it is actually all still there! What may have changed is the price, and although the $100/acre prices of the 1990's are history, we are nowhere near the ethereal $15,000/front foot prices common for waterfront on the Lower Peninsula's west coast.
There is strong interest in rural land on prime waterfront not because urban dwellers fear terrorism, but because in the wake of 9/11 people appear to be rethinking their priorities and refocusing on the family. A retreat in the Upper Peninsula where the family can be together for quality time and recreation without urban distractions has become even more attractive.
There have been and for the foreseeable future will be more buyers than sellers for high quality water frontage. Here is the good news: Even after those years of rising prices, money still buys much more water frontage in the U.P. You can find land equal in quality to anything in Michigan below the bridge or in Wisconsin.
Historically the reward for taking the time to travel to this less developed, more rural, relatively undiscovered area is that you get about four to five times as much waterfront land for the same price. (Not to mention some great brook trout dry fly-fishing!) Today, looking at prices to the south, you can get ten times as much.
So, what should you expect to pay this year in the U.P.? Many features of land need to be considered: Good usable access, legal access, (two very different things), plowed roads, well water, septic disposal, the size of the parcel and availability of power are just some features that affect price. As they say, "All generalizations are wrong including this one," but here goes:
Quick and dirty expect quality inland lake frontage to run $600 to $800 per front foot. Sand frontage on Lake Superior is $1,000 - $2,000/ff (the higher prices close to Marquette), and hard to find at that; rock frontage, which can be very beautiful and has some interesting benefits, is generally $600 - $1,500/ff, although I have seen parcels that I think are absolutely as valuable as sand frontage and perhaps are more appropriate for frontage on Lake Superior. Lake Superior water levels are within two inches of the long time low, 19 inches "below chart." In years when water levels are nearer the high water mark the advantage of owning rock shoreline that does not erode like sand beaches does becomes more obvious.
Land prices depend on what it looks like and what's there, but $1,000/acre seems to still be a good generalization. Waterfront drives the price, so if it has waterfront forget about comparisons on a per acre basis and look at front foot prices.
There is every indication that the scarcity of good water frontage will continue to intensify. A Barron's article in July of '95, "Eden for Sale," truly prophesied the future when it forecast a surge in demand based on the demographics of the baby boom (and made me a Barron's reader.) The short run is difficult to predict, but I do believe that over the next ten years quality waterfront land prices will soar. You are not too late for waterfront to be a great investment, and you can use and enjoy it.
In a major study a third of the respondents in the Midwest said they hoped to buy a second home in the U.P. If baby boomers follow their parents' example many will continue to buy waterfront real estate. They will sell their primary residence when they retire and will begin spending six to ten months out of each year on Lake Superior or an inland lake. In my experience people spend more time at their UP "camp" or cottage than they expected to when they bought the property, and global warming and the changing seasons have only accentuated that trend. Demographics say the peak time for purchases of waterfront land by the baby boomers will occur in the next few years.
The best investment for most Americans in the 1970s and 1980s was something they never bought as an investment. It was their single family home. Homeowners from that time retired on their equities. If this continues to happen with second homes (and therefore second home vacant land), as the demographics say it will, any lull in the market for vacation waterfront land will be a buying opportunity. Again, mortgage rates are at attractive levels, and banks in the U.P. will finance vacant land.
I believe the scarcest commodity is privacy. Larger parcels of quality waterfront property offering real privacy are scarce and growing scarcer as land is divided into ever-smaller parcels. The U.P. is one of the few areas left in the United States with good choices. Where else can you buy a whole private lake for less than a king's ransom, or for a tenth of the cost (!) of a Naples condo in a concrete high rise flanked by more of the same?
I have spent the last ten years doing database searches to identify the best of the remaining undeveloped quality waterfront property in the U.P. There are still choice properties available, but don't wait much longer. Now is the time to act.
Marquette County, for example, has 1,800 lakes (counting some very small ones) with 30,000 acres of surface water. That sounds like finding a good one should be easy. But if you eliminate from consideration lakes that are already subdivided into small lots, or are swampy, or too shallow to hold fish, or smaller than a few acres, or have no legal access, and if you ignore State, Federal or County ownership, and lakes owned by the big mining companies over known mineral reserves, ... you will find that there are less than 200 lakes in Marquette County in which you have any interest at all.
I have now searched all but the extreme western and extreme eastern portions of the U.P. in this fashion. The result is a list of the owners of 350 lake parcels with good size on quality lakes. When I can find you one of those it represents more than a "good buy." It can offer privacy for you now, and a legacy for your children!