Lake Geneva Real Estate Market May Crash

“In this community there is several years’ worth of excess inventory, even if we do not build another house. If we were to proceed with another large development in this area I think it would be disastrous economically for our community….I am certain it will be a long time before we can absorb any more development. That is not only because of the excess inventory that we have but also because the non-job growth migration has come to a screeching halt in this country. … I think it will be at least 10 years until we see a reversal of that trend…. To put another large real estate development on the books at this time would risk crashing the real estate market in this part county. For that reason I think we need to keep this agriculture. I think we would be fools to let it get developed in the near future. I think it would be a huge mistake to let this be developed at this time.” So stated Lake Geneva Wisconsin Plan Commission member Matt Kuehl during the May 18, 2009 Smart Growth meeting.

Commissioner Matt Kuehl reversed his decision from the prior month smart growth meeting to zone a 700 acre property, annexed to the city  on the outer southern boundary south of Big Foot Beach State Park, from planned neighborhood to agriculture use only.

Planned neighborhood zoning implies a broader mixture of land uses including some office and commercial development according to planner Mike Slavney.”It would be divergent housing choices ranging from half acre lots to relatively dense condos and apartments.”

This area has been controversial from it’s annexation. In the spring of 2008 the city held a referendum on whether to allow a large scale new-town like development with a hotel resort, known as the Mirbeau-Hummel. The results were that 77% of the voters said no to that development.

Dave Williams, a longtime opponent to this development, berated the plan commission for ignoring the results of the smart growth procedures and the results of the referendum for upgrading the Hummel property at last months meeting. “YOu are in the middle of two threatened law suits about the very issue, it’s nice to give them more ammunition at a point of time he doesn’t need it…..The fix is in at city hall.” Argued Mr. Williams at the beginning of the meeting.

Commissioner Matt Kuehl took a market approach to his reasoning not to allow development at this area now.

“This is the one lot that can have an impact on our overall real estate economy, the others are small….This is the one piece of property that if it goes forward I think would crash our local real estate market. When I say crash I don’t say that lightly, I say CRASH our local real estate market. People think the real estate market is bad up here. You haven’t seen a bad real estate market. Go to Las Vegas, go to Phoenix, go to LA, those are real estate markets that have crashed. The reason they have crashed is they have allowed an over development of areas. Once that had accrued and the areas had reached a breaking point the area crashed. We can repeat that mistake at a local level by doing something like this.”

“We have a responsibility of the community as a whole to lookout for the real estate market. There is nothing else out there that can have that kind of damaging impact, in my view.” Concluded Mr.  Kuehl

Commissioner Tom Hartz was also in favor of keeping the zoning agricultural.  He pointed out that “We are looking at a piece of land that is not contagious to existing development, the time is not right now, I would say with 1100 approved units already…. We have plenty of supply for at least 10 years, but according to our planners we have enough for 20 years. Why add another 700 acres to that list.”

“This property isn’t contagious to any property within the city limits, this is a jump.We have a number of projects that we have approved that have already started that are in trouble right now. It would be my desire to see those projects finished. I think if we approve a large development like this and for some reason he does not read the same tea leaves that we do and starts the project we have condemned the projects that aren’t finished, that are in trouble, to a much longer recovery.  I think we do a disservice to our residents, to just good thoughtful planning. We should finish what we have started until we start something new. By making this a part of the residential land use plan we have opened the door for it to be developed.”

Commissioner Lyons stated ” I don’t see this plan as triggering a development……I don’t see there is that much a risk in it crashing our market.”

Commissioner Al Kupsik wanted to know why are we picking on this one property, ” lets go back to look at them all.”

Mayor Bill Chesen’s reasoning behind his vote to annex this 700 acres three years ago was that Linn township, who had control prior to annexation, had designated the property as residential and commercial development in their master plan.

“There is sewer that the city provides to the lakefront property to protect the water quality of the lake that is adjacent to that property…. Linn has asked for additional expansion of that sewer service along that shore line. Linn is providing more residential development in an area that we are providing services to. It means we provide the services and they get the tax base. That was my whole reasoning behind annexation. We decide when that property is developed because we provide the zoning for that property.”

“We have to look out for the greater community as well because sewer and water services are going to be needed along the lake shore… I can think of one subdivision not too far for there where during mid summer in the dry season that water is running down the hill to the lake, and it foams when it hits the water. That is a condition that is not acceptable, and we are the ones that are going to have to do something about it. We, the city of Lake Geneva, have the ability to solve that problem for the town of Linn.  The greater good may be providing services along that area.” So concluded Mayor Bill Chesen.

Lake Geneva City Attorney Dan Draper reminded the commission that. “You need to make a determination that area from a planning standpoint not because of who the parties are involved or who owns the property or anything like that. It has to be from a planning prospective ….it is not a site specific determination.”

Commissioner Matt Kuehl made a motion to show the area around the 700 acres as agriculture with an over lay shading to show future development as residential.

Planner Mike Slavney says this means that ” as the need for potentially residential development occurs in future versions of the city’s comprehensive master plan, this area would be recommended for residential or planned neighborhood.”

Because there was no roll call in the vote your correspondent’s best estimate of how the vote went is : Voting in favor of changing the plan to Agricultural: Kuehl, Hartz, Horne, and Chesen. Voting for keeping the area “planned neighborhood”: Tolar and Kupsik.

Matt Kuehl then made a motion to change 100 acres next to the state park from “future state park acquisition” to” private recreation.” This is land owned by local developer Brian Pollard who wants that designation, according to Mayor Chesen. This would allow for a future hotel resort. The land is in the state parks plan for future expansion.

The Lake Geneva Youth Camp land was also designated as “Private Recreation.”

Mark Hanson of the Field Check Group, a seasoned research outfit that specializes in real estate and mortgages  cites all of those “terrible kick-the- can-down-the-road modifications that leave borrowers in five-year teaser, ultra-high leverage, 150% loan-to value balloon loans” that when they start adjusting upward will “turn millions of homeowners into over levered, underwater, renters, and ensure housing is a dead asset class for years to come.”

Field Check’s data show “that the mid-to-upper-end housing market is on the precipice of the exact cliff that the market fell off of in 2007, led by new loan defaults. “