Milt Paulson runs a small real estate office in Battle Lake, prime Minnesota lake country. He's been selling Ottertail county lake homes for more than 30 years.
"We're at 66 active listings today," Paulson noted on a recent April morning. "Normal for us this time of the year might be 40, which is indicative that it's taking longer to realize a sale."
Paulson says a couple of years ago, he'd tell potential buyers they only had one shot at a property they liked because lake property was selling so quickly. Now, he says, buyers are looking and waiting and looking some more. People still want to buy lake homes, but they're much more cautious.
“The buyers were ahead of me on the reality chart. They were calling the agent and making low ball offers and I wasn't entertaining that idea.”John Skolte
"If we see suburban Twin City homes at 10-15 percent less in value, then those people who are our primary source of lake home buyers, they're not as aggressively looking," says Paulson. "They don't feel as wealthy as they did a couple of years ago."
Cautious buyers are forcing sellers to make concessions. Milt Paulson says while property on some of the most desirable lakes is holding its value, he's never seen so many price reductions on lake homes.
"A year ago there was some anticipated increase built into the prices, because it had been going up. People putting things on the market in the spring were saying, 'If it was worth $250,000 last year, it must be worth $275,000 this year,'" says Paulson. "They were anticipating a continued increase which did not happen. So it's our job to bring them back to reality."
Reality can be hard to swallow. Just ask John Skolte, who lives in St. Paul and has a cabin near Ely he's been trying to sell. He bought the property in 1994 and watched the value soar, until recently.
"Things definitely slowed down. There was a property on our lake for $189,000 and the guy sold it for $120,000 just to get rid of it," says Skolte.
Skolte recently pulled his cabin off the market rather than reduce the price. He says the changing market helped him decide to keep the cabin.
"The buyers were ahead of me. I was the seller and I'm thinking, 'Well, it's gone up 100 percent and it's going to go up 200 percent,'" says Skolte. "The buyers were ahead of me on the reality chart. They were calling the agent and making low ball offers and I wasn't entertaining that idea at the time."
A lot of lakeshore property owners are facing the same decision. Sell at a reduced price, or hold the property and hope the market perks up.
According to one Minnesota real estate expert, lakeshore property prices will recover faster than other real estate because of supply and demand.
George Karvel, Arnold and Leonard Mikulay Distinguished Chair in Real Estate at The University of St. Thomas, says the real estate market, including lake homes, was over priced in recent years. He says the market will probably correct to a more reasonable, sustainable level.
Karvel predicts with thousands of baby boomers approaching retirement, many will be selling their homes and moving to the lake. "And that demand is going to continue to become stronger and stronger," says Karvel. "So for the moment, if there's any price weakness, it's probably going to be the last great buying opportunity on lakeshore real estate."
Karvel says the window of opportunity might last two or three years, before prices head upwards again.