Lake home real estate is growing strong for a second year in a row after sales stagnated during the recession, according to real estate agents across northern Minnesota.
No one tracks lake home sales, but real estate agents report demand is growing, even as prices remain relatively flat with many homes on the market.
"We're doing two deals today actually for a total of a million plus. So it's a good day," said Milt Paulson, owner of Paulson Land Company in Battle Lake, located in Otter Tail County — one of the busier lake property markets in the state
Paulson said they saw the market turn around last year when sales were up 25 to 30 percent from 2011. He said that trend has continued this year.
The vacation home market changed in the past 20 years as increasingly expensive homes replaced weekend cabins on many Minnesota lakes. Those bigger homes drove property values higher and lake home prices rose dramatically.
Lake property prices and demand depend heavily on location. Prices are holding steady in many areas, realtors said, with owners selling slightly below the asking price. But on prime lakes prices are rising with occasional bidding wars.
It's a healthier market now than before the recession, according to Steve Mooney, Minnesota chair in real estate at St. Cloud State University.
"There were so many people chasing so few properties prior to the recession that the prices were getting kind of out of hand," said Mooney. "There were great returns for sellers if they wanted to get out of the market, but it was very hard for buyers who wanted to get in to the market."
Lake home prices held steadier during the recession than some of the residential markets in the Twin Cities that saw steep price drops and lake home prices are not bouncing back up as fast those residential markets.
But Mooney said the lake property market is turning around, so a lot of people want to buy before prices rise again and interest rates go higher.
"Prices are not going to drop down dramatically again unless there's another total financial calamity," Mooney said. "So I would anticipate prices will continue to increase but hopefully at a more reasonable level."
Yet Paulson said some realtors are starting to see speculative buyers.
"They think we're at the low or have turned the corner so they want to be jumping in here as far as investing in lake property," Paulson said.
Will speculation fuel a rapid rise in prices? Paulson said he doesn't think so. He said there are too many lake homes on the market, and it's still a buyer's market.