Northwoods' Real Estate Economics

Real Estate values in Vilas and Oneida Counties do not appear to be falling. However, volume by every measure is down from 25% to 35%, depending upon area. The question is why?

One possible explanation may be simple economics. We all were taught that when demand remains constant and supply increases that prices should fall. Conversely, when demand remains constant and supply falls, prices should increase. Lakefront property is usually owned by affluent sellers who can choose to "ride out a buyers' market." They can decide not to reduce price and continue to enjoy the benefits of lake home ownership.

In these instances, the laws of supply and demand still apply. Supply has remained relatively constant. I think that most practitioners in the area would agree that the number of buyers is reduced thus creating a lower demand. Theoretically, that would result in lower prices. However, lower prices have not yet been detected. Most Sellers have been reluctant to lower the price. So, Buyers have been choosing to walk away resulting in fewer sales.

This is an unusual moment in history. I cannot recall a time when there have been deflationary pressures but no corresponding price decreases. The free market continues to exhibit its power over the market by reducing sales volume.