This past summer I had the good fortune to be visiting the town of Fredericksburg in the Hill Country of Texas. I was one of many, as this tiny, out-of-the-way burgh attracts a whopping 1.4 million visitors every year.
Tourists come for the idyllic countryside of rolling hills, and old-fashioned Main Street stuffed with cafés, restaurants and curio shops; sample the German cuisine of the town’s founding fathers; and visit the important stops such as the Lyndon Johnson Boyhood Home and Ranch, and the National Museum of the Pacific War.
What caught my eye about Fredericksburg, in terms of this column, was its location, close to two major cities, San Antonio and Austin, but not in between — west of both. In effect, this vacationland spot formed a venue triangle with the bigger cities.
It occurred to me as I was lollygagging about the quaint town, stuffing myself on German Tex-Mex food, that I had experienced this geographic triangulation before, in Lake Geneva, Wis., a vacationland spot that’s located in driving distance to Chicago and Milwaukee, but not in between — west of both.
I decided to investigate the residential markets of both locations to see if there were parallels — and there were.
Fredericksburg and Lake Geneva are not only vacation spots but historic second-home markets. In Lake Geneva, the attraction is the lake and it has been luring deep-pocketed capitalists since the turn of the last century.
Fredericksburg has a much shorter history as a second-home market, with the leisure class buying into the region only over the past three decades. Their objectives are generally isolated homes on large acreage. In effect, Fredericksburg’s second-home investors are "gentleman ranchers."
Secondly, despite the bucolic setting between two major cities, the fortunes of Fredericksburg and Lake Geneva are mostly tied to just one of the locations; for Fredericksburg, it’s San Antonio; and for Lake Geneva, it’s Chicago.
The bias toward San Antonio has mostly to do with topography. Fredericksburg is about 1,000 feet higher in elevation giving it cooler summers and colder winters, making it a convenient place to escape the heat. For Lake Geneva, the bias against Milwaukee is also about weekend escapes.
Milwaukee sits further north than Lake Geneva and in Wisconsin people traditionally go north for their vacation retreats — that would be away from Lake Geneva.
Finally, both vacationlands have been affected by the country’s economic malaise, but less severely than expected, and Fredericksburg and Lake Geneva boast new population peaks.
"We are a little over 10,000 people in population — that’s the biggest our city has ever been," reported Sherman Durst, proprietor of Fredericksburg Realty. "We picked up over the last 10 years. Back in 2000, we were probably at 7,000 to 8,000 in population."
As for the local residential market, the low point for Fredericksburg home sales over the past 15 years came in 2009. "We attribute that to the national economy," said Durst.
In 2010, activity picked up, with dollar sales and unit sales both rising over the year before. "Our residential market is where our strength is," Durst explained. "People still need shelter, so we are selling mostly shelter housing. We are not selling as many weekend homes as we did, which relates back to the economy.
About 80 percent to 95 percent of Fredericksburg homebuyers come from within the state.
The city of Lake Geneva now counts 7,500 year-round citizens, up from 5,000 in 1978 when John Law, owner of Re/Max Geneva Realty Ltd., began selling homes in the region.
From 2007 to 2009, housing values dropped between 10 percent and 20 percent (depending on the proximity of the house to the lake), Law reported, but sales in 2010 were running slightly ahead of 2009.
"My experience is, we tend to lag slightly behind Chicago," Law explained. "If Chicago slows, the market here recedes, but not as quickly."
The low end of the Lake Geneva market is limited to condominiums and those prices start around $100,000. At the other end of the spectrum, full-time residents have been known to pay upwards of $750,000 for a property. For second-home buyers, prices rise exorbitantly. Currently, the most expensive property on the market has a listing price of $7 million.
"The largest sale this year was for vacant property on the lake, which went for $5,850,000," Law said. "It was originally listed for much more and then the price was dropped to $6,350,000. Although there were competing buyers, the selling price was less than the final listing price."
What does Law expect for 2011? "No radical jumps in activity, but a continually improving market," he said.
Home prices in Fredericksburg average about $180,000 to $200,000. Those are essentially in-town homes. However, during the boom years, the big market was in ranches.
Ranch properties hit high points in sales during 2006 and into 2007, selling for as much as $6,000 to $8,000 an acre — and this does not include properties with year-round creeks or rivers that were sold for as high as $12,000 to $15,000 an acre, Law noted.
"From 2005 through 2007, 30 to 40 ranches were sold annually," he said. "The unit sales dropped to 13 to 14, respectively, the past two years. Currently, 40-plus ranches over 100 acres in size are listed for sale. The average asking price is $8,572 per acre."
Are they selling?
At mid-year 2010, 69 homes were sold in Fredericksburg, the same number as 2009. For the same time period in 2009, just 11 out-of-town properties (mostly ranches) were sold; by mid-year 2010, 34 out-of-town properties were sold.
Is this an indicator of an improving market in the Hill Country? Durst seems to think so.
As he observed, "When the economy goes down, people head into town; when the economy goes up, people head to the country."
In Texas, when the economy perks up, folks head for the hills — the Hill Country, to be exact.
