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February 2018

We, literally, have a dirty little secret about preserving buying power for a golf home in the Southeast.  Buy dirt now and build your dream home later.  Read more in this month's issue of Home On The Course.

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February 2018
Colleton River Plantation, Bluffton, SC

The Art of the Deal on Home Sites

Imagine that you are a born negotiator.  You love to dicker, and negotiating a discount price makes you feel as if you sank a 30-foot putt for birdie.  Wouldn’t negotiating the price of a wooded lot beside a highly rated Jack Nicklaus or Pete Dye golf course in a beautifully landscaped community down to $1(!) make you feel euphoric -- and with a water or golf view, nonetheless?

Well, here’s some bad news:  No negotiations are necessary.  In fact, you have your choice of 13 $1 lots in Colleton River Plantation, one of the most upscale and golf-centric communities on the Carolinas coast.  As of the end of January, the Bluffton, SC, area MLS (Multiple List Service) was showing a baker’s dozen of home sites in Colleton River listed at $1 each.  And these are no scruffy lots.  One looks out across a lake, and the seller is willing to pay the club initiation fee of $15,000 for the buyer. (More about that below.)  Two others look out directly on the Jack Nicklaus layout, one of my favorites in the Carolinas, especially for its lightning fast greens.

Okay, you ask, what’s the catch.  Well there is one, as there always is in a deal that seems too good to be true.  In this case, the “catch” is the club membership, which is mandatory.  All in, annual dues and homeowner association fees will run approximately $20,000.  Back in the mid-2000s, land and homes were selling fast at Colleton River and its companion communities of Belfair and Berkeley Hall (same club membership arrangements), and some homeowners believed that the dramatic price rises for lots in the community would continue at least for a few years, when they intended to flip extra lots they purchased for over $400,000, each requiring membership (and the obligation of dues) in the club.  That was the very definition of irrational exuberance, and with lot values plummeting to near nothing when the recession hit, and that contractual obligation of $20,000 annually in combined dues and fees, you can imagine how desperate some lot owners were –- and still are.

Nearby Belfair, with beautiful landscaping and 36 holes of fine Tom Fazio golf, is showing nine lots for sale at $1 each.  Berkeley Hall, on the other hand, has sold through its $1 home sites, its least expensive piece of property priced today at $10,000.  Berkeley Hall also features 36 holes of excellent Fazio golf and a dramatic brick Georgian clubhouse.

Mandatory membership is a two-edged sword, which is to say -- I am running rampant with the clichés here -– it can be both a blessing and a curse.  I explained the curse part above; if the economy sours, so too could your investment.  But the blessing part is that if you want to live in an upscale community and have been blessed with the resources to comfortably afford $20,000 per year in funding your lifestyle, these bargain lots (and many others priced nominally a little more) can be a financially sound point of entry, especially for those couples who see themselves enjoying places like the aforementioned communities for 10 or more years to come.  One other thing about mandatory membership:  It ensures a steady flow of resources to your club and clubhouse, through thick and thin and even recessions.  Many golf clubs in communities that did not require membership of its residents lost members during the recession years; those with mandatory memberships, like Colleton River, were comparably stable.

I once asked one of my customers, a retiree of a major international oil company, if he thought he was taking a risk by buying in Berkeley Hall and obligating himself to club dues.  He told me he believed “the common interest of the owners to maintain a top-quality private club at a reasonable dues level greatly exceeded the risk.”  And he added that because he was able to purchase a lot at about 1/10th its original price and build a home for a reasonable price per square foot, he further reduced the risk if he and his wife had to sell.  In the end, though, the couple’s choice of a home community with a mandatory membership was less about a financial calculation and more about how they will spend a good chunk of the rest of their lives.  “It was a lifestyle decision,” my client said.

My real estate expert in the Bluffton/Hilton Head area, Tom Jackson, can help make even more sense of considering any of these communities.  I would be happy to put you in touch with him, or vice versa.  Please contact me for an introduction.

 

 


If you are considering a search for a permanent or vacation home in a golf-oriented area, please contact me for a free, no-obligation consultation at editor@homeonthecourse.com


The Case for Buying a Lot Now,
Building a Home in Three Years

If you are considering buying a home in the Southeast in a few years and are counting on spending the proceeds from the sale of your home up north and whatever other savings you have at present, waiting to start the process could cost you.

The fact is that homes in the highest quality golf communities in the Southeast Region sold last year in ever increasing numbers and at prices about 8% to 10% higher than the previous year, following a trend that started around 2012, after the shock of the Great Recession wore off and the stock market (and near-retirees’ and retirees’ 401Ks) rebounded.  The announcements of new golf communities are far and few between, which means inventory of homes for sale has been relatively static in recent years while demand from baby boomers -- their confidence in the future restored -- has grown significantly.  No PhD is necessary to understand that greater demand in the absence of greater supply leads to higher prices.

And that is clearly the case in most of the markets I follow in the Carolinas, Georgia and Florida.  In Brunswick County, NC, for example, which comprises the coastal area on both sides of US Highway 17 from Wilmington south to the South Carolina border, total real estate sales increased 32% year to year, and passed the $1 billion total mark for the first time since 2005, according to the Brunswick County Board of Realtors.  The average sales price increased by 8.5%, a number that meshes with anecdotal reports from most markets with active golf communities in the Southeast.

There are some outliers, such as the Pawleys Island area south of Myrtle Beach and including the towns of Murrells Inlet, Litchfield Beach, Georgetown and Pawleys Island.  Here, the average sales price dropped $40,000 to $424,000, even though inventories of homes for sale were down.  But as our real estate professional in Pawleys, Cathy Bergeron, explains, “properties on the market for a long time…are finally starting to sell, but at lower prices.”  She predicts that as these “drags on the market” (my words, not hers) are flushed out of the system, prices will rise.  (Note:  The market for condos selling for around $200,000 was strong in 2017, a fact that tended to tamp down prices at the higher levels for both condos and single-family homes.)

Assume you are a couple who intends to purchase a golf home (or any home, for that matter) in the Southeast in three to five years.  Assume as well that your budget to purchase that house is $300,000, in today’s dollars.  No one can predict the future, but using the last few years as a guide, consider that an 8% increase in prices this year will increase the cost to purchase a $300,000 house by $24,000 at the end of 2018; and another 8% increase in 2019 will drive the price up to $356,000, and another 8% in 2020 kicks it up to $384,000. (I rounded off the big numbers.)  Waiting for three years could put a major dent in a couple’s buying power for the home of their dreams, forcing them into a smaller house or a much less desirable one.

There is, however, one approach that could mitigate much of the loss of buying power.  Call it a hedge against real estate price inflation.  You could purchase this year a home site in an established high quality golf community, even though you do not plan to build for at least a couple more years.  Lot prices have not risen anywhere near as quickly as have homes since the Great Recession and, in fact, some are selling for as low as $1; and they are nice lots that sold for more than $400,000 before the recession (that number is not a typo).  See the accompanying sidebar for more on these $1 lots and other bargains.  A home site typically accounts for about 1/3 of a home’s total value; buying a home site now would provide a hedge against some of the expected price rises for golf homes in the South, and protect as well against a sudden surge in the prices of lots.  Of course, for the two or three years the lot sits unimproved, property taxes and HOA fees must be paid.  (Taxes are minimal compared to what we are used to up north, a few hundred dollars to a couple of thousand for an unimproved lot in many Southeast locations.)  

But if you believe, as I do, that prices for homes in high quality golf communities could rise as much as 30% over the coming three or four years, the purchase of a lot now makes financial sense for couples looking to protect their buying power, as well as their dream of the perfect home.

 

Justice for All?  Golf Community Residents Take Their Board Members to Supreme Court

I typically promote this newsletter and its topics at my web site, GolfCommunityReviews.com, but I am reversing the process for an important story I will feature at the web site, once I finish all the appropriate research.  It is a complicated issue, but the Cliffs Notes version is this:

Some residents of the Callawassie Island Club in Okatie, SC, have refused to pay multiple years worth of dues to the country club there.  At issue is whether the club’s board and its supportive Property Owner’s Association can impose a mandatory membership program on its residents.  An appeals court in 2016 sided with the residents, and now the community’s officials have pushed the issue all the way to the highest court in the state of South Carolina.  At stake, quite possibly, is not only tens of thousands of dollars for individual residents (and couples) but also the viability of mandatory membership programs in South Carolina and beyond.  As you will note elsewhere in this issue, such vaunted communities as Colleton River Plantation, Belfair and Berkeley Hall, all just a half hour from Callawassie, impose a similar obligation on property owners, although they are organized in a different way (i.e. the POA and club are run in tandem whereas Callawassie's two entities are separate, though simpatico in terms of the need for mandatory membership).

Of course, for those future golf community property owners who see bad news as a possible buying opportunity, Callawassie’s problems could be a silver lining.  Although no Callawassie properties are currently listed for $1 -– although the community’s real estate agency of record has been accused by some of the local residents of deceptive marketing of its listings–- anything under $10,000 with a view of the beautiful adjoining marsh seems like a great deal, especially if the residents and their governing bodies can repair the hard feelings after the court decision.  That’s a big IF, one I will explore in the coming weeks and will report on at GolfCommunityReviews.com.  

In the meantime, if you are looking for property or a home in the Low Country of the Carolinas, please contact me and we can assess your many options.

 

 

Larry Gavrich
Founder & Editor
Home On The Course, LLC

 

 

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