Although in many communities it costs about the same or a little more to buy a piece of land and build your home as it does to buy someone else’s existing home of about the same size and quality, that parity will not last long. As builders take on more work, they will raise their prices; and building materials like lumber will continue to increase in price as well. Developers, seeing more demand for nice buildable lots, also will begin to raise their prices on raw land. We took a look at a few of our favorite golf communities to compare the costs to build a new home with a comparably sized and outfitted home of the same size inside the gates. We asked our real estate professional contacts for an estimated cost-to-build that would accommodate granite counters, hardwood floors, all-wood cabinetry and other high-quality accessories. All the lots and resale homes listed below are posted for sale at GolfHomesListed. When you click on any of them for more details, we ask that you sign up with name and email address only; after that, you can check out details on the hundreds of properties we list.
Carolina Colours New Bern, NC Lot: ¾ acre on lake, $49,500 Est. costs to build = $125 per sq. ft. Build 2,460 sq. ft. home for $307,500 Total cost = $357,000
Current 2,460 sq. ft. resale = $370,000
Wachesaw Plantation Murrells Inlet, SC Lot: ½ acre, $139,000 Est. costs to build = $120 per sq. ft. Build 3,200 sq. ft. home for $384,000 Total cost = $523,000
Current 3,200 sq. ft. resale = $429,000
Landfall Wilmington, NC Lot: ½ acre, golf view, $175,000 Est. costs to build = $165 per sq. ft. Build 3,200 sq. ft home for $528,000 Total cost = $703,000
Current 3,200 sq. ft. resale = $699,900
Viniterra New Kent, VA Lot: 1 acre wooded lot, $149,000 Est. costs to build = $150 per sq. ft. Build 3,000 sq. ft. home for $450,000 Total cost = $599,000
Current 3,000 sq. ft. resale = $599,500
The Landings Savannah, GA Lot: .40 acre wooded, $112,500 Est. cost to build = $150 per sq. ft. Build 3,400 sq. ft. home for $510,000 Total cost = $622,500
Current 3,400 sq. ft. resale = $529,600
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Yes, But, Still: The Glories and Pitfalls of Building Your Golf Dream Home Now
My wife and I own an attractive home site in Pawleys Island, SC, at the elbow of the dogleg on the par 4 16th hole of Jack Nicklaus’ Signature golf course. Next door is a beautiful home with landscaping that maximizes the view down the fairway and out to the marsh just beyond the 16th green. That home has been on the market for a couple of years and, in a tough climate for home sales along the Grand Strand of Myrtle Beach, is reasonably priced. We have toured the house and like it a lot, but we would want to invest a fair number of dollars to make it truly our own. Like many couples currently considering a permanent location to a warm weather climate and a golf community, we go back and forth about the pros and cons of building our version of the perfect home versus buying someone else’s perfect home. As a service to those of you who might be engaged in an internal debate of the same type, the pros and cons of building a new home, as I see it, follow.
Land in Golf Communities is Cheap Yes: This is true. You may have read the stories -– first in this space and again months later when the Wall Street Journal did its own version –- of the $1 lots for sale in upscale golf communities near the South Carolina coast. Customers of ours from the Washington, D.C. area recently purchased a lot with views of both golf course and water for just $45,000 in one of Bluffton, SC’s finest golf communities, Berkeley Hall, where homes sell in the high six figures. The lot sold originally for $300,000. If our couple build a 3,000 square foot home with fine cabinetry, granite, hardwood flooring and other elegant touches –- local Realtors estimate the cost at about $200 per square foot –- our couple’s total cost will be just over $600,000. Their new home will likely appreciate to the $800,000 range the instant it is completed, given the high-quality community and killer views from their new back porch. But: There is always a catch to cheap land prices. They may signal a developer in trouble or a community struggling to convince baby boomers to buy there, or that the costs to live in the community are unusually high. In the case of our couple with the bargain $45,000 lot, golf club membership is mandatory at Berkeley Hall, a roughly $15,000 obligation annually (that includes homeowner association fees). That should not be an impediment to couples who are ready to build right away and plan to get their money’s worth from use of the club for a substantial part of the year. But many couples won’t build for a few years, and in the meantime they will make dues payments for a club they hardly get to use. Of greater concern is that prices for the most prized lots are starting to rise, according to our real estate sources (see below).
Still: When you get a $200,000 discount on the price of a lot, you are essentially getting a free 1,000 square feet of space in your new house (based on the liberal cost of $200 per square foot); or, looked at another way, more than 10 years worth of club dues payments. And some owners of lots are still desperate to sell, even at a significant loss.
These Low Prices for Home Sites Will Be Gone Soon Yes: It is already happening. “In Colleton River,” says Tom Jackson, a real estate professional in Bluffton, SC, “12 lots sold in 2011 and, in 2012, we had 39 lots sell and huge price increases. And folks only buy lots now if they are going to use them” rather than the speculation that preceded the 2008 recession. Real estate works on the simple principle of supply and demand. As demand increases, so will prices. But: There are still plenty of good home sites available, and more coming on the market as their owners see the chance to recoup a larger portion of their original investments. Those whose hearts are set on building their dream golf homes should be as worried about an increase in building costs as much as they are about the cost of the home sites (see lumber costs below). As contractors begin again to take on more work, they can be choosier about the projects they engage and more comfortable building a little more profit into those projects. The costs to build will almost certainly rise this year and next. Still: For a couple looking to build and move within the next year, the market remains in their favor -– for the moment.
Building a House Is Self-Inflicted Torture Yes: If wallpapering a room can cause couples to divorce, imagine the stress of building an entire house. Now consider you are trying to manage the builder of your $600,000 investment in, say, Pawleys Island, SC, while living 800 miles away in your primary home in Connecticut. That complicates the recipe for stress. Only those with great fortitude, and marriages to match, should take on such a project. But: There are ways to manage effectively the building of a new home. After you sell your primary home, you can rent a home in the community in which you are building. Not only do you get to be on-site for most of the construction, but you also integrate much faster into the life of the community you have chosen. Bill and Karen, customers of ours from California, are doing just that at Governors Club in Chapel Hill, NC, where they have found a beautiful home site above the Jack Nicklaus Signature golf course. In quick order this past summer, they bought the lot, sold their home on the west coast, found a six-month rental inside Governors Club and recently finalized plans with a builder. Their home should be ready by next fall. Still: Have your eyes wide open to the pitfalls and stress of building your own home, and if you think there is even a small chance of problems ahead, buy someone else’s dream home and then make it your own with a few revisions.
Building a Home in the Current Environment is Cheaper than Buying a Resale Yes: Lot prices have not rebounded as fast as home prices have, making the building of a home cheaper in some golf communities than buying a comparable resale. Builders have struggled over the past few years and have offered sharper estimates, cutting back on their profits in order to keep their crews working. They knew that without projects, these construction workers would leave the area for other jobs. Therefore, in some markets, pricing by builders is still sharp. But: The benefits of building your home are more about having it your way than about saving large sums of money. Material costs to build a home are rising rapidly as demand picks up. The National Association of Home Builders, for example, indicates that lumber costs increased 37% in 2012, from $273 per 1,000 board feet to $373. As demand for their services increases, contractors will feel more comfortable re-raising their prices to pre-recession levels. With increased material costs and choosier builders, the cost to build could rise by 10% to 20% or more this year, forcing buyers to either pay up to $100,000 more for that home worth $500,000 in today’s market, or to cut back the size of their homes by a few hundred square feet. Still: People put their homes on the market for all kinds of reasons –- aging, family considerations, financial duress. If you do your homework –- we at Home On The Course, LLC are happy to assist you (Contact us) -– you will find many sellers offering their homes at prices lower than it will cost to build a new one down the street. In the end, your choice comes down to whether you want a new home built to all your specifications or a resale home that matches most of them.