Brutal truths about looking for a home on the course

    In concluding a helpful piece about housing prices at the Wall Street Journal Online, real estate columnist Dave Kansas wrote this:  "Ultimately, if you need to sell, it's important to know that the housing downturn cuts both ways. You may not get the price you once could have, but buying a new place will come cheaper than in the past."
    The premise is not strictly true, especially for new homes in upscale communities.  After a week of visiting golf communities in the mountains of North Carolina that ranged in age from 2 years old to 25 years, it is apparent that certain categories of housing are not cheaper than in the past.
    Time and again, I asked the question of developers at the communities I visited if traffic and sales had slowed and if a slowdown had resulted in a reduction in prices.  "Yes," "yes and no" and "no" were the responses, respectively.
    It is true that the intense interest of three or four years ago in vacation or retirement property has slowed somewhat in the mountains, but not dramatically.  For one thing, an "evacuation syndrome" has driven many Floridians north seeking shelter from the storms, lower property tax rates, lower insurance rates, a cooler climate and relief from constipating traffic.  Interest from snowbirds has balanced a slowdown in traffic from northern states where those who want to retire and relocate south are hanging on in the hopes their homes will command prices approaching those of a half decade ago.
    As for sales of homes in the mountains, it seems I should have probably stayed in Atlanta after a two-year work assignment there in the late 1970s.  Based on conversations with developers in the most expensive communities in the southeast, the amount of personal wealth created in Atlanta in the last 20 years is staggering.  I hear the same story over and over again in upscale communities like The Cliffs and their competitors; Atlantans are buying $1 million and up properties as second and third and, in some cases, fourth homes.  In one case, an on-site agent told me he sold a lot to a couple who built a six-bedroom, lavishly furnished home they planned to use just three or four weeks a year.  Between the Florida evacuees and those from Atlanta and other wealthy enclaves in the south, sales at the more expensive communities do not appear to have suffered all that much.
    And prices have not eroded in the new communities at all.  Developers dare not cut prices of lots and spec homes for fear of incurring the ire of the person who bought a similar property just a few months earlier.  Imagine how you would feel if in May you paid $300,000 for a ½ acre lot on the golf course only to see your developer reduce the prices of the lots up the fairway by $100,000, thereby depreciating your property instantly and dramatically.  Developers know what kind of signal that sends to the market, and they want no part of it.  They'd much rather pay for your golf membership or help with your taxes or stick a big HD TV on your living room wall as incentives.
    The only true "bargains" in the more upscale communities of the southeast are via re-sales.  When a developer has sold all or most of his properties, he moves on, leaving an on-site agency or the local real estate brokers to battle for listings inside the community.  Issues of aging, job relocation, financial issues, and family issues, such as divorce, compel people in the single-family homes in these communities to list their properties at realistic prices.  Also, time and again during my trip, I heard about folks who had borrowed to invest in two or three or more properties during the boom period, and now must raise cash to stay solvent.  The more properties up for re-sale -- and there is plenty of inventory at the moment -- the sharper the pricing.
    So, what does this all mean for someone contemplating a move to a southern U.S. golf community?  First, and most obvious, is that if you have cash to spend on a home, you are in fat city.  Metaphorically speaking, drag a dollar bill through some established communities and watch the desperate dive at it.  And although developers are not going to lower prices in a community that is partially sold, your cash will help you negotiate substantial incentives.  Make sure, though, that the developer not only has a track record of success, but deep pockets as well.
     For example, four hundred landowners at the Grey Rock community near Lake Lure, NC, had good reason to believe that Land Resources, after a dozen years of building communities in the southeast, had a good track record, but the company's pockets weren't deep enough to forestall closing down their sales office and stopping construction of the promised amenities in the community.  Consider also the Ginn Company, a builder of luxury communities whose amenities and price points appeal to the "See, I've made it" nature of many of the newly wealthy.  From all accounts, the Ginn empire is teetering and its property owners are up in arms at promises not kept and six-figure investments now at risk.  Ask the developer you are considering doing business with to show you "the books," and ask your financial planner or a CFO friend to take a look as well.  It is stunning, and depressing, that many people are compelled to commit a decent chunk of their net wealth based on a three-hour tour, the positive comments of a few residents, and an enthusiastic sales agent.  
    For those intending to use the proceeds from their current home to fuel the purchase of a new home in a southern community, understand that prices in newer southern communities are not depreciating, or at least not depreciating the way they are in your primary home.  The longer you wait, the greater the spread between what you will get for your current home and what you will pay for your next one.  You have heard that here before.  The one exception is brand new communities that will come on line in the next couple of months.  They can sharpen their pricing against the competition because they have no track record of sales, no residents to alienate by cutting prices.  But you need to balance the prospect of comparatively low prices with issues of security; you will be buying into a community with no homes or amenities built, just the promise of them.  If you have capital to put at risk, then the payoff could be substantial later...or not.  Do your homework on the developer, and make sure his pockets are deep.
    Of course, you could consider forgoing any notions of a brand new home and look for a re-sale.  Many, many beautiful homes are available in established golfing communities, and these homes are likely to have some combination of the amenities you would build into a new home anyway.  You will have much more negotiating flexibility than you would with a developer, and you might just wangle some extra incentives from the seller, like transfer of their golf membership, if permitted, or more generous financial terms.  Recently, I steered a couple to The Landings, just outside of Savannah, where they purchased a 10-year old home at a great price.  It looks out on the 11th green of one of The Landings' six golf courses.  The Landings is more than 20 years old, a stable and vibrant community with little in the way of risk.
    Understand that if you find a community with a mix of developer properties and re-sales (either lots or homes), the developer will likely push one of his properties rather than have you look at comparable properties for sale by others (which are likely to be less expensive).  Make sure if you wander into the sales office on site that you ask about re-sale properties, and if you don't like the answer, hook up with a local real estate agent and scan the MLS (multiple listing service) for homes in the community.
    Finally, consider also being represented by a real estate broker with substantial experience and broad knowledge of communities in the region you are considering.  I know of one in particular with a keen understanding of communities across the southeastern U.S.  The firm has an ear (and nose) to the ground, and they were among the first to smell trouble in the Ginn organization, whose properties they have yanked from their recommended list.  They don't recommend a community unless they have visited it, often multiple times, and last week one developer told me they even visited the local town hall to make sure that his community's deeds and covenants were as advertised.
    If you are interested, contact me and I will put you in touch with this realty firm, at no cost or obligation.  Given your potential investment of hundreds of thousands of dollars, you should have experts like these on your side.