Lots for a Little:
$1 Homesites are Back
Here we go again. Another national crisis, another economic disaster and another reeling real estate market, although this one may have a positive wrinkle or two for certain categories of purchasers.
If you are reading this, you have seen this movie before, beginning in 2008 and the fall of Lehman Brothers, with the resulting havoc in the real estate market. Back then it was subprime mortgages; today, it is a deadly virus and massive unemployment — neither a recipe for eager buyers to stroll through someone else’s home. And yet, some real estate professionals I work with say they are seeing clients, and many of those are buying. This shows just how resolute many retirees are about fulfilling their dreams of an active, engaged retirement involving golf.
Back when the recession hit in 2008, many nearly retired couples panicked, selling their already depressed equities at significant losses and putting their money in more conservative instruments yielding not much more than 1% annually. By the time the stock market roared back, their lack of an investment yield of more than 1% killed their buying power as golf community properties appreciated as much as 8% annually since 2011.
Yet some nearly retired folks, whether shocked into complacency or out of an innate financial sense, kept their stock portfolios more or less intact through the recession and then watched them return to their former levels, and then some. Those who did so were able to score some nice retirement homes in the 2012 through 2019 timeframe. Those who pretty much survived the recent drop in the stock market are positioned well because many property owners in high-quality golf communities find themselves cash strapped and eager to sell. That, and the other factors of our economic depression (e.g. 30% unemployment), are driving down prices again…some to absurdly low levels.
Bargains Then, Bargains Now
In no market is that truer than Bluffton, SC, home to the deluxe golf communities of Colleton River, Belfair and Berkeley Hall, each with 36 holes of excellent and superbly conditioned golf courses and filled with active residents. These communities, however, are part of a dying breed in that all residents have been required traditionally to become full golf members of their respective clubs. Initiation fees for this quality of golf are relatively reasonable at around $20,000, but annual carrying costs that include club dues and homeowner association fees run to about $20,000. That obligation is applied per property; any resident or outside speculator who buys a lot is on the hook for the initiation fee and annual costs…
…which is why 10 lots in these communities are currently priced at $1 each; faced with a market for homesites that has virtually disappeared, these speculators are faced with a double whammy — currently worthless lots with an ongoing financial commitment. Do not misinterpret worthless as flawed or ugly; these properties, on the contrary, are nicely sized and feature some excellent views. At their peak, some sold for as much as $400,000…like this one, currently for sale for a buck:
“This home site affords golf views of the 14th green and 15th tee. Private location off a quiet cul-de-sac. At .43 acres this home site is 175 feet deep and 135 feet across the golf course view.”
Mindful that the nation’s economic history has repeated itself with the current pandemic and market chaos, the Bluffton communities are beginning to offer less costly social memberships, as well as non-resident memberships.
“On $1 lots,” says my Bluffton/Hilton Head real estate professional Tom Jackson, “I think they are here for a while until communities create a social membership with $7500 [annual] dues.” Some of the communities, Tom told me, have also begun to offer memberships to non-residents and those who live beyond 75 miles of the communities to take the pressure off the need for mandatory full-golf memberships.
The $1 lots look like a bargain, obviously, but current construction costs in the Bluffton/Hilton Head are significant, starting at $250 per square foot and amounting to $750,000 plus $1 for a 3,000 square foot home. That may be the right number for a couple that has dreamed of their own home design, but there are viable alternatives in the resale market.
“[It costs] much less to buy a home already done, for sure,” Tom said. I noted one listing of a home facing the Nicklaus golf course at Colleton River with 3,000 square feet, four bedrooms and four baths, on more than ¾ of an acre, priced at $586,900. It was one of many such homes in that price range in the deluxe golf communities of Bluffton.
Bargains by the Lake
For those on a tighter budget, a community like Savannah Lakes Village in McCormick, SC, is obviously appealing. One home I noted online is priced at just under $400,000 for three bedrooms, three baths and over 3,100 square feet located on Lake Thurmond. For those interested in building at Savannah Lakes, they will find lots priced generally in the $20,000 category and construction costs at their highest at $140 per square foot. That means a 3,000 square foot brand-new home would top out at $420,000. Note that Savannah Lakes’ current developer is offering packages substantially lower than that because of an arrangement with the county on releasing undeveloped lots.
“I’m having my best year in quite a while,” says Michael Sherard, my on-site real estate contact. “I bet we had close to 70 new starts last year and sold about 90 resale homes. Our house inventory is down to around 55 homes which is the lowest it has been in 20 years.”
Michael has a notion of why Savannah Lakes is bucking the trend.
“We think the virus is causing people to get out of metropolitan areas, and [with the money] our company is spending on marketing, we are going to see a surge [of sales] we have not seen since before the 07–08 recession,” he told me.
Note that golf membership at Savannah Lakes comes with the modest $100 per month homeowner association fees. Members can opt to pay as they play (modest green fees about $40) or join the club on an annual basis if they play a couple or three times a week and cut those per-play fees about in half.
None of us can be sure of how the pandemic will evolve and what its effects, short- and long-term, will be on the market for golf community homes and property. There is little doubt that, so far this spring, traffic by potential buyers to golf communities is down but that could very well be camouflaging pent-up demand.
“We are still selling,” said Tom Jackson in Bluffton, “but have had fewer visits this spring. The big effect will be June, July and August when we have a lot of closings normally from spring. We are hoping that folks that come in spring will come [back] this summer.”
Most of those folks are 60 and older, in the prime risk categories for Covid-19. If they do come back this summer, that could say as much about the status of the pandemic as it does about the inherent strength of the real estate market for retirees. Here’s hoping Tom and other golf community professionals get their wish.
Covid-19 and Me
I feel a bit guilty thinking about myself while so many people are suffering or have died from Covid-19. But when this crisis is over, most of us will have survived, life will go on but in ways we can’t help pondering. And so I ponder.
Many of us have had plenty of time to think these past few months. If there is one thing the current crisis has taught me, it is that living a hermit’s life is underrated. I self-imposed a quarantine on myself in early March after reading, and taking seriously, the Center for Disease Control’s list of high-risk factors related to Covid-19. Since I checked the box for most of them, I felt mortal immediately. Diabetes? Check. Heart condition? Check. (I had bypass surgery in 2017.) Over the age of 60? Double check: I turned 72 in late April.
Readin’, Writin’…and Paranoia
Isolation has been productive for me over the last nine weeks. I have watched a lot of decent movies I wouldn’t have seen for years, or ever, and binge-watched a few crime dramas; increased my book reading to eclectic levels (Woody Allen memoir and a history of the Battle of Culloden, which secured the United Kingdom’s domination over Scotland); and, most exhilarating, organized the research, observations and essays I have written about golf communities into the first draft of a book, which I hope to publish later in the summer. On balance, sequestering has been good for me…
…except for one thing: I am constantly at war with paranoia. I have ventured out of the house just six times in the two months, not because I felt stir crazy but because my wife Connie thought it was a good idea for me. (As the more responsible and careful half of our couple, she has been doing all the grocery shopping; but when she returns, I tend to steer clear until well after she has removed the gloves and mask and washed up.) The first time out of the house, we took a 1½ mile walk in our neighborhood in Connecticut on a nice early-spring day; the locals we passed seemed especially cheerful, probably happy to emerge from their own isolation and encounter other humanoids. It felt good to walk, and no paranoia ensued.
The second time was to take a car ride with the dog; I suddenly had a craving for a cheap burger, and we wound up at a Burger King drive-thru behind a dozen others with the same idea. I was nervous about a window server handing me a bag that she — and who knows how many others? — had handled, but I was slightly reassured when her gloved hands delivered the bag on a tray, which I didn’t have to touch. But a few seconds after, I considered if she changed her gloves after each handling of a bag? The virus, I had read, can live on plastic and paper for a day or more. What about the wrappers on the burgers, and the little box holding the French fries? I grabbed for the hand sanitizer in the door handle and rubbed it on my hands — and on the bag and steering wheel.
No Scone Unturned
My third outside exposure was also food related. One of the many things on my pre-Covid bucket list was to bake respectable scones, those British triangles that, when done right, capture the dual revelations of crunchy and crumbly in one bite. The only place on earth I have ever tasted what I would describe as a perfect scone was in a small café in Edinburgh, Scotland. It was nearly a religious experience and one that the coffee shops and bakeries of Connecticut have not come close to in the years since that initial revelation.
From my home oven and an online recipe, I produced a credible bacon and cheddar cheese scone — “credible” is a level or two below respectable, and mine had a good crunch but a crumble that was on the cakey-dry side. I made enough to produce a dozen scones, and I wanted to share the extras with our favorite food buddies for their opinions. I bagged a few, drove the 1½ miles to their house, and then shoved them into our friends’ mailbox on top of the letters the postman had delivered. On the way back home, I passed the couple taking a walk in their neighborhood. I rolled down the window and, from a safe distance, asked them to go check their mail. To which they replied, “We are only doing that occasionally.”
I thought, “That’s odd,” but after a few seconds it occurred to me: There is that little latch to pull open the mailbox, and I had touched it with an ungloved hand. And I had not immediately applied the hand sanitizer I keep in the car door handle’s recess. Had I touched my face shortly after? Obviously, my hands were all over the steering wheel. I worried about it all the way home and after I got there, even as I washed my hands in warm water for more than the prescribed 20 seconds.
Fourteen days later, I was still Covid-symptom free, but I kept thinking about the steering wheel I touched, and how long germs might last on hard rubber.
In any case, my friends wrote back the next morning. “OMG, these are great!” they texted me about the scones. “Larry David would even love these,” they added, a reference to the irascible star of Curb Your Enthusiasm who, in one episode of Season 10, punished a café owner in LA for the “muffins” he advertised as scones. (In the episode, David opens a “spite store” next to the offending café owners’ shop and tries to put him out of business. His own scones turn out to be dry enough to choke at least one customer.)
I was uplifted by my favorite couple’s comments, but then started thinking, “What if they are just trying to be nice?” On reflection, it is hard to believe there is a better definition of paranoia than doubting the sincerity of friends. And it is a signal to me that if, as experts predict, Covid-19 will be lurking for another one or two years, until a vaccine is ready, that paranoia will indeed strike deep…and change the nature of some of our relationships.
Although I am more than ready to play golf, with all the restrictions that make sense but won’t kill my joy for the game, it may take some time for me to return to polite society. The only good news is that, by the time I am ready to emerge fully from my quarantine cocoon, I could be closer to the perfect scone.
Larry Gavrich
Founder & Editor
Home On The Course, LLC
