Why 2017 May Be Your Year
to Buy a Golf Home

For those whose window to purchase a vacation or retirement home in the South is between one and five years, this may be the right time to think in terms of sooner rather than later.  Here’s why:

Price Rises Look Like a Trend

Consensus is building that the price increases of 2016 will continue through the coming year.  Already, some markets –- Naples, FL, comes to mind –- have whizzed past the exalted price levels of just before the 2008 recession.  Naples homes lost about 50% of their value during the recession but most golf communities have come all the way back and then some, showing prices in 2016 beyond the previous high point of the market.  And even though mortgage rates have begun to rise and are likely to continue to do so in 2017, experts do not see any adverse effect on the housing market.  Furthermore, many retirees won’t be financing their new homes in the South but rather will cash out of their primary homes, downsize into a cheaper market, and pay all cash.  Finally, inventories are way down across most of the country, and even the armchair economist knows that when demand is high (mostly from baby boomers) and supply is low, you can count on prices rising.  Baby boomers with primary homes they plan to sell might want to consider a shorter time frame.

Price Decreases Look Like a Blip

There are some select golf communities in the Southeast where prices stayed pretty much level in 2016 and a few where they decreased.  Because of the aforementioned supply and demand realities, these could represent the best bargains of all.

Sometimes numbers mislead.  In Cobblestone Park, north of Columbia, SC, started as a high-end luxury community by the ill-starred developer Bobby Ginn, median home prices dropped $13,000 between 2015 and 2016 to $272,600.  But rather than some phantom market force causing the slide, it was more a consequence of D. R. Horton, a major builder inside Cobblestone, offering new, slightly lower-priced models that turned out to be popular.  Cobblestone’s recently constructed clubhouse and pro shop create more intrinsic value in the homes that were already there; and the excellent 27-hole Lee Janzen/P.B. Dye semi-private golf course doesn’t hurt either.

Price trends in 2016 at western Virginia’s Wintergreen Resort were, as some might characterize them, “stupid crazy.”  No community east of the Mississippi combines the pleasures of golfing and skiing more adeptly than does Wintergreen, located beside the Blue Ridge Parkway and about an hour west of the university town of Charlottesville.  At a few hours from Washington, D.C. and with seasonal and year-round homes priced at some of the lowest levels of any golf community we know, Wintergreen is strangely undiscovered.  Average price levels of $148,000 in 2016 for mountain-located condominiums and $348,000 for mountain-section single-family homes were both down a fair percentage year to year, possibly the result of a change of ownership at the resort.  But our sales professional at Wintergreen, Steve Marianella, informs us that the new owners, the experienced EPR/Pacific Group, have a year of operations under their belt now and had the best "non-ski" season in Wintergreen’s 40-year history from last spring through fall.

Migration from North to South picks up steam

The latest census reports show that flows of population from cold northern states to warm southern states are increasing once again.  It had slowed a bit during the recession years.  We rely on migration reports from the big moving companies that are based on the numbers of customers they move from one state to another.

United Van Lines' annual National Movers Survey is easy and fun to review.  These movers shake things up with a colorful map at their web site that shows distinctly which states gained population, which lost and which states are essentially in balance. The 2016 survey indicates the big winners were the Pacific Northwest states and the Carolinas, although South Dakota topped all states with a 68% inbound rate (which meant 32% left the state).  Oregon (67% inbound population), Idaho (65%), and Washington and Nevada (58% each) were among the states with what United Van terms “high inbound” rates.  North Carolina also showed a 58% inbound rate, but South Carolina nosed out its neighbor with a 60% inbound rate.  The only other state with an inbound rate higher than 57% was tiny Vermont, with a 67% rate that virtually tied Oregon for second spot.  (United Van says Vermont just inched out Oregon.)  My daughter was graduated from the University of Vermont in Burlington, one of the most interesting small towns in America, and chose to live in Vermont after graduation.  I make many visits there, drink the best craft beers in America and eat in their ubiquitous farm-to-table restaurants, and I totally understand its popularity.  My wife and I could very well contribute to Vermont’s inbound rate in the coming years.  (Although not dense with country clubs, the courses at Vermont ski resorts and at other locations are first rate.)

With a 57% inbound rate, Florida (and Arizona) are considered in the study to be “medium inbound” states; all other states in the Southern half of the nation were “in balance” in 2016, meaning the difference between the inbound and outbound rates are, in the survey’s terms, “negligible.”  Among the largest “outbound” states were Connecticut and the Middle-Atlantic states (New York, New Jersey, Pennsylvania) and all the Rust Belt states except for Indiana, which was balanced.  As a Connecticut homeowner, I take its place on the list as a signal that now may be the time to sell.  (We are fixing our 35-year-old house up to do just that.)

Mortgage rates start to rise

In December, the U.S. Federal Reserve raised its short-term key interest rate and, not unexpectedly, mortgage rates rose at about the same time to their highest levels since April 2014.  For those of us who remember the 1980s and mortgage loans with rates in the double digits -– my wife and I had one of those at a 13.5% interest rate –- 4.4% looks quite good.  But many homebuyers of the last few years are sitting with rates under 3.5%; we are not likely to see those again for a long time.

For baby boomers with lots of equity in their current primary homes, mortgage rates may be largely irrelevant.  Who needs the stress and obligation of having to pay off loans in retirement?  But at rates below 4%, borrowing was a cheap way to get into a slightly bigger and better home than you might have considered, or to take out a home-equity loan at equally low rates that might have helped renovate a newly purchased home you might not ordinarily have bought without “cheap” money.  If rates continue to rise, that window might close.

Inflation rears its head

If past is prologue, the inflation many experts are predicting should not have an adverse effect on the affordability of homes.  The prices of homes will generally reflect the rate of inflation, and as long as Congress doesn’t eliminate the tax deduction for mortgage interest, home ownership should continue to be a modest to good deal. Yes, prices of most everything should rise, including home prices, but so too should incomes (savings rates and salaries). 

But a rise in income from salaries doesn’t do much for us retirees who are largely on fixed incomes.  Social Security and pension payments may provide reliability, but they certainly are not dynamic; and in a battle with inflation, fixed payments obviously lose.  In short, if you believe, as many economists do, that some inflation is at hand, and you rely mostly on fixed sources of income, then waiting too long to buy a home for your retirement years could erode your buying power as home prices rise.

A Nice Place to Wait for the End of Days

Many people, maybe half the country that did not vote for Donald Trump, are suffering from a disease called “Inauguration Anxiety” and a touch of schizophrenia.  Those disposed toward anyone but Trump don’t quite know how to reconcile that their 401K and other accounts invested in the stock market grew by double digits after the November 8 election; the fuel for the increases was likely because regulations designed to protect consumers but seen as onerous by financial institutions are in for a re-hauling.  Wall Street likes that.  Those of us who are retired should be especially nervous about changes because, of course, we have the shortest time horizons and the least flexibility; if national or world events cause upheaval in the coming years, we baby boomers don’t have that many more years to recoup our losses.

Russia, Syria, ISIS, Iran, how to replace the Affordable Care Act, racial tensions –- the world would be a daunting place for even the most experienced leader.  The next four years are likely to be filled with anxiety and stress.  What better place to hide out than in a lovely home adjacent to a terrific golf course.  Just cut the cord on cable news and watch a lot of feel-good movies.

Predictions for 2017 House Market,
and a Few Calculations

Zillow, the popular online real estate enterprise, predicted in November that home prices would rise 3.6% in 2017 based on the input of 100 top economists and housing experts.  The National Association of Realtors prediction was pretty much in line.  As of last November, home values had risen 4.8% in 2016.  At this point, though, just days before the Presidential inauguration, any prediction about the housing market, or the general economy for that matter, seems a fool’s errand.

If, for example, President-elect Trump follows through on his plans to deport undocumented immigrants, the construction of new homes would likely slow dramatically.  (And the labor costs to build them would increase, forcing home prices higher.)  Nationwide, there is already a low inventory of homes for sale, and any slowing of new construction could drive prices up.  Concurrently, any rollback of financial regulations and the lowering of taxes, core Trump promises on the campaign trail, could make it easier for developers and homeowners to borrow money, although some experts predict an additional spur to inflation if some of the shackles are thrown off the banks.

Historically, rises in mortgage and inflation rates tend to dampen increases in returns from stock market investments.  The stock market investments of the last year, especially in retirees’ IRA and 401K portfolios, should stimulate confidence in the purchase of a home, especially among those already wealthy citizens with significant investments who are looking to relocate, say, to a warm weather climate.   In short, an inflationary period could mean that the housing market actually does a little better than the stock market in the coming year or four.  Those with the resources to make a move might consider one sooner rather than later.

Regardless of what the future holds, those who own primary homes in the North and plan to move South are holding the hot hands for now.  First, the low inventory of homes across the country (supply) intersecting with the interest of millennials and others in purchasing their first or an upgraded home (demand) may mean homes that many have owned for decades are near their peak values, an argument that now is a good time to sell.  Second, and perhaps more important, it is cheaper –- in some areas a lot cheaper –- to live in most places in the South than it is in the North.  Regardless of the impact of other factors that make housing market predictions difficult, one thing is certain:  You will save a lot of money -– i.e. give yourself a raise –- if you move from North to South.

How much of a raise, you ask?  Here are a just a few comparisons of the cost of living in cities North and South (courtesy of BestPlaces.net):

If, for example, a couple living in Kingston, RI, spends a total of $100,000 per year on all their living expenses, they would save $35,000 by moving to Georgetown, SC, conveniently located between Myrtle Beach and Charleston.  

Savannah Lakes Village's Excellent Year

Sales at Savannah Lakes Village in McCormick, SC, were up almost across the board last year.  That performance reflected sales in many of the other golf communities we follow.  See related notes in the accompanying sidebar.

I’ve written many times that Savannah Lakes Village offers pretty much the best bargains in golf community living, with two interesting and challenging golf courses and extremely low fees for the amenities on offer. Our real estate pro in town, Michael Sherard, reports that in 2016 his agency sold 72 homes in the Lake Thurmond community, including 10 with golf course views and 18 on the lake. Average sales price increased nearly 6% to a still reasonable $206,736. Interestingly, that was almost precisely the average cost of a golf view home that sold last year. Waterfront homes averaged $319,000 per sale, quite a premium over other locations in Savannah Lakes but still way below the $1 million plus paid for lakefront homes in communities considered more “upscale” than Savannah Lakes. Lot sales for 2016 almost doubled over 2015’s numbers, with a surprising 46 sold. As an endnote, I think Savannah Lakes’ experience in 2016 is a harbinger of what very well could happen in golf communities across the Southeast. Contact me if you would like an introduction to Michael Sherard and Savannah Lakes or to any of the fine golf communities we follow.

Larry Gavrich
Founder & Editor
Home On The Course, LLC