Many people who bought homes next to golf courses thought their property value would rise. But they are now discovering that golf-home prices can drop, too, as the popularity of the sport recedes.
Decades after developers began to blanket the Sunbelt with residential communities built around golf courses, many courses are closing – triggering legal fights over the consequences.
Hundreds of communities built around golf courses that are money losers, according to Peter Nanula, chief executive of Concert Golf Partners, an owner and operator of about 20 private golf clubs across the country.
Among other projects, Nanula’s company has acquired and started to rehabilitate a golf club in Lake Worth, Florida, that closed one of its three golf courses and filed lawsuits against residents who refused to pay fees for club membership.
According to the National Golf Foundation, more than 200 golf courses in the United States closed in 2017, and 15 new courses opened.
Blake Plumley, Florida-based development consultant, told the Wall Street Journal that the prices of nearby homes usually drop about 25 percent when a golf course is closed. Price drops as deep as 50 percent are possible if litigation erupts over a golf course, causing legal uncertainty that discourages potential golf-home buyers.
Nearly 24 million people played at least one round of golf in 2017, down from 30 million in 2001, when the popularity of the sport peaked, according to the National Golf Foundation.
In the early 2000s, developers who built residential communities around golf clubs started to require all of their home buyers to become club members.
Mandatory club membership was intended to guarantee the financial feasibility of golf courses surrounded by homes. But mandatory club membership can reduce home values by reducing the number of people willing to buy such homes.
Prices for homes that come with mandatory membership in a golf club are “way below what they should be selling for,” Ken Johnson, a real estate economist at Florida Atlantic University, told the Journal.
In the early 2000s, a golf community in Lake Worth called Fountains of Palm Beach began to require all its home owners to join the Fountains Country Club, which is located on the gated grounds of the community.
Mandatory club membership withered the housing market at Fountains of Palm Beach, where homes that previously sold for about $400,000 have traded at prices under $200,000, according to Sharon Harrington, a resident of the community and a real estate agent in the Lake Worth area, just south of West Palm Beach.
Fountains Country Club closed one of its three golf courses in 2016. By then, Harrington’s membership dues had climbed to about $24,000, almost five times what she paid when she first joined. She and other residents stopped paying dues, and the club sued to enforce the mandatory-membership rules.
The lawsuits against her and other residents were dropped after Concert Golf Partners acquired Fountains Country Club.
Nanula, the chief executive of Concert, told the Journal that membership in the club is no longer mandatory for residents of Fountains of Palm Beach, and home prices in the community are recovering. He also said Concert has upgraded the club’s facilities and is preparing to redevelop the golf course that closed in 2016 as housing.
Mandatory memberships persist at other golf communities. For example, buyers at Akoya Boca West, a 10-story condominium in Boca Raton, Florida, are required to join the Boca West Country Club, which charges a $70,000 initiation fee and monthly dues of about $1,000. Prices for the condo units start around $1 million.
After three years on the market, 40 percent of the units at Akoya Boca West are still unsold, according to Robert Siemens of Siemens Group, the developer of the condo, who says mandatory club membership hasn’t deterred buyers. [Wall Street Journal] – Mike Seemuth
Source: The Real Deal Los Angeles