Downsides to Living On a Golf Course

CHICAGO (TheStreet) -- Property on a golf course is supposed to be a gold mine, but it can be as grating as grown men repeatedly shouting "It's in the hole" while re-enacting Caddyshack outside your kitchen window.

Given the shape of the real estate market, homebuyers can't be blamed for seeking the advantages golf course property can offer. The S&P/Case-Shiller 20-city index of home prices rose 0.7% in April after collapsing 3.6% in March, and its 10-city composite rose 0.8%. That's still 4% and 3.1% off their respective April 2010 paces and likely won't add up to much after the National Association of Realtors announced that home prices dropped 3.8% in May.

Low interest rates on home loans that have been declining since January and have held steady at 4.5% for a 30-year-fixed mortgage, according to Freddie Mac, haven't helped woo potential buyers put off by tightened credit restrictions. The Census Bureau found that U.S. homeownership dropped from 69% in 2004 to 66.5% at the end of last year. Amid 9.1% unemployment and a $166,500 median existing home price that's down 4.6% from last May, buyers are looking for a sure thing. More often than not, frontage on a golf course is a pretty safe bet.

Back in 1996, The Appraisal Institute found that houses with frontage on a golf course fetched an average premium of 8% compared with other homes in the area. Roughly 14 years later, when the baby boomers started retiring and had a lot more tee time in them, the institute found demand had skyrocketed. In a study last year of a development called The Reserve at Lake Keowee in Sunset, S.C., the institute found homes with views of the community's Jack Nicklaus-designed golf course sold for 42% to 85% more than houses that didn't get a look at the greens.

This, unfortunately, is the first downside to owning a home on the fairway. Homeowners are buying in high and, according to a (pre-recession) 2003 report from the institute, were paying 12.7% more for homes in Las Vegas on private golf courses than they would for homes without courses at all. Now that Las Vegas' foreclosure rate is at a nationwide high of 3.21%, according to RealtyTrac, and prices of existing homes are down from $220,000 two years ago to just $128,000 today as the city copes with 12% unemployment, even golf course-adjacent residents are probably wishing they hadn't bet the bank on property near the bunkers.

That's before homebuyers have to deal with all of the noise and traffic associated with their golf course neighbor. As the institute notes, the premium on a house on a private course is nearly double that of a semiprivate resort course or a public green.

Those private courses are also a lot busier, with the National Golf Foundation golf market research group finding that the most avid golfers make up only 7.5 million (or 28%) of the 27.1 million golfers in America, but account for 77% of the rounds played and 71% of the money spent on the sport. Golfing's core audience, meaning those playing eight or more rounds a year, is 57% of all golfers but account for 94% of the rounds played and of the $26.3 billion spent on golf a year.

These are the kinds of folks who'll shell out for club memberships -- and the type of players who won't give you a mulligan when you're trying to sleep in on a Sunday and are awoken by a foursome's reaction to one of the caddy's knee-slappers. The only consolation is that the folks across the street from you have it much worse. While the institute says homeowners with golf-course frontage get a 7.9% boost in home values, neighbors just a 10th of a mile from the golf course gate -- who get all of the increased traffic and lawnmower noise but none of the views -- actually see their property values decrease 3.7% from average. Compare that with a homeowner a half-mile away, whose selling price slips only 0.76% by comparison.

At least they're out of the line of fire. When a potential homebuyer in Dublin, Calif., went to real estate website Trulia three years ago with doubts about a home that backed right up to a golf course, Trulia brokers cautioned the buyer about the its resale value.

"A 'fairly large number of golf balls in the backyard' and 'walls along one side and part of the rear show impact marks from golf ball hits' would give me serious concern," says Dave Sutton, of Dave Sutton Homes in Portland, Ore., citing descriptions from the shopper. "The issue is how will you feel about sitting in your yard: If you are worried about getting hit by a flying golf ball (which could easily be fatal), you will soon stop using it at all."