Yesterday someone asked a very good question about what I saw as to the direction of the value of Golden Gate Estates lots. They had heard that once Ave Maria University is built that lot values would increase and start selling faster.
Below is my response – it is rather lengthy:
For quite some time, people have said property values in Golden Gate Estates would go up because of both the Town of Ave Maria and Ave Maria University being built in the eastern part of Collier County. It is one of the reasons that Golden Gate Estates lots shot up in value along with home prices.
The fact remains that Ave Maria is located about 5 miles further east of Golden Gate Estates and the starting prices for a residence in Ave Maria are now in the $200′s. The town will have many amenities that Golden Gate Estates does not have – public water, sewer, parks, water theme park, tennis facilities, shopping, fitness center, etc. The town of Ave Maria will be a destination for people, not Golden Gate Estates. Most likely the area of Golden Gate Estates to see some positive impact with be those areas that are close to Oil Well Road, which is the direct route to Ave Maria. The further away a property is located from this corridor the less impact Ave Maria will have on a property’s value.
A good example is the impact that Orange Groves and Orange Blossom Ranch subdivision had on the Waterways and Orangetree subdivisions, where the home in Orange Groves and Orange Blossom were and are being built starting in the $300′s, where the existing homes in Waterways and Orangetree were selling for more and now, their prices have dropped substantially and barely selling. The same impact was felt in the Golden Gate Estates areas surrounding Orange Groves and Orange Blossom Ranch. People like new construction rather than an existing property.
Another factor that will be or is actually starting to be an impact on Golden Gate Estates – is the rate of foreclosures. The number of foreclosures is rising, due to people not being able to afford the monthly payments. Several reasons – increases in property taxes, increases in insurance, and the financing program they used to purchase the property. Many people used either option adjustment rate mortgages (ARM’s) of some type. Generally, the ARM’s are either 1/1, 3/1, 5/1, 7/1, or 10/1 – the first number represents how long the mortgage has a fixed rate and then the interest rate adjusts – unfortunately, the interest rates have risen since the purchase and the homeowner is faced with higher monthly payments. All the increases combined – even though individually are small when combined are significant for the homeowner and thus payment problems start which end up in foreclosure situations. Many of the homes were purchased by individuals that were classified as high-risk borrowers and various loan programs used where it truly did not meet the needs of the purchaser(s). I was interviewed by both NBC Channel 2 and ABC Channel 7 here, regarding the foreclosure situation – it is my humble opinion that we are now seeing only the tip of the iceberg for foreclosures.
Another issue that will affect property values is the tightening of lender requirements – for example, last year someone with credit scores of 580 could obtain a loan, today the requirement is up to 600. There is a greater scrutiny of loan applications and appraisals to ensure their accuracy. As lending requirements tighten up the number of potential buyers dwindle. This is occurring due to the amount of foreclosures taking place throughout the country. Residential lots or vacant land is a higher risk than residential properties and these types of properties may see more stringent lending requirements.
One other factor that will affect property values is the rate of growth (population) that will be taking place in the future – one report I read stated that the state expected a school population growth this year of about 44,000 students state-wide – the actual number turned out to be less than 1,000! If the population stabilizes, then the demand for housing decreases, when demand decreases so does home values, and it trickles down to the residential lots and vacant land.
Also, Hank Fishkind a noted Florida Economist (he is surveyed by the University of Florida’s School of Economics) has stated that residential improved (not vacant lots) properties may increase between 3% to 7% per year. Vacant residential lots generally increase at a lower rate than improved residential properties. It is important to note that the rate of increase is based upon the estimated market value at a given time and not the acquisition cost of the seller.
Lastly, the weather (hurricanes) will have an impact on the demand for real estate – a bad hurricane season will cause less demand and the prices will again decrease.
The issue of whether a property’s value will increase is rather a complex issue as you can see and not just narrowed down to one cause and effect, but it is a combination of events/actions and their effects that will determine future market values.