While it is still summer on the calendar, the new piles of pines needles on the ground are a sure sign winter is just around the corner. I wish my time allowed me to specifically address all the comments both left here and emailed, and I would love more time to play with innuendo, but I do have clients to serve, a business to run, and a life to live. The most recent theme is “What will be the generator for the next cash flush, appreciation growth period?” or something like (in my words): What’s going to make the market GO again? I get asked the question here in this forum, in the produce section of VONS, at the post office, hardware store or just about anywhere else I go in town. (Thanks for the ski season when I can hide behind my helmet and face protection and listen to others pontificate. Be mindful of who you’re riding the chair with.)
As California and Nevada real estate values escalated in the past 10 years, Mammoth was especially prone to “triggers” that sent the market into mini frenzies––Intrawest marketing pushes (originally dubbed “mail drops”) and other well timed “announcements” and hyperbole, and the granddaddy, the Starwood acquisition era. And the ridiculously low interest rates and easy qualifying spiked the Kool-Aid bowl. But now the economy is turned on its head and developers are hunkered-in and real qualifying is back in the process. So is there any possible trigger on the horizon? (By-the-way, anything with “Ritz-Carlton Mammoth” emblazoned on it may become a valuable collectable.) My personal feeling is this potential trigger will likely come from an external influence rather than an internal one. But in Mammoth one can never be sure.
Since I’ve always fantasized about writing fiction, let’s first discuss what the possible internal influences could be. The two-and-a-half years of new Ski Area ownership appears to be a rudderless boat, almost dead in the water. If we compare the timing of the purchase (the top of the market and most likely overleveraged) to so many other purchases in that time frame, words like default, write-down, short sale, etc. instantly come to mind. Oh, excuse my ignorance, the Ski Area is too big to fail. The really exciting thing coming is the new branding, to be set in motion this fall. If it isn’t perfectly professional, with solid buy-in from the community, then it may just become the New Coke of Mammoth lore. I’ve promised to be open minded and enthused.
The Ski Area just seems to lack leadership of any kind. It appears to be run more like a highly leveraged hedge fund lost in denial. And we know there are plenty of those out there, just open the financial pages. Maybe Woolly could become the new figurehead and make guest appearances in town assuring the citizens that everything is all right. But the point of all this is that something has to change––maybe new ownership, new management, somebody or something, with real resort experience and caring. I hope for something other than a bunch of blast-through private equity/hedge fund/Wall St. profiteers in our future. Excuse my ignorance again. It may take years of pain, but…the sooner the better in my opinion. But would that be a trigger? And meanwhile, real estate values could take such a direct beating due to this floundering that this alone could be the trigger. People (buyers) are definitely out there looking to invest in Mammoth. Most are on the sidelines trying to time the bottom.
Other internal triggers? Most now fall under the category of “lost opportunities.” Kool-Aid clouds the thinking, darn it. (Or maybe we just need enough passage of time for people to forget.) The “new” airport and air service won’t create any pop. If successful and able to continually grow and expand, there is no doubt that it will be good for sales activity and values. But it will be an ongoing process. New splashy developments have lost their trigger value––too much letdown emanating from the Village and Eagle developments, or lack of developments. I say five to ten years to correct that ship, and about that much time to re-absorb the inventory to create any real demand, or at least the demand for developers to justify moving forward.
The condo hotel concept is going to need some serious re-working, the lenders on both ends are scared to death and the concept is flailing in almost all markets. Here in Mammoth, the back-end execution (promises, promises) of these development plans has probably caused more damage then anything else. The projects themselves are okay, but the other “pieces of the pie” were left out. So maybe now we can convince the outside world that we have the Fountain of Youth here somewhere (Dave seemed to have found it). Or maybe we should quietly plant gold instead of trout in our local creeks and bring back panning. The powers-that-be need to create a new gold rush. They don’t seem too interested in fundamentals.
The external influences are much more compelling. Whether they have the potential to create a frenzied trigger is hard to say. I’ve referred to Mammoth as a “safe haven” because I’ve heard that term used by others. It’s more than just affluent people parking money in local real estate. What I’m talking about is the potential for a “black swan” event, or even the general degradation of life in southern California metropolitan areas. With ancestry in Los Angeles reaching back to the 1800’s, I can’t ignore the area’s history of civil unrest. Things don’t seem to be getting any better and tougher economic times will only make things worse. Problems there could create more demand here, and a small surge in demand can put plenty of pressure on the limited supply of this market. For many, Mammoth could move from being discretionary to necessary.
On a grander economic scale there are many variables. Money has never flowed from asset class to asset class with such rapidity as we have seen in the past 10 years. I clearly see some flowing back to real estate already. It’s part of a greater diversification plan for many. There is plenty of cash on the sidelines, but if it gets nervous about inflation (or even hyperinflation) then it will likely jump into the game of hard assets. Interest rates are moving lower for those who have down payments and can qualify (what a concept). And the factors I’ve discussed ad nauseam––proximity, climate, etc.––are still here. And maybe global warming will make Mammoth the only reliable ski area in California.
Then there are personal triggers. The older you get, the more meaningful these things become. Time waits for no one, not even boomers. If the growing consensus is we’ve entered a prolonged “muddle through” economy, why muddle along with it? Talk to your orthopedic surgeon and make sure you’re good to ski and golf for the next 15 years. Then get on with it.
Meanwhile, the Mammoth brokers who have devoutly pushed the local developer’s overpriced product the last couple of years are now chasing foreclosures. Talk about triggers. Allegiance and loyalty are thrown out the window in exchange for new profits and survival. Are the local developers sitting on inventory asleep or are they just waiting for the sheriff to come knocking at the door? But I digress. I’ll work on more of these questions. So many questions, so little time.