I had to change the date on this Broker’s Report, it was originally dated October 13. Yeah, it took me a month to finish it, and I had to re-write it, because plenty has happened in the last 30 days including considerable business. The “anticipation of winter” sales push started early in August, and then stalled, and then moved solidly back into motion the last 30 days. It almost looks like it could continue through what is normally a slow period, the holidays. Just when you think….
The Mammoth real estate market is all about stress and opportunity. I repeatedly see buyers picking up the shattered remains of unfortunate sellers/owners in the form of REOs, short sales and even motivated sales with equity left. And the best news for Mammoth is these buyers are financially sound and aren’t buying for “investment,” or for flipping, or on hype. They are buying with plans for enjoyment, recreation, and quality time (and that, at the end-of-the-day, is the reason to own Mammoth real estate).
Mammoth market watchers are in a yin and yang position. Many are watching (and waiting) for the outcome of the Town’s negotiation with their big judgment holder MLLA (Mammoth Lakes Land Acquisition) aka “Hot Creek.” Negotiations are ongoing and private. The bankruptcy card is no doubt being played as part of the negotiation. If payment by the Town is over many years, some are concerned about the impact to public services, etc., and ultimately real estate values. But I’ve beaten this horse, and we’ll just have to wait and see how this plays out. And it may not make a bit of difference to real estate values whatever the outcome, except for those who are waiting, and waiting.
The opposite side is a subtle but very real change at Mammoth Mountain. Years ago when Starwood arrived as the new owner I forewarned of how “hedge fund” mentality would take over the Mountain’s business style. It looks like we have survived the negative part of the cycle (the leaning out, cost cutting, HR changes, etc.). It appears the Mountain is now prepared to expand in many positive directions. What are the subtle signs? Recent news reports have CEO Rusty Gregory stating he “has a little money to spend.” But they have already spent some money. Skiers are going to find some nice improvements on the Mountain; a new high-speed (and realigned) lift at Chair 5 and RFID gates at most chairs and another try at “L.A. food.” The Mountain is also changing the old Sledz into a worthy tube park. They’re also aggressively pursuing the land swap at the Main Lodge with an eye towards a major rebuild and modernization of that area. Rumors are also flying that the funding for the pursuit of the Eagle Base Lodge is imminent (and a high-speed Chair 5 is a critical link). And not to forget we are about to have daily air service from Orange County and San Diego.
And under the radar but certainly on mine has been the Mountain’s resolution of their back tax assessment squabble with Mono County. The Assessor had us (the Appeals Board) prepared for “a war” coming in spring with two weeks of hearing time set aside. But the Mountain quietly rolled on values and the dispute is put to bed. The accumulation of subtle things tells me there are very positive signs coming out of Mammoth Mountain. That is the good news for owners of Mammoth real estate, especially the ones who ski.
My regular readers know I’m a hard core inventory watcher. The aggregate numbers are in my face daily as I scan the MLS. Burgeoning numbers outside of the normal seasonal shifts are what I’m watching for. With ten days until Thanksgiving the inventory is looking very normal. The overall numbers are coming down. Lingering (and overpriced) listings are turning to seasonal rentals and back on to nightly rental programs. REOs clearly remain some of the best buys. And I don’t have hard data to prove it, but it sure seems like there are more buyers in the market looking for fixer-uppers. Maybe there’s just a lot of bored contractors out there who still have money, and ski passes. Or maybe all the remodeling and redecorating shows on TV have given people the bug. And EVERYBODY is looking for “value.”
As the inventory starts to decline into winter, the best segment of the market with some remaining decent inventory is the $300K-350K priced condos. I haven’t figured out why that segment has been so stale. These are good properties. The condo inventory under $150K has been cleaned out. There is still good price support for decent homes above $500K. Anything below that is compromised one way or another. There is is still plenty of junk in the inventory. I also find myself going back to the 2002 Comp book to look at values. Today’s sales are almost mirror images of 2002, obviously with some variables, but it interesting to look at and note where there are differences.
I’ve talked plenty about foreclosures and pricing. But the significant trend is the management of REO properties increasingly moving to outsourcers. The banks just can’t handle the volume. Why is this significant? As these foreclosed properties move more and more into the hands of outsourcers, the more the “expect the unexpected” seems to become the norm. Some outsourcers become very aggressive on pricing and willingness to negotiate. And others, not so much. The “deals” will be inconsistent. We’re also beginning to see more deed-in-lieu activity, so properties lingering in the foreclosure pipeline may accelerate to the market. And we’re receiving more and more calls from hedge funds and their brethren that are looking to buy distressed assets in pools at deep discounts. They are looking for cursory valuations. We’ll have to wait and see how the REO properties out of these pools will be priced. 2012 could get wild.
The nightly rental market dynamics appear to be on more and more buyer’s minds. Reminds me of the 1980’s. For some, for no other reason than protect the “back end” of their investment. I’m seeing this through the whole spectrum of price ranges. The Internet continues to change the business models. Seems like everyday I hear of someone’s new idea, and there’s some good ones. I’ve become fascinated by the new front door locks being developed that work well with different rental schemes. There are different styles utilizing algorithms and wi-fi that can give owners complete control over who has access at very specific times. “Handing out keys” is going to become a thing of the past, and so will losing a key. Now you’ll just have to remember the code. And this winter we’ll just have to see how the Town’s new TOT (bed tax) enforcement plan will work. More fun in 2012.
In a recent newsletter I spoke about the prospects/rumor of a 1000” winter. That sounds great for skiers and snowboarders who want to ride all summer and fall. But another 350” on top of what we had last winter would come with staggering costs. It would result in a huge financial burden to all parties who pay for snow removal (from the State to private property owners). Property damage would be incredible. Anybody who thinks it would be “great” obviously doesn’t live here. But that leads me to another discussion that I’ve been having with buyers lately. Many prospective condo buyers are wincing at high common area fees. But I’ve been pointing out the high cost of snow removal. I explain that if you own a single family home in Mammoth you are going to pay $900 per year just for blower service for your driveway. And then you are likely going add to that additional costs for walkways, decks, propane tanks, etc., and in a year like last year the roof will need to be cleared at least once, unless you’re lucky. Owners can easily rack up snow removal expenses equal to $250-300 per month over 12 months. That’s the cost of being here. So when looking at HOA fees, just take $200-300 off the number and put it in perspective. And if we get 1000” of snow, you can expect a special assessment, and some pain.
If you come to Mammoth this winter you will likely be introduced to the latest effort by Elizabeth Tenney to beautify the town. Elizabeth took over the dismal landscaping at the Post Office a few years ago and with the help of many locals (including many artisans), the Post Office looks beautiful in the summer and is like a park unto itself. Now she wants to tackle the tacky front door of Mammoth. And any real estate person knows the value of a quality entry statement. The design work and construction drawings are complete. The proposed monument signs are on both the north and south side of Highway 203 at the entry to town. The south side is in front of the new court building. So look for more news on the Mammoth Gateway Community Project. The fund raising has begun but will kick into high gear this winter. Many businesses and individuals are already pledging support. There will be opportunities to have your name on a laser engraved brick paver, or all the way up to “legacy plaques.” Elizabeth says this is her last “project” before she officially retires. But her vision is for an entry that both local residents and second homeowners will be proud of every time they drive by. Let it snow!