Broker’s Report, January 16, 2007

January 16, 2007–Much of what was said in the Sept. 19 Report still holds true. In an Oct. 20 article in the New York Times on ski homes I was quoted “We are in a bit of a stall…” pertaining to the real estate market here in Mammoth. I received several questioning comments along the same line, “A stall like with a car or a stall like with an airplane?” For clarification, the present stall is like that of a stalled car (and not one stalled on Davison Road). I’m not seeing any evidence that the market will represent the stall with an airplane–at least one in flight.

General real estate activity was very slow up until the holiday period. Inquiries and property showings increased during the holidays, with a few sales. Active agents (including myself) report that buyers are looking and appear qualified and are serious about their intent to purchase property in Mammoth but most are reluctant to make offers. When offers are made, negotiations are taking longer and more often than not the sellers are making the final moves to the buyer’s price. I have seen recent negotiations taking as long as two to six weeks before a meeting of the minds. As I write this it appears that a few nice higher-end homes have or are going to escrow as result of negotiations that started during the holiday period. I do think if we had more snow we would have more visitors and hence more sales. But we certainly can’t place all of the blame on snow conditions.

Right now the overall inventory is mixed from the fall–a few more condos on the market and a few less homes. There is no evidence of any sellers panicking at this time, and their asking prices still reflect it. We are beginning to see some significant price reductions. But for lesser quality properties, the sellers are clearly going to have to reduce prices further, maybe much further. Today’s buyer is looking for quality AND price. Earlier in the fall we saw some nice single-family residences, with sellers getting realistic on pricing, go to contract and close escrow. The inventory numbers are going to be the key thing to watch as we head into summer.

A growing percentage of the condominium inventory are recently built properties, namely the Intrawest developed properties, that have the appearance of being purchased on speculation back in the 2003-2004 time frame. Based on the original deposits (some held for many months to years) and purchase prices, and furnishings and carrying costs, these speculative buys may not prove to be profitable for their owners. But they may become good (or maybe even great) buys come late summer. The timing will shift depending on each of the sellers. Some of these sellers may fall into the class of “affluent speculators”. We’ll have to watch this segment of the market and see how much absorption there will be–and how motivated the sellers become.

The fractional developments at 80/50 and Tallus have been closing some shares. I’m sorry, but I think it is insane to allow buyers to close on fractional properties when the developments still look like construction zones and the services are not in place. The buyers are probably just as crazy to do so. I don’t think sales will be brisk in these projects anytime in the near future. There are too many unknowns and questions; can they manage and staff the projects as conceptualized? Are the budgets anywhere near financial reality or will costs (to the owner) skyrocket? Can they sell enough units to become viable? Can they get past the mystique that these are glorified timeshares with the “easy to get in and difficult to get out of” syndrome?

All last winter Intrawest marketed their “Altis” project–a high-end “resort club” property scheduled to be built along the ski run above the Bridges condominiums. This is one of the premier locations in Mammoth–direct ski access and panoramic views. The project is on hold for now. According to Intrawest the construction cost estimates were too high. I read not enough buyers willing to pony up pre-construction deposits.
One thing that does amaze me, and a positive indicator in the market, is the number of high-end homes that continue to be built in Mammoth. Take a drive up to the Bluffs and you will find seven new homes under construction–all started since mid-summer. These are large homes being custom built (typically $400-600 per square foot). While high-end homes built on speculation are not selling, the people who want a large home like this in Mammoth certainly don’t seem to be hesitating to build their own. And that process can take 2 to 4 years or more to complete.

Another observation; I’ve spent a great deal of time in the Mammoth Knolls subdivision this past year and am astounded at how much major remodeling is going on there. The Knolls is known for beautiful trees, immediate access to Forest Service lands, and now close proximity to the Village. Many older homes have been bull dozed, added on to or substantially remodeled. The quality residential areas seem to be growing in popularity and investment.

Future developments are moving slowly through the planning pipeline. Environmental studies and environmental impact reports are in various stages for; the development at the Eagle Lodge/Chair 15 parking lot, for “Clearwater”–the massive redevelopment project proposed on Old Mammoth Road where the old Ocean Harvest, Rafters and Sierra Nevada Inn are located, and for the Starwood Capital proposed “1” Hotel which is now slated on Minaret Road across from the Village basically from the old Berger’s restaurant to the end of lower Forest Trail. Snowcreek Phase 7 is now being promoted and the long admired knoll adjacent to Old Mammoth Road will become a vast grading project soon, maybe even this summer. That should make for some great arrowhead hunting!

The new owners of the three corners at Minaret and Main (Whiskey Creek), known as “Crossroads” continue their planning efforts. They are scheduled to pre-sell a small quarter-share project on Minaret below the old Ullr Lodge in the next few months although no big marketing effort is occurring yet here in town. This quarter-share concept is shaping up to be something different from fractional in that owners will have a defined every-fourth-week right (presumably trade-able) to their unit. We’ll see.

Meanwhile the Town’s newest affordable housing project has opened on Old Mammoth Road adjacent to the Snowcreek Athletic Club. The sidewalk and lighting look nice and it is good to see happy local families occupying their new homes. The town has several smaller projects underway in various locations off of Main Street. It is quite impressive to see what the Town (Housing Authority) has been able to accomplish with development exactions, grant dollars and housing incentives. It is personally gratifying that the hours spent in meetings in the 90’s as a Planning Commissioner and a member of the Housing Advisory Committee didn’t go to waste.

I am beginning to carefully watch the newer projects that rely on un-individually metered gas heating (and especially those that depend on heating understructure garages to protect exposed plumbing) and those that are heavily dependent on manual labor. Both are becoming increasingly costly. Higher common area fees will inevitably affect values.

Many months ago I wrote about the market fragmenting–real estate values not staying consistent through all market segments. I anticipate micro trends even within segments. The next year will be fascinating and potentially full of pitfalls and opportunity. If you plan on transacting real estate in Mammoth in the near future, it would be best to be working with an experienced (in the business prior to 1998–the end of the last down cycle), knowledgeable and full-time Mammoth real estate professional. The game has changed.

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