Broker’s Report June 16––I’ve got plenty to say this time around so bear with me. I’ll try to be concise. I’ll cover ground including the very interesting current market conditions, the ongoing development planning in Mammoth, the anticipated effect (my guess) of escalating gas prices on Mammoth, the latest and perhaps desperate maneuvers by local real estate “professionals” that consumers and customers should know about, and some recent comments made by Starwood Capital’s CEO Barry Sternlicht. Stay with me.
Mammoth real estate activity in the past 45 days has made it clear there are real buyers for properties in almost all segments of the market if the prices are down. How far down? In some segments that means up to 25 to 40 percent off of the peak asking prices. I said asking prices. As I’ve alluded to in the past, “asking prices” and seller’s expectations became delusional. We’re now finding what the market will bear. But in other segments the buyers are becoming serious with only a 5 to 10 percent cut from the peak.
Just some examples; Most of the REO (lender owned/foreclosed) properties are selling. Last week we listed a REO 1 bedroom + small loft/1 bath at Sierra Manors at $149,000. This is no cream puff property––it needs plenty of work and is located in a late 60’s built project. But there was blood in the water. The property probably could have been sold 25 times. Another example; an unimproved Bluffs lot seller became seriously motivated this week and offered a special price if a buyer could close by July 1. The seller was offering a 25 percent discount off the last comparable sale. Again, blood in the water.
In the last 30 days we’ve seen high-end residential sales (my office) at $3.4M, $2.5M, $1.5M, and others in the $1.M to $1.3M. These buyers were all buying at below replacement cost. (And the Town is trying to raise permit fees again––close to the highest in the country.) And there are plenty of people milling around looking at real estate. Every day I see people in nice cars slowly driving down my street looking, pointing, checking the map. The high-end interest is what impresses me. I can only conclude that the affluent continue to park money in Mammoth real estate as a diversification of their assets (and is this a potential hedge on inflation?). I also believe that the Boomer effect continues and the mountain lifestyle is becoming increasingly appealing. I’m also hearing the term “safe haven” used more and more––and they’re not using it in financial terms.
The local real estate inventory is staying on the low side. This is normally the time of year we see inventory increasing. We may be seeing what I refer to as “the Aspen effect” pertaining to real estate. I’ve been saying this is very much a “don’t have to sell marketplace.” Plenty of listings are expiring and not coming back on the market. Many sellers are indifferent. This is typical of the market in Aspen as recently reported––very few owners have real pressure to sell, and when they do decide to sell, they price it appropriately and liquidate. The Mammoth market is appearing more and more like that. Of course, the gamblers of past couple of years who financed to the hilt are in an entirely different boat. They are just getting foreclosed on (or are trying short sales first) and these REO properties are finding new owners at nice discounts.
Meanwhile, the local papers continue to be filled with articles about planning and development meetings. There seems to be a strange clinging-on to false hope. New project inventory mostly sits. Commercial vacancies abound. Many Town employees are once again trying to justify their jobs and the developers are trying to justify that they still have viable projects, or that there is some magic bullet. (BTW, if you haven’t heard, The Ritz has been “postponed” for a year for a variety of “reasons.”) These meetings are filled with “blue ribbon” participants and “stakeholders” and even some obvious shills. It’s entertaining for a few minutes but I spent endless hours in these types of meetings in the 90’s and everybody takes it all so serious. And in the end all of the earnest planning gets shoved aside when corporate and individual greed brings the hired guns to town to intimidate the weak elected officials. Most of this ongoing discussion is an exercise in futility––the Wall St. money to back these projects is gone. And even if it existed, the development execution of the past few years (and the lack of buyer interest in these projects) has been so poor that anyone can see that that risk is too high and the cake is spoiled. Plan it all you want but nothing is going to happen without some economic viability. Or until the collective buyer mindset forgets. I’m really glad these people want to spend all this time in these meetings, I’m going to spend my time outside. Maybe they should hold more of these meetings outside.
Okay, so how will the price of gas affect Mammoth? Many fear the exorbitant prices will destroy tourism. But Mammoth remains on the affordable side of the vacation spectrum. Some speculate that travelers won’t go great distances but will still travel, and Mammoth is within the range they will travel to. Maybe visitors will stay longer and stay more centralized and enjoy the amenities within the close proximity of their destination. Mammoth can certainly fulfill that, especially in summer. Maybe Mammoth visitors will rely less on motorized sports and get on their bikes and on the trails. I’ve already heard reports of more European visitors this spring, and everything is “on sale” for them. And maybe, just maybe, lots of second homeowners who rarely use their properties will actually come and spend some time in Mammoth rather than take expensive vacations. They might even re-discover why they own in Mammoth in the first place.
I’ll title the next paragraphs “Consumer Protection.” The local real estate community becomes more entertaining all the time. It has now become more important for agents to answer their phones so their clients don’t think they’re at their second job. And the July 1 “wireless” law means agents won’t be seen babbling away with their cell phones to their ears as they’re driving down the street. But some are beginning to show what I think is desperation. Recently, one unsold new project reported four “sales”. They were actually the developer partners buying units from themselves with conventional financing. Now this might make sense to get rid of some of the higher construction loan interest rates. But the listing agents were ecstatic about these “sales” that now “represent comparables” to be used “in your daily marketing and sales activities.” Buyer beware (please). If you are a potential buyer in this market in this price range or in this project you will be told about these “sales”.
And now we have the largest brokerage representing the new and near-new developments in Mammoth deciding they should be representing foreclosures. Does that mean they’re throwing in the towel on dozens and dozens of the developer’s (Intrawest) unsold (and getting stale) properties? And what about the multitude of clients they already sold (and earned hefty commissions on) and have their properties listed (and can’t sell)? They hyped and sold Village properties and now they want the REO listings that will crush their client’s values. I guess the new strategy is––throw your old clients under the bus so you can get new ones. (FYI––I’ve never sold a Village unit.) Sorry, I just have a thing for “consumer protection”. As a kid I remember hearing, “Son, you just can’t talk out both sides of your mouth.” Today, maybe it’s okay as long as you don’t do it at the same time.
And then some great quotes from Mr. Sternlicht from the past couple of weeks. From the recent New York 2008 hotel conference;
“Mexico is the new force. It is a huge destination. People don’t get sick there anymore. From the U.S., we are in the same time zone. The weak dollar makes Mexico a bargain. All this makes Mexico big.” Hey Barry! Mammoth is in the same time zone and people don’t get sick here either. And all the businesses are discounting because everybody is hurting. And you already own us! Wassup?
Or, “There is no need for another hotel, but there is a need for another experience.” Oh, so now we know why the “1” won’t be built. So what is the “another experience” you have planned for Mammoth? I can’t wait. Sounds like more trout and rice for the local masses.
And then Mr. Sternlicht is quoted in the Wall St. Journal that “cheap airline tickets have inadvertently subsidized the hotel industry.” Well, isn’t that timely? I’m sure all those condo hotel owners in the Village just can’t wait for your Ski Area to help subsidize cheap airline tickets to fill their properties with quality rentals at high rates (as promised by their agents). Don’t hold your breaths.
So the local election is over and we will have a new Assessor with real experience––and a changed Town Council too. But Mammoth as a whole is still void of any real leadership. Don’t expect that to change at anytime in the future. But for now summer weather has arrived, the Memorial Day weekend moisture is greening things up nicely, flowers are blooming, the deer are moving in, the Creek is rushing, so see ya!