This Mammoth Real Estate Q&A appears in this weekend’s The Sheet. Mammoth has plenty of new snow, classic warm weather and a big crowd.
Q: Well it’s that time! Time for Paul to make some predictions about what the Mammoth real estate market will do in 2009 so we can plan accordingly. So what can we anticipate for the year ahead? And as usual, don’t sugar coat it.
A: Predicting anything in Mammoth has always been a dangerous preoccupation. That said I’d prefer to refer to the following as “things to watch for” in 2009. Curses aside, we do live in interesting times. Mammoth has entered a familiar “pain and dream” cycle once again but with all sorts of new twists (let the Village go to hell and re-redevelop the entry to town–that will solve everything). Some actually think they can re-inflate goldilocks, others are seriously lost in denial, and laughingly, there are others that think they can hide from the most recent past by being gloriously reborn at something now worthwhile. And some are just getting down to a new (old) way of doing business.
The first thing to watch is what I’m watching the closest–foreclosures. The 2008 pace in Mammoth was slow but steady. The volume wasn’t alarming but they did affect the values, mostly because the properties were priced to sell by unemotional sellers. The good news is that there were buyers, and those buyers gave us a clear idea of the price support levels in the local market. As we advance into 2009, I think we will see a similar pace, or maybe just up a little. Like many real estate markets, a significant volume of sales will be foreclosed (REO) properties. Indicators are there will be a few more in the Village condo hotel projects, maybe even a few in the Westin Monache.
Right now the lender/owners of these REO properties appear really motivated. I think its has much to do with pressure to get cash back on their books. But every REO transaction is different, even with the same owners. So predicting how they will proceed is impossible. But the REO sales will continue to set the pace of the market. If the volume of available properties comes up, or if the inventory lags, then sales prices will continue to stairstep downwards.
The next thing to watch is interest rates. As of this writing the rates have come down sufficiently enough to spur a surge in refinance applications. That is significant. A fixed rate mortgage with a nice low rate is a solid inflation hedge. And just like gas prices, they may come down to ridiculous levels, at least for a while. Conforming loan limits are up in Mono County. But the rules for qualifying are another story. Stated income loans are out. FICO scores (today’s adult report card) and equity are critical, and sustained and verifiable income (tax returns) a must. All others need not apply. At least for now. With all the inevitable changes in Washington, who knows what will happen. A repeat of 2003-06 is unlikely. But lending has always impacted the market, and it will in 2009. Stay tuned.
The next thing to watch is the pressure on the Town to tinker with the ordinances regulating nightly rentals (transient occupancy) in the single-family zoned neighborhoods. I’ve written about this in the pat, but now the writing is on the wall. The Mammoth Town Council is reacting to their budget shortfall (it’s deja vu all over again). They just moved to cut ten senior staff positions. Now they’re going to look for more revenue (bed tax). For years the Town has looked the other way on clandestine home renters. It’s a bit of a quandary, owners are renting for big dollars and the Town isn’t getting their 13%. But the whole program violates the Town ordinances.
After all the bear shit the Council has waded through in the last year, who would want to sit through these public hearings? But now it has become a matter of getting the money (sounds like an old Yiddish saying a friend of mine used to say). Many locals don’t want to allow transient rentals in the single-family neighborhoods–especially if they live there. Some don’t care. Some make a living servicing the arrangements (and could prosper more if it weren’t “illegal”). But the locals are the voting block. The second homeowners are more inclined to be in favor. If nothing else they would like to have the option of legally renting and perhaps offsetting some of the expenses of ownership. I think there are many potential buyers of homes who don’t want to own in an Association but would like to own a quality vacation property that generates revenue. Clearly, the renters like renting homes. Some of these underground operations are pulling in big numbers (and little taxes). In 2009, economics may dictate a new direction. And that direction could impact values.
Another one to watch, and I did predict it (it was so obvious), is what, or who will end up with the infamous Hillside property. Roger Staubach/Cypress Equities was foreclosed on just a couple of weeks ago. That was going to be the Ritz-Carlton. The property could have been picked up a the Trustee’s Sale for about 20% of what Staubach/Cypress purportedly paid or about 25% of what they owed. It went back to the bank. Too bad the Clearwater people don’t have the vision to own it. Okay, so I’ll make a small prediction. If the Clearwater folks would buy and develop the Hillside property instead, and give the Town the property they own on Old Mammoth Road as their impact fees, everybody would be so far ahead. But what the hell do I know, I’m just the court jester. But somebody is going to buy Hillside for cheap. But then what do they do with it? With condo hotel projects on their heels, development fees and costs out of control, and development financing in the toilet for many years to come…I have an idea. The Town should make the new owner plant extensive indigenous grasses and wildflowers on the property as an environmental measure to control dust. Then the Village and surrounding neighborhood will have a nice park for the next 20 years. (Some small pads for our Pilates mats would be nice too.)
And speaking of developers, will we hear anything profound in 2009 from Starwood Capital? (Who are they again?) I really am hoping for a Baccarat Hotel now instead of the “1” (it appears there will only be one “1”). After all, Mammoth is a Baccarat kind of place. The Ski Area does have an impressive new logo, but what happened to the new brand? They’ve spent so much time and money and had all the experts working on it. Is the logo the brand? I’m so confused (as usual). Maybe they’ll get this all sorted out in 2009. That isn’t a prediction, only a hope. The world seems so full of hope these days. But we do have daily air service now and God knows we all need for it to continue. It all seems a bit anticlimactic at this point.
There is one prediction I really do hope comes true in 2009. I plan to get more skiing in. But for some reason that never seems to work out either. Happy New Year!