Return of The Mammoth Crashpads

Broker’s Report Jan. 11––Almost 10 years ago Mammoth Mountain announced a new pre-purchased (in spring for the following winter) and discounted season pass which became known as the MVP (Mammoth Value Pass). The program has been a major success. For previous season pass holders it represented a really substantial discount. But for the other 30,000-plus original purchasers, it made Mammoth their own affordable home ski area. It also drove strong demand in several segments of the local real estate market. Back then I dubbed those property segments as “crashpads.”

Real estate values were still quite affordable in the year 2000. For the 10’s of thousand of new season-pass holders the natural progression was to secure a place to stay without having to make “plans.” Demand escalated for ownership and rentals. The demand for ownership was significant in the low-end of the markets. The new pass holders were willing to buy anything that had a bed, a shower, and a coffee maker. As I recall there was very little discretion beyond that. These were crashpads for new pass-holding fanatics who intended to spend more time on the Mountain than in their new property. It was a mania unto itself. The activity was predominately in the condo market, but it did affect the home market too. (This phenomenon greatly impacted affordability for local residents in the immediate years to follow as market values increased.)

But with higher prices and the MVP mania diminished, the demand for lower-end condo subsided for several years, until recently. The evidence is in the foreclosed/REO sales for 2008 and very recently the enthusiasm around a project named San Joaquin Villas. The cheap condos foreclosed on and remarketed (REOs) were bought-up reminiscent of the crashpad era. Each new low-end REO listing gets plenty of interest. And now the Mammoth Lakes Housing Authority is turning back units (they overbuilt the deed-restricted housing in Mammoth––imagine that?!) and the developers are dumping them off their books at prices that buyers are loving and moving quickly on.

So what has caused this interest in low-end “crashpads”? Is this just good old-fashioned bottom feeding? Is there a resurgence in using the MVPs (maybe the recession finally afforded the pass-holders the time?)? Are the new “pass” deals offered by the Mountain appealing enough to rekindle demand? I haven’t put my finger on it, but the demand is real and it will be something to watch in 2009.

For those statistical junkies, the 2008 closing numbers for Mammoth real estate should be posted on my office website any time now in the usual place. Unfortunately, it will probably resemble your 401K statement. The recent holiday period provided a solid stream of lookers and inquiries despite the excellent skiing and weather. Overall interest in Mammoth real estate seems up but nobody “is in a hurry.” There have been a few home sales in the $700-900K range but the standoff remains between potential buyers and sellers. Higher-end home prices continue to drift downward for anybody who really wants to sell and we’re slowly heading into near-or-below replacement value on some (assuming contractors don’t want to work for free).

Intrawest has re-established their local marketing arm, also-known-as Playground (maybe they should name it Musicalchairs), and are holding daily open house/gallery at the Westin for those of you who want a tour and see the condo hotel units you can now purchase for a substantial (20-30%) discount off of what buyers were closing at just a year ago. No big hurry though, I think they have about 60 or 70 Intrawest owned units to get rid of (besides all the other resale units). But the nice salespeople might have some cookies for the kids. The Westin is the nicest place to stay in Mammoth and they do have a real bar. Intrawest is also starting to put the Woodwinds on sale at discounts, but if a buyer looks around I think there are more attractive properties/deals––but that price-point is a bit stale too. The big winner for Intrawest has been San Joaquin Villas, the affordable housing project they built for the Town and got back because the Housing Authority is overloaded with inventory. So they slashed the prices to the open market and the buyers lined up. (Maybe the market is telling them something.) For folks who like these things, watch Fortress Investment Group (FIG) on the NYSE, the chart looks like most lately but the related stories are good entertainment.

One little tidbit from what I’m calling an “80% of maximum” holiday period, owners (including single-family homes) utilizing their own online rental services reported callers “really negotiating” and “grinding” on price. Certainly a sign of the times, but I wonder how many condos represented by agencies went un-booked because they can’t/wouldn’t deal? Oh well, just more lost revenue for everybody and 80% of peak made it very tolerable and enjoyable for everybody––unless you went to VONS on New Year’s Eve. The balance of the real estate news is pretty ho-hum––the overall inventory of homes and condos is slightly high for this time of year, but still not alarming. The foreclosure mill has slowed through the year-end/year-start but is expected to return to a steadier pace through the year, and construction is at an almost standstill (so it is the perfect time to build or remodel).

Based on my observation, I’ve decided to establish some “real estate red flags” or rules for 2009. So here goes. First: if your agent seems a little anxious or pushy, ask them if they have any personal real estate for sale or in default. Or if they’re late for their second job. The answer will be a good indicator of their motivation for you to buy. While most buyers are in a slow, steady and patient mode, the market doesn’t warrant aggressive behavior. Secondly (and I’ve recently discussed this), purchase quality and location over price. Yeah, some buyers are getting some major discounts––but for a good reason––the property has serious resale-ability issues unless it is a frenzied market. We may not see a frenzied market for a long time. And in the meantime, you’re stuck with it.

Thirdly, be careful of purchasing in uncompleted condominium projects, especially if it is unlikely the same developer will completing it. The Economies of Scale is important to understand in the effective and efficient operation of a condominium project. And history has shown it takes some of these partially completed projects years to really stabilize. And lastly, if purchasing in an older condominium project, try to buy on the back-end of major capital improvement projects and assessments. At this point in the market these improvements aren’t really adding value to the ultimate sales price. But moving into a project that has needs or plans in the immediate future could cost $10’s of thousands in difficult-to-finance assessments/expenses. Of course, everyone is free to not follow this advice.

And last month I found an answer to one of the nagging questions in my Mammoth life. There was a nice article in the December issue of Inc. Magazine on Dave McCoy under their monthly “How I Did It” feature. (None of the Mammoth-based press has mentioned the article so I figure they all missed it.) Dave is quoted, “In 1991, we had to lay off 150 people, because we had six years of very light snow. Instead of keeping all the best people, I looked at the people that were really able to take care of themselves and let them go first. It worked out, because they ended up doing greater things than they had been doing. It may not have been wise, but that’s the way it is with me.” Well, well, well––some clarity.

Dave ended with, “There’s no way to understand my life unless you see where I spent it. When it’s clear and calm on the mountain, there’s no more beautiful place in the world.”

That Mr. McCoy, is something most of us understand.