Broker’s Report, March 22––In the past month a good number of things have excited my cynical side, some of it good enough for Saturday Night Live or The Daily Show, and I’ll get to that. But the snow and skiing have been so excellent and the Sierra and the surrounding vistas so full of white that being negative is a difficult thing to be. And the weather has been classic Mammoth––going from a series of blizzards, powder days, and luscious wind events, to instant spring and all the good that brings. Somehow this seems to be the new definition (and was probably the old definition) of what Mammoth is and destined to be. Forget all the man-made imperfections––the whole country is full of marginal strip centers and malls. Let’s stay focused on all of the natural greatness and open space, and take the time to revel in it.
People who know me recognize that I am grounded in the fundamentals of real estate. I don’t own a skirt and pom-pom and don’t lead any cheers. I don’t have a set of scripts like so many agents. I’ve been fired plenty because I don’t kiss enough ass. People who know me also know I hate to see people make poorly informed, un-educated real estate decisions. But I see it all of the time as I watch the market. And most of time their agents don’t know any better either. Sometime people don’t realize how desperate their agents are to make a sale. I’m always curious to see who represented the buyers and sellers in these transactions. And lately, I’m seeing more agents calling themselves “experts” or having “certifications” when in fact they have little experience. These terms themselves are now considered a liability in the more prudent circles of the industry. Law firms are just waiting for these self-pronounced experts to make mistakes that experts shouldn’t make. As for me, I’m just a cynical dummy who likes to support my skiing and fishing habits by selling real estate. And while the Internet is great resource for consumers to become educated about the market, it is no substitute for being in the field with an experienced and knowledgeable agent. There might be tons of money swirling around the virtual world, but in real estate world people still need to understand the real.
Besides continuing demand and low inventory in the Mammoth market, the big real estate news is the recently re-launched sales efforts at 80/50. Me personally, the only thing worse than trying to sell resort fractional property would be trying to sell something with the Trump name attached to it. But the 80/50 project is as sweet as Mammoth has ever seen, or maybe will ever see. Too bad it isn’t the flagship “boutique hotel” that a wacky faction of Mammoth locals thinks is viable here. But from an old-school real estate mind like mine, owning a product like this seems more like a liability than anything else. Kind of like a pricey lease on a yellow Lamborghini. But then again that works for some. One of my old friends who is a very successful Mammoth businessman remarks, “Yeah, I’ll split it with you 80-50.” That just about describes the arrangement in my book, but he said it, not me. I have no doubt the sales will be successful. This sales effort is the next (and maybe last) iteration of the well-proven Intrawest sales program here in Mammoth, and most of us know what that’s all about. I wonder if they’re showing “On the Shoulders of Giants” to anyone? Actually, I’m just jealous of all the leads they will generate at this beautiful property and Village location and the freedom they have to sell those prospects properties in the balance of the Mammoth market. That’s a very nice opportunity for the agents sitting the property.
The next source of potential cynicism is MMSA bumping the price of the MVP to $639. This does impact real estate because so many of today’s real estate buyers are MVP holders. I would love to have sat in those meetings, assuming they just didn’t throw a dart at the board. The data has to be fascinating information about Mammoth skiers and visitors. But I think based on riding the chairlifts I could predict the conclusions within 10 percent. In business school there was this thing called pricing function. Somewhere there is a magic equation based on MVPs, tickets sold at COSTCO, and those sold as part of packaging. Oh, and the number of people who just walk up and pay $92. There are plenty of people who won’t balk at $639 for a MVP. I paid $1140 for my season pass 12 years ago. I’m in, as long as my knees hold out. The greatest thing about having a pass is the MOTIVATION TO USE IT––no excuses.
The red flag was the MVP offer for “the all-new two-year deal on the MVP for $609 per year.” This is a first and causes some concern for me. Normally I’d jump on that kind of deal but in an era of Ponzi economics I’ll wait. That type of offer is a cute marketing ploy, but today it may imply a bold statement of “WE NEED CASH.” Wall St. calls it financial innovation. I can only imagine that the fine print states that if the MMSA debt is sold from one of Barry’s entities to another of Barry’s entities the deal is modified somehow, obviously to the detriment of the pass holder. And right out of the Intrawest sales manual (I’m para-phrasing) “there is only a limited number of these special opportunities available” to purchase the two year pass at $609/yr. Please. What happens if only 20,000 MVPs re-up at $639? The economy could do that. Pissing customers off could do it too. The following year’s price could be $589 and opened back up. The $609 might be better at the sportsbook in Reno.
Meanwhile, one of the major shopping centers in Mammoth is in receivership. No surprise (in fact, what took so long?). The knowledgeable saw this coming almost as soon as the deal was completed. Receivership is a nice way of saying the bank needs to make sure the property doesn’t go to hell. Forget the payments, time to protect the asset. What’s so funny to me is that about a year ago the Town of Mammoth Lakes was negotiating its future office space lease and was seriously considering becoming a “partner” in this mall. Did they think that their current landlord wasn’t aware of the stress at the competitor? What is it about this huge debt/lousy management scenario people don’t get? Oh, sounds like Sacramento and D.C., sorry. But good skiing can overcome cynicism.
The next good laugh happened this last week. Units built and sold by the Mammoth Lakes Housing Authority to “certified” owners as moderate-income housing now appear as short sales. Ah, the almost bizarre convergence of two of my pet peeves. Now, the older I get the more impatient I become with time wasters (shrinks say that happens with those in remission of cancer––31 years for me this week). In the mid-90’s I spent soooooo much time working out low-income and affordable housing policy and direction for the Town. Most of the elders didn’t like my opinions, I think they thought I was too young to know anything. I’m now convinced this was all a big waste of time. It’s like some bad real estate LSD trip. I guess many of my readers would need a better understanding of it all, but having deed-restricted properties with certified owners now marketing short sales in those properties is just beyond belief. I need to go skiing. Or get drunk. Maybe someday I’ll have the patience to write a post to explain it all in a way the common man can understand. Government has failed us once again. We all better get use to it.
For those looking for more specific market information, refer to my last blog post MF6.0. The market continues to be active and sellers are beginning to get an upper hand in the condo and home segments, but my bet is the buyers won’t let it go to their heads. We may get back to another stand-off in the second half of the year. The lenders with defaults (who care) certainly hope the buyers support higher prices. Sellers should look for stabilization not appreciation. But the buyers will determine that. And buyers and their agents are frustrated by the lack of good inventory. Meanwhile, the quality and quantity of snow have made this a good winter for Mammoth all around. To expect more commerce in this economy would be foolish. We’ll see how the new businesses (especially the Village) and those on the brink will react though the coming slower months. Unless someone has a card up their sleeve, May and June will be dead. Mammoth has a local election in June and its guaranteed to get heated. Eight candidates will run for three Council seats and that includes four existing or previous Council members. I hope the local media has the guts to cover it.
Come hit the slopes in April, plenty of snow pack and the crowds will be light. Bring the fishing rods and the bike. It’s triathlon time.
I’m scared. Why??? Well, it’s NOT because my income is down about 40% and falling. Or that my wife is soon to take a 10% pay cut…or that I have two kids in college. Or that my real estate holdings have fallen about 30% from the peak. Or that my equities are anemic at best. Thankfully, my occupation allowed me to prepare well in advance so we can weather a severe financial storm. So my fear is not financially based, instead it’s political. Make no mistake, battle lines are no longer drawn between Republicans and Democrats debating our country’s future under the common unity of the constitution and capitalism. Nope, we are now divided by a much larger gap….capitalists on the right and socialists on the left. Big difference! So, what does this have to do with your column Paul? Well, if I thought this was a “typical” business cycle I would feel more comfortable stepping in and buying because of the appealing price points. However, I am very concerned that if this socialist juggernaut continues and Prop 13 and mortgage interest deductions are revoked it would have devastating effects on property values. Just as an earthquake can forever change the landscape in Mammoth, so could a seismic shift in the political tectonic plates crumbling into the rubble of socialism. Wilbur
What are these appealing price points that you speak of. Can you buy a place in mammoth and get 9% of the price in rent each year.
NO!
Buy and start bleeding money. Simple as that.
You are right….I have not found anything in Mammoth that "pencils" based on traditional investment hurdles. However, my criteria for Mammoth is not as sober as it would be for a pure income play that I would apply to something in my own back yard in SoCcal. So, while I place most weight on the "numbers", my love of Mammoth and all the wonderful things that come with it more that justify factoring in a pinch of "emotional slop" (i.e. monthly negative or "bleed" as you put it or even a tinge of "yellow Lambo" as Paul would describe it). With that said, to me the most tempting deal so far was the 2/2+L at the Summit that went for around $270k a few months ago. Even though it was a fixer, I found the price very appealing.
Wilbur
Wilbur;
You've been talking to the wrong side of the horse again. What you really fear is losing the upper hand that you see as your birth right. Take a deep breath, put the kool-aide down, the sky is not falling. Nobody other than you gives a flying snowball what you have or what you'll buy except a hard up realtor. Join a militia so you can again feel the false since of security that material wealth brings you. Truthfully I feel for people that any amount of wealth will never have enough. You came with nothing and you'll leave with nothing just like the rest of the peons, deal with it.
Yep, you are absolutely right about the fear of losing the upper hand. That is precisely my point about lines being drawn between capitalists and socialists. Since there is no such thing as a perfect government I prefer capitalism which in essence tends to error on the side of free enterprise, individual rights and small government. Conversely, socialists prefer to error on the side of regulation, centralized control, public ownership and big government. One of the key reasons I choose capitalism is I fear “big government” much more than I do “big business”. Why? Well, history is pretty consistent in revealing the worst human rights violations and atrocities are at the hands of big government. Transgressions by businesses, while troublesome, are petty compared to the horror played out in Germany, Russia, China, Cambodia, etc. If you think businesses can produce thugs….they are nothing compared to the maniacal egos that rise to the top of the ultimate power position, which is a big centralized government. Since power freaks come in all sizes, shapes and affiliations, I am just as concerned about those on the right side of the isle as on the left. Finally, while socialists are enjoying a late Christmas, we would all do well to keep a close eye on Santa to make sure that while we has us mesmerized by gifts, he is not lifting the family jewels (i.e. constitution). Wilbur
The wing nuts of the social security era, the civil rights era and medicare era were making the same claims about socialism because they didn't get their way on these issues at the time. This dog and sled show will dye a slow death and the free enterprisers we be on to their next ponzi schemes, Mammoth will start and not finish a new/old main street with town subsidies. We've had to bailout the savings and loans, wall street, the big banks,insurance companies, Fannie and Fredie, the auto industries etc. Seems that socialism is for corporate america at the expense of the capitalist taxpayers. Follow the money Wilbur the jig is up. When its not the constitution, its the debt burden we are leaving our children thanks to eight years of G.W. and his wars. Being ranked 37 in medical care in the world scares me more then Faux News talking points.
1 France
2 Italy
3 San Marino
4 Andorra
5 Malta
6 Singapore
7 Spain
8 Oman
9 Austria
10 Japan
11 Norway
12 Portugal
13 Monaco
14 Greece
15 Iceland
16 Luxembourg
17 Netherlands
18 United Kingdom
19 Ireland
20 Switzerland
21 Belgium
22 Colombia
23 Sweden
24 Cyprus
25 Germany
26 Saudi Arabia
27 United Arab Emirates
28 Israel
29 Morocco
30 Canada
31 Finland
32 Australia
33 Chile
34 Denmark
35 Dominica
36 Costa Rica
37 United States of America
Mr. Ed
Mr. Ed, seems to me that when it comes to the big picture we are in agreement…..we both want fiscal responsibility and world class healthcare. And like you, I hate to see the bailouts of big business…nothing should be too big to fail. As far as villains, I agree GWB was fiscally irresponsible but lets not leave out all the other scoundrels in various branches of government and political parties like A. Greenspan, C. Dodd, B. Frank, H. Paulson, D. Fuld, P. Gramm, C. Cox and the most responsible of all…the American Consumer. Mr. Ed, you accurately point to all the bubbles over the past few years which for the most part are tied to capitalism run amuck. But lets not throw the baby out with the bathwater (we both like bad clichés don’t we) and embrace socialism. Remember, as bad as these bubbles are/were, they are nothing compared to when the mother of all bubbles bursts which is big government….and that is where this wave of socialism is driving us. Finally, I can’t believe we’re behind San Marino in anything…what the heck is it??? A country…really?? (I best google it and find out…I bet its one of the countries in Africa or Eastern Europe which seem to change on a weekly basis these days). Wilbur
First, I'd like to complement both Wilbur and Mr. Ed on a civilized discussion of a contentious topic – politics. Second, I would like clarification on my understanding of the great depression and our current recession. I thought both were caused by big government not regulating big business, or deregulating big business in the case of our current mess.
Wilbur, I don't fear big government because I still believe in the checks and balances built into our system. If I remember my high school American Government class, we have the House representing the working class, the Senate representing the landed gentry/aristocracy/entrepreneurs, and the president representing the whole country. I've got a piece of shrapnel in my crotch from a misguided war in Vietnam because I believe in this country and its system of government, and I can’t stand the Republicans or the Democrats. What I fear is big business, and the bonuses given out in the last two years is a case in point. Adam Smith's invisible hand works beautifully at the local scale. If Paul paid himself 1000 times what he paid his associates, he'd be a one man shop. At the local level, individual buying power and a social conscience keep the economy in check. At the national and international levels, those checks are gone. The CEO of KB Homes made 163 million in the year before he was fired. The CEO of Oracle is worth 44 BILLION dollars. When big business is this big, it starts to control big government. I don't have a degree in economics, although Paul does I think, so please straighten out my thinking here.
Speaking of Paul, I'd like to get back to his blog. Recently I got an email from Copper Mt offering a $49 deposit option to hold a season pass for next season. Then I get an email from the Mammoth Mountain offering a two year savings of under 5% if I'll fork over $1218. The 5% is based on no increase in price the second year. I'll be curious to see how that flies. I'm sticking with the one year plan, thanks. BTW, I cannot imagine they will drop the price next year below this year’s price because it would really upset the folks who bought the two year ticket. The 20% bonus for putting cash on my MVP card I did buy into, although I probably won’t do it again. Two weeks ago on the chair two guys were talking about Deer Valley, where they had skied the week before. What’s the cost of a ticket now at Deer Valley, I asked. Same as here, and you sure get a lot better service there, they said. That’s ok by me; at $10 per lift ticket, which is what my MVP cost this year, I don’t expect much except great snow, great terrain, and functioning lifts with short lines, and that’s Mammoth.
Wilbur, I am really impressed with your knowledge of geography if San Marino was the only country you didn’t know on Mr. Ed’s list, and I have a degree in Geography. BTW, I thought San Marino was the country just south of Pasadena where the president of USC lives. I’ve been through that neighborhood a few times, and it looks to me like they have good health care, judging from the people I see out jogging. They’d be at the top of my list of health care coverage too.
-John
Guts to cover the council election?
Guts is not the issue, but with eight people running- logistics is the problem. We need a Napoleon of News.
Also, I was one of those that saw the Sierra Center Mall thing coming, and I am not a knowledgeable person on the matter.
My dad was in real estate and my mom ran a retail business. I've seen it from both sides.
What were they going to do raise the rents to justify the purchase? Trouble was obvious a mile a way.
They raise the rents, the businesses are gone. It's Mammoth, retailers aren't rolling in cash.
Good commentary. I'll be interested to see how MVP pass rate hike affects the crowds in 2011. We're MVP pass holders and condo owners in Mammoth Lakes. We're probably going to continue to buy every season until it becomes cheaper to get on a plane and head to UTAH from San Diego!
So will not go.