Mammoth Broker’s Report, May 27, 2010 – I Hope It Doesn’t Snow In August.

Broker’s Report, May 27––Mammoth local residents are getting downright grumpy and perhaps deservedly so. Most are addicted to Vitamin D and endorphins and this spring has provided diminished opportunities for both. April and May have been marked by continued snow, a slowly receding snowpack (doesn’t help the early mountain biking) and tons of WIND, continued wind, and almost persistent wind. The Ski Area still has great volumes of snow on the runs but only the really hardcore fanatics are still interested, and the US Ski Team.

Potential buyers watching the Mammoth real estate market are getting grumpy too. The lack of inventory, and especially quality inventory, and the lack of “steals” in the marketplace have them frustrated. And opportunities to lock in excellent interest rates has them salivating. Now we are entering the period when the local market typically sees a build in inventory with a peak usually around Labor Day. It’s also the period when the buyer’s minds wander away from their Mammoth real estate cravings, so it may become the summer of discontent for many because the plums will go to those who are paying attention. As I say in this market, “as interest wanes the opportunities arise.” Mammoth is indeed a funny real estate market. We hear it all the time, “That new listing sounds great, I’ll be up in a couple of months to take a look.”

So what did we learn from this glorious past winter? We once again witnessed that it dumps in Mammoth and when it does the skiing and riding are quite fabulous. This was an exceptional year for fresh snow opportunities. Maybe global warming, or whatever trend we are in, is destined to make Mammoth the Alta of California. The snow was quite enjoyable this year… I didn’t hear anybody say they missed Patina’s food on the Mountain but the hipster Hyde Lounge sure seemed to be a hit. The Village cranked from all observations, but now we’ll see how they manage through the long shoulder periods and summer. Total skier days are reported at 1.25 million with a small up tick in revenues. The air service from multiple destinations has been deemed a success with little or no subsidy needed. (Actually, the owners of condo hotel units operated by Mammoth Hospitality may be the ones subsidizing it, but who really knows, or cares.)

Mountain operations were visibly lean and streamlined but outside of a need for more resort participants to comprehend the Responsibility Code, all of that didn’t seem to matter. No one had time to complain about the grooming because it was soon covered in fresh snow. And Wednesday is still the best day to ski…. I don’t know why they haven’t picked up on the taco truck concept that is so popular in L.A.–––having mobile food facilities only makes sense, maybe too much sense. Mammoth shined for the Olympic snowboard qualifying events even though nobody was watching, they were too busy tearing up the rest of the hill. And the young twin-tip riding freestyle skiers in the park and on the mountain have become almost mind-boggling to watch.

The local Town Council race has turned into another mundane comedy (of errors?). The “solution” to Mammoth’s problems is to entice and promote more real estate development. Weren’t we just addicted to that heroin? (thank Rusty for that line). So just more short-term thinking from this group. They obviously don’t see the disconnect––thinking that developing more units can solve anything especially without buyer demand at higher price points and available financing (and forget some of the highest development fees in the country). Sorry, but the mojo of the roaring 2000s isn’t coming back anytime soon. Real estate values are beaten down, so more supply is not the answer.

Mammoth can no longer rely on external events and hyperbolic marketing to drive tourism demand and development. Several candidates have the platform that we “need to DRIVE more tourism to Mammoth.” Forget the cliché-ness of the statement, but our visitors are not cattle. If anything, what plenty of Mammoth does is drive visitors away. Very few seem to grasp the concept of attracting visitors and then treating them to such an enjoyable experience that they can’t wait to come back. But of course it may be that yin and yang thing: Mother Nature attracts the visitors so we need drive them away. We must be in balance. (Some people think it is a deep-rooted Sierra Club conspiracy.) But these elections amaze me. I really don’t understand why all these Council candidates spend all of this money (and time) for a position that pays next-to-nothing, and displaces quality recreation time. It has to be ego. Meanwhile, I see little hope in filling the leadership void. But the new Council is certain to “drive” more development to Mammoth, now if we can attract the bankers, the buyers and bed tax paying visitors. (Leave that to me because my campaign promise is to drive real estate values back up all by myself!)

The most significant new trend in real estate is the impact of last year’s implementation of the federal government’s HVCC or Home Valuation Code of Conduct. Now that we’ve sorted through the workflow minutia and hiccups, the real effect we are seeing is lender-required repairs to properties prior to the funding of loans. The appraisers are acting as the eyes-and-ears of the lenders and are required to identify deficiencies, and they are. This is holding up the closing of escrows. And essentially many transactions are now composed of three separate negotiations: the first is the original “meeting of the minds,” and then the post-physical inspection negotiation for repairs, and thirdly a negotiation for the lender mandated repairs as flagged by the appraiser. The lenders allow for holdbacks in escrow for the repairs but only after the submittal of contractor estimates and monies held at 150% of those estimates. For sellers of less-than-perfect properties this means two things: cash buyers are increasingly attractive (but cash buyers want discounts), or if they are anticipating a financed buyer, better repair those red flag items before marketing. The lenders are even demanding repairs of bank-owned properties that have traditionally been sold “as-is.” Oh, the irony.

The Mammoth market remains a story of micro-markets and segments. What applies to one part of the market doesn’t apply to the whole market. Appraisal reports indicate that Mammoth’s market is “stable” and not a “declining market.” The MLS data shows low inventory. The condo inventory is full of small low-end 70’s-built condos, mediocre condo hotel units, and rehashed or reclaimed deed restricted units. Very few units under $400K are worth getting excited about. Some sellers are beginning to play the game of “how-low-can-we-go” on the less desirable properties. New REO listings aren’t helping values, but neither are the relatively high common area fees attached to these properties. (Maybe some of the market should be labeled a “stable but declining” market.) Cheaper season passes could help move this inventory of crash pads, but we’re bouncing off the ceiling of that phenomenon. Many potential buyers are desirous of picking from more quality choices under $600K but they are few and far between. And now the potential sellers are holding back thinking that segment has hit the bottom. That is unless they have found new motivation. Buyers and sellers are both experiencing a slow war of attrition.

And forget looking at homes under $600K––there are major compromises everywhere. A recent REO, a vintage 60’s-built “A-frame” on a small lot brought a half-dozen or more offers in the $300K range. The inventory between $600K and $800K only gets slightly better. But there have been some great buys in the $1-1.5M range––including large, newer homes on great lots (like the Bluffs). And there are a handful of new bank-owned properties coming in that segment of the market. Currently there are less than 60 homes on the market. We’re certain to see more as we move into summer. These properties now have good financing (and great rates) so we’ll see how that impacts that part of the market.

Speaking of lending, the scrutiny of condo hotel and heavily “front-desk rental” managed condominiums continues. Obtaining loans in these projects continues to be dicey if not impossible. Another general wave of REOs is in the works, but right now the banks tend to want to fish with higher prices, but not always. “Expect the unexpected” continues to be the mantra. And paying attention. Short sales have been successful, but none of them are great deals. For anyone interested in buying a vacant residential lot, values are beaten down, inventory is low, and there are some tasty choices out there. And many contractors are begging for business. It’s also a good time to consider an older well-built condo in a great location (like creekside in Snowcreek) and have a contractor do a major remodel.

While private development will be in a stall this summer, the public side will see some nice projects. The Lakes Basin bike trail construction will continue with the first path from Whiskey Creek to Twin Lakes opening in the coming months. The new courthouse construction is underway across from McDonald’s and we’ll be blessed with another southern California-style building in the gateway of town (despite efforts by the Town). The Scenic Loop road will be closed all summer for a complete rehab and widening (to be more bicycle friendly).

This has been a busy yet very enjoyable winter (albeit too long). Local residents and visitors alike are ready for summer and all the joys that come with it. I’m expecting a busy summer, both for tourism and real estate. So in the meantime I’m hanging up the “gone fishing” sign and going to seek out some sunshine and warm, flat water. See you when I return.

I see this is my 100th post on this blog. I guess I need to be more diligent.