Mammoth Broker’s Report, March 21––A Tumultuous World and Frustrated Buyers

So this is what they call a “buyer’s market?” Am I the only one confused here or is the term buyer’s market a bit of a misnomer? Or are the unique nuances of the Mammoth real estate market just shining through? Yes, buyers are making good buys if we consider the steep decline in values over the past few years, and low interest rates, and other alternative investment/purchasing options, and the availability of contractors and suppliers to aide the gratification process. And what if prices don’t go any lower? Or what if they do? Or what if just “getting in and getting on with it” is more important than hitting the perceived magical bottom? Where are the screaming deals? So many questions, or maybe we need to just let the events of the world settle down (yeah, like that is going to happen). And by-the-way, Mammoth has just pushed over 500 inches of snow for the winter with more on the way. So plan on great spring, and maybe even summer skiing. Snow never seems to hurt the Mammoth real estate market.

This may be a buyer’s market, but there are plenty of frustrated buyers who aren’t feeling the market is playing in their favor. One thing you come to realize when you broker real estate in Mammoth Lakes is that despite all the chaos and distress in the world, all the unemployment and economic woes, and all the mixed signals, there is the inverse too. There is a faction of people who are hard working, highly successful, under-leveraged, etc. that are looking to own a piece of Mammoth. It may be a discretionary purchase, but for a variety of reasons, they want it. And many teeter on wanting it and not being a “fool” (and that is most likely why they can afford it). Many are frustrated they can’t find what they want, let alone at the price they want. Some regret playing hardball in the past. And some pay attention to the Mammoth real estate inventory on the Internet more than they do their own stock portfolio.

The lack of quality inventory (or that “particular property”) is the major culprit for their frustration. And this condition doesn’t appear to be getting any better. Most of the good inventory has been sorted through, analyzed, and put to contract. Although sometimes the good properties will curiously sit there no matter how times it is shown to buyers (and then all of a sudden everybody wants it). Winter isn’t typically the time of year when inventory comes on the market even though many of the serious buyers are here looking intently. And some of the inventory is sitting around with sellers still waiting for their higher price, and some like to wait for years. Much of Mammoth is a “don’t have to buy, don’t have to sell” market. The Internet watching buyers are always entertained by the “days on market” statistic. And they always know if the listing has been re-issued (to reset the DOM) at some point.

The next group of frustrated buyers are involved in short sales. A recent California Association of Realtors survey reports that 43% of short sales failed in 2010. I don’t know what the number is in Mammoth, but probably pretty close to that. But it isn’t the failure so much as the waiting, and the uncertainty. The buyers get impatient and can wander off track, especially when the skiing is so good. The same CAR survey reported that 63% of short sale agreements took more than 60 days to get approval from the bank. Some take much longer than that. And during all of that, good properties come and go off the market. Buyers can easily change their minds when they find something they like better. Some of the better buys can be found when existing short sales fall apart just before approval, and then the property comes back to the market.

Many buyers are watching the foreclosure market and anticipating certain units. But then they don’t like the bank’s asking price. Then they gamble that other buyers won’t like the asking price and will play the waiting game. Banks clearly continue to try to uphold values. But they will drop their prices. They might even send it off for auction, and often times that doesn’t work so it comes back again (most auctions have minimum bids at a price close to where it was recently listed). Then more frustration comes when the more attractive REOs come to the market and they receive multiple offers. In the mix there’s always the low-ball buyer, probably an unbelieving buyer (that there are multiple offers), and maybe a very serious buyer or two. The serious buyers are often buyers who have previously lost-out on another attractive property, usually by playing their own low-ball game. The multiple offer scenarios are most often cast into a “highest and best” response from the bank. At that point some buyers get angry, some get belligerent, and some get real.

More self-induced frustration comes from “Mr. Cash Buyer” and “Mr. Crash Buyer”. Although many buyers in the Mammoth market do in fact purchase with cash, some have to let you know it rather emphatically. Typically, the more noise they make about it, the bigger the discount they expect. If the property is in demand, the problem is they are likely to be competing against another cash buyer, and maybe a frustrated one that has already lost-out a few times. Mr. Cash Buyer is certainly to be respected, but in today’s Mammoth real estate market it doesn’t buy a massive discount. He will almost always win out over an equal-but-financed buyer. Cash doesn’t necessarily get the screaming deal, but it certainly helps get the deal. Now if the property has sat on the market, and the seller has undo motivation, and Mr. Cash Buyer isn’t going to nitpick on contingencies, then a large discount is quite possible, and probably warranted. But those scenarios are few and far between.

Mr. Crash Buyer is a whole different sort. He thinks (and tells everybody) there is more market crash coming, but he is still looking at properties, and even making offers. For an agent, dealing with Mr. Crash Buyer is a bipolar experience. One moment you’re dealing with someone positive and sincere, the next moment the world is crashing down in despair. Sometimes it’s a good act, sometimes it is their genius showing through, and sometimes…. The toll is usually on the spouse or family who “wants to get on with it” as well as a lot of wasted time and energy for the agents and the seller. Sometimes the toll is in the form of a lost deal that was actually a good deal, and won’t be replaced for many months, if at all. But if it really is a good deal, another buyer is usually there to pick up the pieces. The odd thing is I always seem to learn something quite novel and interesting from a Mr. Crash Buyer. And anonymously riding a chairlift with a babbling Crasher is always entertaining.

The frustration also greatly depends on what segment of the market a buyer is looking in. In the last couple of months, properties with good access to ski lifts have been selling, but what would you expect in winter. Inventory in the Village is down and there is solid price support, and the foreclosures there are drying up. Buyers looking for a modest but quality home in the $550K to $750K range are very frustrated––too many compromises and definitely not enough inventory. Even the more expensive home market has been thinned of the most desirable properties, and those foreclosures are drying up too. There has been good absorption of the low-end (and often REO) condo market (aka “crash-pads”). List prices for quality 1-bedroom units are creeping back up, and we’ll see if they’re supported. The popular oldie-but-goodie condos on Chateau Road have sold well too. With the Ski Area recently announcing the re-opening of the MVP (Mammoth Value Pass) to new membership, that will certainly drive some purchases (it always has).

What isn’t selling? Residential lots are sitting although the Ski Area’s rumblings about prioritizing a base lodge development at Eagle/Chair 15 has renewed interest in lots there. Those buyers seeking a nice residential property are seeing selling prices at or below replacement and are also seeing diminished lot values and are thinking of building. And the contractors are available. When the snow melts the dozen or so “good buy” lots may be prime for the picking. We shall see. The “summer sale” properties are moving slower, but of course they’re buried in snow.

Mammoth continues to see handfuls of move-up buyers and buyers pursuing a secondary or “investment” property (providing some of the demand in the condo-hotel segment). Overall, despite everything else there is plenty of confidence in the market and if buyers could find the properties they desire there would be even more sales activity. It would be nice to end their frustration.

Now back to shoveling snow.