Market Summary: February 3 – February 17
The Mammoth MLS is reporting 17 closings in Mammoth Lakes for the period ranging from a low of $31,000 (storage unit) to a high of $970,000. This is almost the same number of closings in the previous four weeks. The sales data reports three (3) REO/bank owned property closing and three (3) short sale closings. Nine (9) of the closings were OVER the $300K mark. This is good activity in the market for the pre-President’s w/e, which typically marks the start of the late-winter and spring selling season in Mammoth.
Housing Inventory
At the period’s end there are 110 condominiums listed for sale, only down 1 from the previous newsletter. The inventory of single-family homes is up two (2) to 42. There are only three (3) homes listed under $500K and one of those is a just-listed REO that could get bid-up over the $500K mark. Residential lots listed for sale are still at 28. So it looks like the inventory numbers have stabilized for now. Local real estate agents are hustling for new listings. Sales volume (closings) and inventory will be interesting to watch over the coming months.
Pending Transactions
The total number of properties in “pending” (under contract) in Mammoth Lakes increased by one (1) to 67. Of the 67 properties in “pending,” 16 are “contingent short sales” and 12 are in “back-up” status. The total number of pendings in the aggregate Mammoth MLS (which includes outlying areas) increased by 8 to 101.
Market Updates and News
The little surge in new REO properties/assignments of the past couple months will likely dry up in the short term. There are plenty of distressed properties in Mammoth but the Notice of Default and Trustee’s Sale pipeline has dried up. The only reasonable explanation is California’s new “Homeowner’s Bill of Rights” enacted Jan. 1. These new regulations prohibit bank’s from “dual tracking” distressed owners. Essentially, distressed owners now have to deal with “one point of contact” at the bank.
The process goes from; default (stop making payments), to offer of loan modifications, to attempt a short sale, to initiate foreclosure. The banks can’t initiate foreclosure while the owner is attempting another remedial step. Basically, the “controlled burn” will just be prolonged further, and further. Just another example of the Fed, the government, and the banks doing everything they can to put a floor in the market. (Who ever dreamed that squatting could become so financially prudent?)
Establishing a floor may work in some markets, especially here in California. Here in Mammoth there are different dynamics. It may work, or it may not. One always needs to be reminded that Mammoth is a limited supply of real estate, and even building on the vacant land that remains within the town limits has become increasingly, and very expensive. But second homes are still a discretionary purchase (and for some a discretionary sale), so demand is different.
Meanwhile, the distressed part of the market languishes on. There is still a large number of properties that are “underwater” either by their purchase timing or refinance. But many properties that were purchased at much higher prices aren’t really distressed. Many of those were purchased with cash, or via 1031 exchanges, or simply have owners that can easily make the payments. But as short sales have become easier for second homes and “affluent” sellers, and the negative credit ramifications less and less, an increasing number of underwater owners in Mammoth are beginning to consider a short sale to “un-burden” themselves.
There are hundreds of owners in this position. Without serious price escalation in the market, more and more will consider a short sale. The new “Bill of Rights” just plays into it. Now if they can just mentally get around the fact they should stop making payments (like so many others). The real estate market becomes more convoluted every day.
Despite the new regulations, foreclosures will continue to ebb and flow, maybe for many more years. Many owners aren’t interested in short selling, especially if they can get a few more years of enjoyment or income out of the property without making payments. Seriously. Today, there is no reason to believe that the ultimate credit damage of a foreclosure is any different from that of a short sale. Nobody really knows for sure.
People who have been foreclosed on in this past cycle are getting new loans today. And there is no reason to believe a short sale isn’t an option after defaulting for a few years. This is all uncharted territory. And for people who need to keep their credit pristine, a short sale or foreclosure isn’t an option. They can only hope for price appreciation.
The most recent foreclosures appear to have the pricing strategy (by the asset managers) of “price it low and create a bidding war.” And so far it has worked for the sellers. The low inventory hasn’t hurt, especially in certain segments of the market. Most of the current REOs are being bid-up over the original asking price. Conversely, there is a batch of REOs that are priced way too high. Those third party broker price opinions (BPOs) and appraisals have their way of being out-of-touch. Ultimately, there is up-and-down price discovery going on in all segments of the Mammoth real estate market.
The new and growing headache for many Mammoth property owners and future property owners is old fireplaces. When I was on the Planning Commission in 1990, the TOML was forced by the EPA to address the episodes of “particulate pollution” in Mammoth. Yes, Mammoth had periods of severe air pollution. After several public hearings it was determined the pollution was an equal fault of both woodburning fireplaces and the cinders used on the roads to combat ice.
TOML ordinance 90-03 was passed and required all open wood burning fireplaces and appliances to be retrofitted to “EPA certified” inserts and appliances. The trigger for the retrofit was the transfer of ownership of the property. These original retrofits were costing in the $2-3K range. Since 1990 there have been thousands of retrofits (and the pollution events have dwindled). But now these retrofits have smoldering issues, literally. Slow burning combustibles in the rear of these installations have been attributed to at least eight home fires in the past 10 years.
So now the ML Fire Dept. and the Building Dept. are on a massive campaign to mandate new retrofits which include opening up the entire flue system to the roof line. The end result is a whole new fireplace system including cosmetics. There are lots of new and very attractive appliances on the market. Throw in some nice rock work and a mantle and the end result is very nice. But the baseline expense is $8-10K. The new ordinance is in draft stage. But it is coming so it is the new “buyer beware.” This could be salvation for the local construction industry… we’ll see.
Noteworthy Sales
The REO sale of Woodwinds #17 at $540,000. This 3 bedroom / 3 bath townhome on the Sierra Star golf course was one of the last properties developed by Intrawest. These were classically pre-sold (with all the hype) at the peak of the market. This sold and closed new in late 2007 for $1,125,000. Quite frankly, I’m surprised we haven’t seen more units in this project go down this road.
The REO sale of Westin Monache #308 for $190,000. This oversized Studio floorplan is quite popular (and for many good reasons). But this was listed at $164,900 and the last three sales in December were right at $165Kish. So did some buyer “lose their mind” or are Westin units really great investments in this low-yield environment? This is the ultimate luxury crashpad in Mammoth but really only viable for two people. And these units do rent well; the service level and fees are BOTH high.
The sale of TimberRidge #33 at $335,000. This 2 bedroom / 2 bath condo also has a private 1-car garage. I had this listed last year and couldn’t get it sold (drought years suck for ski-in ski-out properties) and was fired from the job. This winter it sold. Why noteworthy other than my whining? Here is an example of a buyer paying a premium for an incredible view. In the old days we used to think these types of views had a $5-10K premium. Today, if the seller is patient, the premium could be $50-100K.
Other good sales in the market, but still no profound value direction. Lots of frustrated buyers sniffing around the market, but only a handful willing to “go big” on offers.
Other Real Estate News
Dear Marianna… The Town’s political circus continues with a change at the Town Manager’s position. Marianna Marysheva-Martinez (aka MMM) has taken over. She was the original government “hit-man” hired to sort through the Town’s bankruptcy proceedings. Now the Council has put her in the hot spot. MMM has a reputation for being a “hard-ass” and is supposedly responsible for many Town employees leaving or quitting. The Council is sending a clear message that they are cleaning house. They’re acting like a hedge fund, or they are destroying the last vestiges of “knowledge continuity.” Whatever it is, MMM will certainly draw Town government down to the bare bones with the intent of starting over (maybe we should do this with all government.) And rest assured, she won’t be around very long either.
But all of this got me thinking about managing employees in Mammoth. The fewer I’m responsible for the happier I am; been-there-and-done-that. Living and working in Mammoth isn’t for everybody; some can’t live in a small town or without the “culture” and amenities like malls. They go nutty. Many become distracted by abundant recreation (there’s an old saying “great skiers are a dime a dozen”) and lose focus on personal responsibility. And it’s even worse if their wife has a good job.
And if you aren’t playing on the snow then the snow can become a major nuisance. Many second homeowners become frustrated when people are on “Mammoth time” (a minute has 500 seconds). It is all part of living in this resort. You must gain patience and seek out people who are as responsible as possible. Meanwhile, we’ll have to see how this works out for the Town.
Thanks for reading!