Market Summary: February 15 – March 1

The Mammoth MLS is reporting 20 closings in Mammoth Lakes for the two week period ranging from a low of $105,000 to a high of $2,875,000 (residential). That is up nine (9) from the previous period. There were no REO/bank owned property closings and no short sale closings reported. Of the 20 real estate sales, 19 were financeable properties and seven (7) were financed. Three of the four most expensive sales ($825,000 to $2,875,000 were cash purchases). The Mammoth real estate market remains strong especially considering the time of year and the less-than-stellar ski conditions.

Condominium Inventory

At the period’s end the condominium inventory is even at 154. New inventory continues to come to the market, listings are expiring and not immediately re-listed, and condos are selling.

Single Family Inventory

The inventory of single-family homes is down two (2) to 49. Quality inventory in the lower end of the market is nonexistent. The $800,000 to $1,500,000 segment of the market remains very strong. Many of the homes in this segment that have sat on the market, sometimes for years, are selling. And some of these need substantial remodels.

Pending Transactions

The total number of properties in “pending” (under contract) in Mammoth Lakes is down five (5) to 62 at period’s end. Of the 62 properties in “pending,” seven (7) are “contingent short sales” and 34 are in “back-up” status. The total number of pendings in the aggregate Mammoth MLS (which includes outlying areas) is down (9) to 77.

Market Updates and News

No real significant news stories during the period. The post President’s Weekend “Ski Week” was fairly busy, but certainly not at the visitation volume that a banner snow year would bring. That higher level of visitation often brings an increased volume of real estate shoppers. Last weekend a snowstorm dumped almost a foot of new snow on the Ski Area and ski condition improved substantially. The face runs are still thin but many rocks and some of the sheet ice got covered up. This past weekend Mammoth got even more snow. And the snowmaking crews continue to make snow at every opportunity…

Some interesting economic news from the private sector in Mammoth. The Sheet surveyed local business owners including the Ski Area and the Town. Many businesses are reporting that business revenue is up from a year ago. Some well established businesses have had “record” revenue periods (no telling if those equate to record profits). Other businesses are simply glad they haven’t had to reduce staff. The most famous ski shop in town was quoted as saying “less winter, more year-round” business. The Ski Area recently returned to full hours and pay for their full-time employees. And the Town is reporting that TOT (bed tax) is up significantly. and above the budget. This is all good news. Maybe most of Mammoth will survive this fourth year of drought.

The sentiment amongst local business owners appears that despite the drought winters, the whole “geotourism” concept that was talked about last Fall is for real. For decades Mammoth has tried to figure out how to even-out the seasonality of the local economy. Maybe the solution found us. I found that National Geographic is promoting the concept through The Center for Sustainable Destinations; “Working to protect the world’s distinctive places through wisely managed tourism and enlightened destination stewardship.”

The irony is that the work of the Sierra Club and other environmental groups may be a big part of the answer to a stable economy in Mammoth. And many thought it was all about building more condos. The challenge now is being good stewards of the environment around us and letting the visitors enjoy it. And come to find out the Sierra Nevada has it’s own geotourism website. Thankfully we know where the most spectacular place in the Sierra Nevada is. And visitors want to be here regardless of ski conditions or music and alcohol events.

While Mammoth has been deluged with cash real estate buyers in the past couple of years, especially in the high-end of the market, a recent Realty Trac report stated that 20% of the cash buyers in California subsequently place loans on the property…

One local real estate company is pushing plenty of hype by promoting extreme rental figures and the “land acquisitions” in Mammoth (so reminiscent of them in 2004-05). Here’s the reality; the rental figures are certainly not across-the-board for the represented condo sizes.They could be representative of some of the best units in the Village and The Westin Monache. But one must also understand that those management companies are going to grab their ~50% of that gross rental revenue for themselves. It isn’t like owning apartments. Yes, rental revenue is for real in Mammoth condo ownership, but gross revenue figures are misleading. So is implying that every condo in town can generate revenue like the best units in the Village.

As for the much ballyhooed “land acquisitions”… these are developers/hotel operators looking to marry condo hotel properties with large timeshare components all with a branded hotel “flag.” Plenty of pencils are sharpened to make one of these work. And the assumption is the volume of timeshare sales will make the development profitable. And leasing the “front desk” to an operator will provide long term cash flow. The condo hotel units will sell if priced right and the front desk operation is proven. What isn’t proven is the viability of timeshares in Mammoth. And the pro formas include selling lots of timeshares… Nobody should be buying real estate in Mammoth based on the hype of these “land acquisitions.”

Noteworthy Sales

The 20 closings themselves is noteworthy, but there really aren’t specific ones that are noteworthy; just more of what the market has been the past year. Half (10) of the sales were condos selling under $270,000 with no real indication of price movement either up or down.

The four highest sales (from $915,000 to $2,875,000) were residential sales. In the past 30 years I can’t remember a better period for high-end residential sales. The key has been there are buyers and sellers.

The balance of sales show no new trend. The only thing that stands out is that location is everything to value in the Village. The pricing difference in 3 bedroom / 3 bath units based on location can be $2-300,000.

Other Real Estate News

A rash of advertisements for remodeling contractors in the local newspapers is indicative of what is going on. I’m surprised it has taken this long. But here is explanation of the trend; with no new condominiums being built in Mammoth and many buyers wanting “new” product, many buyers are simply reverting back to older condos with plans to make MAJOR remodels. It all makes sense. Many of the older condo projects are in great locations, or are significantly less dense than newer projects, or offer more spacious floor plans. And quite frankly, they really aren’t that expensive. So many buyers are simply planning significant remodels.

Spending $100,000 on a larger unit remodel is becoming increasingly common. Some are spending more. For owners thinking this way the new fireplace ordinance is no big deal. But the budget will certainly include new kitchens and baths, new windows, and even moving some walls. Adding washers and dryers to older units is common. And while doing all of that the plumbing and electric all needs to be updated accordingly. So remodeling IS and will continue to be busy in the coming years.

Following my latest column on the Main Lodge land exchange, I received an email from one of Mammoth’s prominent (and retired) attorneys who was a former Water Board member and owns two of the major commercial centers in town. He was very complimentary of the column but one of his sentences stuck out, “The entire town is a prisoner of private equity, which I find especially frustrating.” …I had some other interesting emails about the column including one from a 20+ year employee of MMSA administration. But for some reason I had a flashback to a blog post I wrote in January 2007. Here are the last paragraphs…

“My recurring complaint is the resort’s lack of attention to customer service. We’ve had some false start attempts through the years but there is no tangible follow through. Mammoth is 20 years behind in the evolution of resort service. Many of our long established small businesses have it figured out, but as a whole we’re way behind. The powers that be seem more interested in building buildings than providing resort quality service. Great service can overcome many things. Without it we won’t be able to compete at the highest level.

Last year an Intrawest executive (on the service side) admitted to me “there is a serious disconnect at our company from the development side to the operations (service) side”. Maybe Intrawest’s new private equity owner and Starwood Capital can recognize this disconnect. Or will it remain mired in private equity management? I recently read the new bestseller on hospitality “Setting The Table” by Danny Meyer. Meyer is probably New York City’s most successful restaurateur. He makes a profound theory about hospitality, “Hospitality is present when something happens for you. It is absent when something happens to you. Those two simple prepositions–for and to–express it all”. Hmmm…

My other major theme for 2006 had to do with the future of development here in Mammoth. The new owners of the large remaining (re) development parcels have paid large sums for these properties. They are facing very high planning and construction costs as well as the highest development impact fees (DIF) in the nation. Making these developments “pencil” will be an incredible challenge. Developers are asking for 100’ tall buildings and density concessions–on Old Mammoth Road and in the Meadow. What is the Town Council going to do? Our future persons-at-one-time (PAOT) calculations, as well as many other market and economic indicators, say we need to focus on quality not quantity.

And who is going to buy the finished product at very high prices? Savvy high-end buyers want quality construction and amenities and want to confirm service levels really do exist before plunking down their money. Will the developers and their currently disconnected partners be able to perform? We shall see. This market transition creates challenges for all. What can I do for you?”

Thanks for reading!