This Q&A was written for the Thanksgiving weekend issue of The Sheet.
Q: We know that the majority of properties in Mammoth are condos. We want to purchase one but we see mixed messages in the condo market and there are so many to chose from. What revelations do you see in the condo market right now and in the near future?
A: Condos are a critical part of the Mammoth real estate market. They provide a vast selection of affordable ownership options for both local residents and second homeowners. They are also significant property tax generators for the County. And in the post-Measure Z era they will remain an increasingly important base for the Town’s critical bed tax generation.
One of the things I immediately report on in my regular newsletter is the number of condo sales, the number of sales in the under ~$400,000 range (the “bread-and butter” condos) and the percentage of condos (and properties) that were financed. These are the telltale factors in the condo market trends. There has been nothing abnormal lately; a high percentage of overall sales are condos in the lower range and a majority percentage are financed with new loans. Selling prices are up in some segments, and softer in others. Not much “new” information. But there are other significant trends happening in the overall Mammoth condominium market. And most of it is healthy.
Because the cost of land and development exceeds what new condos can sell for, there has been very little condo development since 2008. There may be some new townhomes across from the Canyon Lodge parking lot in the near future. But basically today’s buyers are looking at mid-2000’s construction as “new” (funny how granite is now looking dated). And there are scores of older 1960’s, 70’s and 80’s construction as the more frequent available inventory. And it really is dated. Very few owners are satisfied with Formica counters and fiberglass showers.
So the remodeling trend for older condo units is accelerating. This is far more than just paint and carpet. Buyers are finding older properties are in good and sometimes unique locations. Many are spacious units with good floorpans including plentiful closet space and washer dryer areas. Many have views. Some older projects have less density relative to new projects.
Extensive remodeling in these older units can also require major replacements of dated plumbing and electrical. Some of that is already being handed by the Homeowners’s Associations (HOAs). And the Town’s new fireplace regulations are triggering a wave of remodeling on their own. Many buyers are now figuring if they have to replace the whole fireplace than the kitchens and baths are just part of the whole process. And don’t forget the windows. The window guys will tell you that not only do new windows help keep the heat in, they also make the property more acoustically pleasing (and maybe we have forgotten how loud snow removal can be).
The most creative remodeling in these condos is occurring in the kitchens and fireplaces. Kitchens are being torn-out and opened up to the living areas. Small and large islands with counter-height seating replace the old 70’s bar areas. More efficient cabinets make for increased utility and storage. The small inefficient spaces become large efficient spaces.
Fireplaces are being ripped out to accommodate the new Town ordinance. Some owners are choosing free-standing appliances instead of new fireplaces; they typically provide more heat and consume less space. Others are beautifully building new fireplaces with modern wood burning appliances (or gas appliances if the HOA has retrofitted), lovely stone and mantles, and normally a place for a large flat panel TV. It becomes the centerpiece of the condo. And bathrooms are also being updated and many full remodels actually add bathrooms if possible.
And some remodels get a bit out-of-control. It is easy to spend $100,000 or more to fully remodel a larger condo. Does this level of remodeling make financial sense in the current market?? It can in both rental income and resale. Mammoth isn’t a big “flip” market. But there are properties that come to market that have been nicely remodeled. They often sell for very good (high) prices.
Many buyers in the Mammoth market simply don’t have the time to get involved in a remodel. For them it makes sense to pay the price for a nicely improved property and get-on with using it. Ultimately, if the remodeling is completed prudently, the seller can normally get their investment out with some potential extra. But there are tons of variables.
This remodeling trend should continue. And if these units make it to the rental pool it is even better for Mammoth. These properties make great accommodations for our guests (as opposed to ones stuck in the time warp). In theory they should be generating increased bed taxes. These are properties our visitors want to come back to. The remodeling trend is also good for a variety of local businesses including the contractors both large and small.
There are other positive changes in the Mammoth condominium sphere. A significant one is the changing management structures. California labor laws and federal government sponsored lenders like Fannie Mae have forced many of the changes. The HOAs are being dragged into the 21st century. And it is a good thing.
Following the real estate market declines of the late 2000’s, Fannie Mae decided it would restrict lending on “condo hotel” type properties. Many of Mammoth’s longstanding condo projects ultimately fell into the criteria because of the active onsite “front desk” operations and the nightly rental marketing. This essential “redlining” made these condos within these projects un-lendable which in turn affected the values (downward).
Many HOAs decided the rental operations had to be moved offsite. And some have simply decide to let the third party reservations companies compete for the business. The net effect is fewer and fewer HOAs have any involvement with the reservation business which was so prevalent in the past. Others have remained, and some have restructured. But the Fannie Mae policy has changed the course of this decades-old way of doing business forever.
Meanwhile, California labor laws have impacted the old “onsite management” structure for many HOAs. The old mom-and-pop management structure that proliferated in Mammoth for decades has become archaic. HOA boards are compelled to make changes. And most of this has been for the better too (more dragging people into the 21st century). Professional property management companies with a variety of skilled employees are taking over. And they are the employees of the management company instead of the HOA. The legal ramifications are critical.
Part of the changing rental schemes is the influence of the VRBO and Airbnb enterprises. Renters are coming and going and are more self reliant. The same with housekeepers. Getting access via old fashioned lockboxes and increasingly the electronic “resort locks” make this easier all the time. Today, condo management is more about managing the facility rather than managing renters.
The convergence of fewer onsite “front desk” rental operations and fewer resident managers have changed the face of condo projects in Mammoth. I would expect the trend to continue. Some of the old timers don’t like it, but most see it as progress. The refinements will evolve.
The drought of the last few years has also impacted the HOAs. They have saved on snow removal costs and they have been able to put that money into reserves or reallocate the money to maintenance or improvement projects. Many have intelligently reassessed their water and labor intensive landscaping and have moved towards drought tolerant plantings and attractive hardscape. Many have seized the opportunity to create communal areas with seating and BBQs, etc. instead of more lawn. Regardless of how much snow we get in the coming years I would expect that trend to continue. It simply makes the HOAs more efficient in this mountain environment. But some will resist, they love their lawns.
The California body of law known as “Davis-Stirling” is the Civil Code section that governs HOAs. It has undergone numerous refinements since 1985. This is good news for condominium owners in many ways. And for the brokers and agents who transact them. Many of the recent revisions give guidance to a more responsible operation of HOAs and their Boards. This is very different from the past when HOAs (especially here in Mammoth) were often run in a variety of ways, some good and some bad.
One of the most progressive changes happens during a condo purchase and escrow. The buyer now receives a very complete and updated package of specific HOA information including all of the financial information from budgets to reserve studies, CC&Rs, Rules and Bylaws, minutes of Board and general meetings, and more. The Civil Code requires HOAs to have a designated assembler and caretaker of that information (usually the HOA’s accountant) so that information can be passed to a potential buyer for their approval. The information is often delivered on a DVD or through a passcode protected website. This is so much more civilized than in the past when buyers were often in the dark about HOA specifics.
Condominium ownership continues to make sense for many second homeowners. These trends have made ownership an increasingly sound real estate choice here in Mammoth. And for all of that we can be thankful.