This column was written for the upcoming Martin Luther King weekend issue of The Sheet.
Q: We were in Mammoth during the holiday period and we looked at some condos for sale. We came away with the impression that Mammoth real estate is a good value right now. We think the years of drought suppressed values. What do you think???
A: Mammoth condos are always a good value when the ski conditions are great. With snow comes enthusiasm. Alumni of the Intrawest sales teams will certainly remember the phrase “Selling is the transfer of enthusiasm.” So snow equals enthusiasm equals the selling of real estate. But is Mammoth real estate a good value with or without snow?
We can talk all about proposed developments, and who should own the Ski Area, increased air service and fancier ice rinks all we want. But quality snowpack to play and recreate on is the crème de la crème supporting the value of local real estate. Especially since an increasing number of property owners are trying to maximize nightly rental income and the winter visitors are the “money” in the equation. In that respect the past four drought winters have negatively impacted values.
Value is certainly subjective and subject to multiple factors. Let’s look at other important dynamics affecting Mammoth’s real estate “value.”
The recent drought period has also coincided with the peak and eventual decline of the distressed property market. Foreclosures and short sales impacted the real estate values here in Mammoth as much as anywhere in the nation. Foreclosures peaked in the 2011-12 timeframe and short sales peaked shortly thereafter (and how the government intervened in all of that is another column). The best “deals” (lowest prices) were to be found in that period. So the bottom of this past market cycle really occurred along with the start of the drought.
There is also a large faction of Mammoth property owners who purchased or refinanced in the mid-2000s who have been looking to liquidate but can’t afford the loss of their good credit standing. For them a foreclosure or short sale is out-of-the-question. It is the nature of this market. Many have watched real estate values nudge upward in the past couple of years and are deciding to sell. Many of these sellers actually have to put money into the purchase to close the escrow. Some are taking substantial loses (and some are offsetting those loses with gains in their other investment areas).
But the winding down of the distressed property cycle combined with the drought winters created an equilibrium in the market. There has been enough supply and enough demand to keep selling prices in a stable range. There has been no gigantic push upward like so many other markets in California. And as usual in Mammoth, there are many different segments of the market that have moved differently.
One of the market comparisons I like to make is what a property sold for in the mid-2000s peak market era compared to a recent sale. I only like to use exact same properties for the comparisons because there can be so many minute but critical variables. When closed sales come through the MLS I check to see if the property sold back in the 2004-2007 timeframe. I try to see if there are any significant improvements that have been done to the property that would affect the calculation.
The majority of the sales that fall into this comparison study show that the Mammoth market is selling at 60 to 70 percent of the selling prices of the mid-2000s. And again there are plenty of variables. The Intrawest developed and sold properties from that era tend to have lower percentages (meaning they typically sold for higher market prices 10 years ago). The lowest recent sale that I recall was 53%. At the very lowest of the market some were below 40% of their mid-2000 selling price (most were foreclosure/REO properties). On the opposite side there are some Mammoth properties that are selling slightly over 70% of what they sold for in the peak period. But the majority are in the 60 to 70% range.
One could surmise from this that the values have only rebounded modestly. And maybe the drought winters had plenty to do with it.
The drought winters also delayed some of the Ski Area’s plans for development and expansion. The current ownership seems destined to spend money for capital improvements with money they realize as profits rather than utilize money they can borrow. So these improvements have been postponed by the drought winters. These Ski Area improvement projects always tend to create some real estate buzz (enthusiasm) and some increased demand. Investors always follow investors and investment.
The thing that strikes me as odd is that the Ski Area’s ownership owns a significant portion of the remaining developable real estate in Mammoth and yet they see no reason to take a little risk to stimulate the local values. But what do I know? Sometimes it appears that the environmentalists really do run the show here in Mammoth. The older I get the more I think that may be a good thing.
And lately it appears the the Ski Area’s owners have realized the “good value” of having the Town’s ice rink aligned with all of their real estate. We’ll have to see.
Another way of assessing whether the local real estate is a “good value” is looking at what is being newly built; almost nothing. If values were overinflated there would be construction going on everywhere. Today, buyers who want a nice condo to purchase have to look at a unit that was built in the 2000s or look at something that needs significant remodeling. Even the ones built in the 2000s need some updating and many of the older ones are deserving of “to the studs” remodels. But either way the ultimate price-per-square foot is going to be close to the simple cost of today’s new and quality construction. And that doesn’t include the land or permits. Some people believe that properties selling “below replacement value” equate to “good value.”
The only product that is being newly built in the current market are the homes at Gray Bear. These are single-family homes in the $900,000 to $1,500,000 range. This is a very strong segment of the Mammoth market and this new product is helping to fulfill the demand. Of the 79 single-family home sales in 2015, 30 were priced at over $1million. Many buyers are seeing the “good value” in the Gray Bear homes. Just look at all the factors. The lots are located on some of the most gorgeous fairways of the Sierra Star golf course. These parcels were previously slated for condominiums. But that market doesn’t exist. So the land is being acquired at a price that helps make the whole equation work.
The equation also includes an experienced developer and builder with 40 years of experience in Mammoth. The project is being run as efficiently and effectively as possible while producing a very attractive finished home and neighborhood. The bonus for some owners is the fact that the zoning allows nightly rentals. And the rental/revenue potential is apparently very high. The complete package is very attractive, especially when the discriminating new owners get to select all the finishing touches.
Another “good value” factor is the healthier state of the local condominium associations. Many buyers, owners and sellers may not recognize this. The California Civil Code (aka “Davis-Stirling”) requirements on HOAs have the associations running more professionally than ever before. This runs from accounting and reserve requirements to regular meetings and communications. For associations where the majority of owners are second homeowners, this is even more important. And the drought has played a role too; local HOAs have saved on snow removal expenses in the past few years and they have also been forced to reconsidered their water and labor intensive landscaping.
And if a buyer is looking to build their own home here in Mammoth, the vacant land market still offers excellent and relatively affordable opportunities. Mammoth remains land-locked so sprawl is out of the question. And the hard costs of subdividing land remain high. So for those looking in this direction, this good value might be a “great value.”
Ultimately the “good value” criteria is as different as the variety of buyers and owners of Mammoth real estate. The challenge is making the right match, and that isn’t always easy. But that is the job of a good agent or broker. And yes, some properties are clearly better values than others. And that is true through the whole price spectrum. And it is never all about price.
So circling back to the question, yes Mammoth remains a good value. The more it snows the better the value. So let it snow, let it snow, let it snow!