This Mammoth Real Estate Q & A appears in the President’s Weekend 2017 issue of The Sheet.
Q: My Mammoth real estate agent told me that all the new snow will pump up the Mammoth real estate market?? What do you think? And in the past, how have the big snow years impacted the local market??
A: This is an interesting question because of Mammoth’s variable snow history and the “monster” snow years. In this more recent era of the MVP (the less expensive pre-sale ski passes) the market has reacted more positively to outstanding snow and ski conditions. That is if they can get here and see the properties. And if there is any inventory. We are seeing that now. But the 500+ inch snow years have occurred in an wide disparity of macro and micro economic environments, so the effect has been different.
My first winter in Mammoth was 1981-82. According to the Ski Area’s records that was one of the seven 500+ inch winters of recent record. And coincidentally, back-to-back 500+ inch winters have occurred three times (’82-83, ’05-06, ’10-11). There are four other 400+ inch winters. (This winter is over 400 but we’ll see if it makes to 500 or more, there is plenty of winter left.) 2011 is the only 600+ inch winter. We may get there.
There are two “drought” periods on recent record; 1987 to 1992 and more recently 2012 to 2015. Most of these winters came in under 250 inches of snow.
The most recent back-to-back in 2009-11 occurred at the peak of the foreclosure cycle following (or during) the Great Recession. There was strong motivation on the part of qualified buyers to grab a good buy in the Mammoth market. Part of being really qualified meant the buyer had cash, but it also meant willing to accept some compromises with the property. Former owners were “stripping” properties or they simply hadn’t been maintained. As we are currently learning, properties need extra maintenance when the big winters come.
But while the vultures were swarming and were willing to spend the weekend in their somehow compromised property, the rest of the local real estate market languished. A significant volume of foreclosed and bank owned (REO) properties will do that to markets. Buyers were chasing the foreclosures. There were increasing short sale offerings in the market too. But short sales weren’t providing the instant gratification that many buyers were looking for. The process was still too cumbersome. And the larger economy was certainly holding the market back.
The big snows help create enthusiasm for purchasers. But with it comes added expense to the property and added hassles. It seems like I was constantly shoveling-out REO properties just to give potential buyers access to the front door. 2011 was simply ridiculous. Many of the buyers thought it was comical. I hope they’re having fun now.
And in many cases it was merely the perception that the distressed properties were a better deal. There were many motivated sellers who couldn’t allow themselves to be foreclosed on or to be party to a short sale. Many were willing, or did bring “cash to the closing.” But for some buyers the simple bragging rights of “winning” a multiple bid scenario for the next foreclosure was more important. It was a weird time. All of the snow made it somewhat surreal.
The winters of 2004-05 and 05-06 were similar but completely different. It was a far more jubilant time; money was flowing abundantly and anybody and everybody was qualifying for mortgages. This was the crescendo of the Intrawest era and the beginning of the Starwood era. Lots of money and lots of snow make for good times in the mountain resort world.
But the Mammoth real estate market took a pause in the summer of 2005 between the two big winters. There were plenty of pre-sold Intrawest units under construction or being hyped. But then the big announcement of Starwood Capital becoming the principal owner of MMSA launched the local real estate sales into the stratosphere. And another massive 550+ winter hit. It was almost real estate euphoria.
The basis for this state of glee was that the man who built the Starwood Hotel brand, who essentially invented the famous “heavenly bed,” and who was accumulating some of the finest hospitality assets in the world, was now going to lead the Mammoth resort complex to its finest and grandest iteration. Oh, and by-the-way, the skiing was fabulous.
The market rose another 10-20% or more in value in a matter of months. (As an aside, the Mono County Assessor pegs the top of the Mammoth real estate market at spring of 2006). The plans to build the new “1” hotel across from the Village were in the works. The sign read “The Place To Be, Is About To Be.” And Roger Staubach’s real estate group was planning the Ritz Carlton Residences next to the Westin Monache; “Starting at $1.7 Million” the advertising said.
But then the next winter produced a measly 220 inches of snow and soon after the national economy went into the tank. The plug was pulled on everything and the Ski Area became another private equity asset to strip down and milk for every dime. Not to mention it was a big, underwater asset. It was only last summer when the CEO reported that the “service” component of the operation was being brought back to the resort. Thankfully, most Mammoth fans consider the mountain conditions more important than customer service.
There were big winters in the mid-1990’s with a 500+ inch winter in 1995 and almost 500 inchers in 1993 and 1998. These winters pulled the region out of the long drought of the late 80’s and early 90’s. But the recession of 1991 just killed the slight economic comeback of the late 80’s (despite the drought). Reality is that the big winters of the 90’s probably kept Mammoth from being thrown on the dung-heap. At least there was great skiing and that kept everybody interested. The die-hards stuck it out. And if they stuck around they were likely rewarded.
The drought and subsequent poor economic conditions opened the door for the Intrawest acquisition in 1996. I remember it being a big deal. Their 1996 Annual Report had a big diagram; How We Make Mountains Move – Shifting a Mountain Resort Into High Gear. That is what all of Mammoth needed. But between the big winters and this critically important acquisition, nothing immediate happened in the real estate market. Buyers who bought Mammoth properties in the 1996-98 timeframes would see 300%+ appreciation within four to five years. And the Ski Area annual snow totals stayed over 300 inches until 2007. Life was good for skiers and those with economic stakes in Mammoth.
The two 500+ inch winters of the early 1980’s were a whole different story. They too came on the heels of recessions. But Mammoth had been a major boom town in the 1970’s (why do you think so much of it looks like it is still stuck in that time-warp?). By 1980 Mammoth Lakes was some of the priciest mountain-town real estate in North America, rivaling the likes of Aspen and Sun Valley. But then the whole sequence of recession, earthquakes, volcano scares, Mt. St. Helens, media hysteria, USGS posturing, etc. happened.
It all went downhill from there. But the downhill skiing was great. And there was some serious partying going on. The people that made the very small town of Mammoth in the 1970’s were animals in many ways. There was no holding back, no political correctness, nobody was insulted. It was good time to be young and watch. It was a stupid time to get into real estate. It was a great time to get into real estate.
As Mammoth’s prized real estate went down the tubes the long-time brokers were hyper-critical of the USGS’s handling of the seismic events here in Mammoth. The national media would report on it and show video of Mt. St. Helens blowing. Their assets and livelihoods were going down the drain. But the skiing was great (and so were the drugs and alcohol). They referred to the USGS as the “U.S. Guessing Society.”
I recently had the opportunity to sit through a private presentation by David Hill who was in charge of the local USGS laboratories in this area for decades. Today he is a “Scientist Emeritus” at the Menlo Park Volcano Science Center. He is old, fit and sharp but he seems to have tinge of regret for how it all went down. In the presentation he said “there was simply no protocol for what to do” for the situation he was observing; the earth was moving violently and there was major land mass uplifting in the region. He simply felt it was prudent to let everybody know the place could blow. Thankfully it didn’t. But if this situation hadn’t happened, real estate values in Mammoth could easily be 3 or 4 times what they are today. And then none of us could afford to live here.
So looking back, the big winters provided great excitement and short term bursts of interest. But the macro and micro economics played bigger roles. The question I also keep hearing is “Why hasn’t Mammoth rebounded back to 2006 values like most of California?” The best answer is that the four drought years were likely to blame. Drought appears to be a stronger influence on Mammoth real estate values than big snow years.
But then again others would answer the question by pointing to the “Taking Action” plan of Mammoth Mountain. The plan seems to be waiting for the next recession so there will be another prolonged period of no action. But we’ve become accustomed to that. Meanwhile, the balance of the ski season should be fabulous. And tons of water for the summer and beyond. I have a feeling the upcoming snow and water content surveys will be impressive!
Happy President’s Weekend!!