Mammoth Broker’s Report — May 3, 2020

The Mammoth real estate market remains in a “holding pattern”, a position it has been in for the past 30-45 days. The condominium and singe-family inventory has dropped due to properties being removed from the market and a sharp decline in actual new listings. Property showings and new purchases/escrows are almost non-existent, but there are some. There simply aren’t enough sales to know any trend. A handful of closed transactions do show that buyers in purchase agreements dated in February and early March were able to get discounted sales prices during the escrow period. But they appear to be specific transactional issues like properties appraising far below the sale price and for deficiencies discovered during physical inspections, etc. 

Right now the conjecture is Mammoth property values in different segments of the market will be affected differently. As I discussed in my most recent real estate Q&A, the short term rental market, aka STR, is likely to be impacted the most. But we’ll have to see, there are many variables including potential mortgage forbearance for these “investor” properties. This segment of the Mammoth real estate market was clearly the strongest segment of market the past 6 to 12 months. Especially for condo units in “turn key” or nicely remodeled condition — units easily placed into some sort of STR program for immediate revenue production.

The STR market is being impacted by the current nightly rental prohibitions (currently scheduled to end May 31 but possibly extended beyond that), the STR demand in the next 6 to 18 months, and the new, proposed STR regulations by the Mono County County Health Dept.. These regulations could include new protocols for longer periods between occupancies, new cleaning guidelines including more extensive cleaning of bedding (blankets, duvets, etc), and stricter guidelines on normal supplies like toilet tissue, etc..

But ultimately, each specific STR owner will be most significantly impacted by their level of debt on the property. The trend in the global STR marketplace is for more stressed owners to convert their STR properties into long-term rentals. Online platforms like Airbnb are also emphasizing longer-term stays, which appear to be increasingly popular. (If a visitor/renter wanted to rent a local property for 31 days or longer that would be legal under the current prohibition — and the bonus would be there would be no bed tax (TOT) due). And it is inevitable many of these potentially struggling owners will be offered some sort of short-term or long-term forbearance, forgiveness or debt restructuring. 

In the months ahead we will simply have to observe whether current STR owners become motivated in the local real estate market; will they list their properties with major price discounts? Or can they hang on? etc.. Time will tell. 

The general second home market including thousands of non-STR condos and the bulk of the single-family home market is another story. Much of this market has been rather flat for the pre-virus 12 to 18 months. A good deal of this market segment is not revenue dependent. It simply doesn’t produce revenue. Plenty of it is impacted by the “wealth effect” of the stock market and other investment vehicles. And few of these owners are likely to be unemployed. Many of these properties have also been cash purchases in the past 10 years or are classic “legacy” properties (long time ownership, low or no debt, low property tax basis, etc.). Many of the properties in this segment of the market that were on the market have been removed from active listing status. Many may have second thoughts about selling their Mammoth asset. It might be important to have in the future. NOT having a place in Mammoth may be a mistake. The proverbial escape hatch.        

Meanwhile, visitors have been discouraged by the government agencies and short term rental activity continues to be banned through the end of May or potentially beyond. Much of that will depend on infection rates both locally and in SoCal. The surrounding National Forest and BLM land is open for “dispersed camping” but the higher elevations still have snowpack. Second homeowner visitations have also been discouraged by the government agencies but many are now ignoring this request and coming to Mammoth to “hunker down” or to enjoy some fresh air and open space. The drive itself could be cathartic. There is also evidence that “family guests” are using properties.

Many are pondering what the Mammoth real estate market and the local tourism related businesses will look like in the short term and long term future. There are plenty of unknowns. The community will remain under the Governor’s guidelines for now but I have been predicting that both second homeowners and visitors will be increasing over the next month and certainly once the stay-at-home ban is lifted. My predictions are founded on phone calls and emails from second homeowners I’ve received and the observation of traffic flowing up and down Old Mammoth Road as I sit at my desk. There is nobody policing the bottom of Highway 203. They are free to come. Warmer days will certainly bring more activity, and the days should only get warmer from here.

Local residents are beginning to replace typical socializing events, like going to happy hour at one of their favorite bars, with parking lot happy hours. Backing vehicles into some sort fo social distancing configuration near to their favorite bar or eatery is becoming more commonplace. Utilizing the immediately available take-out food, appetizers and drinks (including BYOB) all while enjoying the sun, fresh air and company of their friends appears to becoming a new norm. New, popular locations are sure to be discovered. Local residents and visitors alike are going to get creative. Neighborhood socializing and parties are also destined to be popular. Restaurants and bars that are not planning on catering to take-out food and this “pop-up happy hour” trend will lose out, and it maybe critical for survival. For everyone.

There are also a handful of restaurants that are already permanently closing; three in the Sierra Center Mall were given lease terminations months back for the upcoming Mammoth Hotel renovation project. Two others are long-time popular restaurants with retiring owners who have been threatening to close for the past few years. Another one is at the end of their lease because the building was purchased a year ago and will be re-purposed. The likely survivors are the restaurants that own their real estate (Roberto’s, Burgers, Mammoth Tavern, etc.) or are able to successfully negotiate with their landlords (the operative question to ask their landlord is; “Who will replace me?). My guess is the high commercial occupancy of only a few months ago is destined to change dramatically in the next year. Some restaurants have received PPP dollars and others have not. That too will be critical for survival.

The Mammoth Lakes Town Council is now proactively looking for ways to appease the visitor’s demand for events and interaction, especially the popular 4th of July period. And they are also keen on helping the businesses that truly need some assistance. They appear to be willing to allocate real dollars. But most importantly they want to assure that Mammoth Lakes will be a “clean and safe” community to visit and spend time this summer and fall. The perception is there, but it must be promoted and maintained. This will include distancing and masks, especially in indoor spaces. My guess is the “clean and safe” theme will all be part of the marketing campaign for summer and fall, and maybe well into the future.

There are other dynamics that will certainly play-out in the coming months. Many are things I have been writing about for the past 30 years — and some of the quirky things about the Mammoth market. While many are expecting general asset deflation in many markets, others are pondering the consequences of the Federal Reserve’s actions. There are strong suggestions of serious inflation and subsequent investor moves towards hard assets, including real estate (especially if it can be financed at ridiculously low rates). This could become a driver in this market. This manner of thinking could create buyers, and it could motivate some would-be sellers into holding onto their properties. We may be seeing this already. We also need the “time and stability” in the mortgage markets, including a better jumbo loan market.

There is another demographic trend that could impact Mammoth real estate. How will Mammoth be affected by a potential “de-urbanization” boom? We’ve talked about it for years including Mammoth’s appeal for telecommuting. It has happened on some degree but not as expected. But now the “work at home “ trend, Zoom and other video conferencing meets the demand for open space, clean air and less density. The mall mentality and crowded entertainment events that Mammoth doesn’t have, are now less appealing. And guess what? The Digital 395 project that brought super high speed Internet service to Mammoth and the Eastern Sierra is all in place to help facilitate it. Many other rural areas are not so lucky and feasible for working at home or more remote. Mammoth is set.

And as have pointed out in the past, the “tank of gas away” amenity is important. Mammoth is the drive-to but isolated resort. The autonomy and freedom of your own vehicle can be comforting in this day and age. No need to rely on an airplane or getting stuck in a bad situation. 

Mammoth has proven to be a resilient community since I moved here in late 1981; three major recessions (the early 1980s, the early1990s, 2008), multi-year droughts in the late 1980s and 2012-2016, massive winters, the 9/11 demand hiccup, earthquake/volcano scares and associated media hyperbole (nothing has changed there), and more.

Let’s hope all of the inherent qualities of the Mammoth region may shine through during these difficult times.  

Meanwhile, as I sit at my desk I can see second homeowners and visitors alike driving slowly through town looking for open businesses. Perhaps they’re ready to spend some money. They have to be enjoying the mountain views and the crisp, cool air. Like I’ve been saying, they are destined to come in large numbers regardless of what the government says. It is just a matter of time.

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