Winter Conditions Return and Mammoth Moves To The Red Tier!
Market Summary – February 28 to March 14
The Mammoth Lakes MLS is reporting 32 real estate closings for the period ranging from a low of $250,000 to a high of $2,750,000. Of the 32 closings, 30 were financeable properties and 20 were financed closings. There was one (1) owner financed transaction. There were eight (8) sales over $1M including four condos and four single-family homes. The low sale was another residential lot, located in the Mammoth Slopes subdivision. Probably a good buy in this market. The 10-year Treasury yield climbed again to 1.635%. Investors simply want to be paid more for the risk of government bonds. This will drive up mortgage rates, for now. But many industry pundits were optimistic that this is signaling a stronger economy and the continuation of a strong housing market. But it may/will slow the refinance boom. FannieMae and FreddieMac have reported that 70% of their mortgage activity in 2020 were refinances. And nationally, cash-out refinances have been at record levels.
Condominium Inventory
At the period’s end the condominium inventory is up five (5) to 25. There were 21 new condo listings brought to the market during the period and 10 have already gone to escrow. A very similar pattern to the last period. One exact Timbers unit that closed escrow some four months ago at $1,199,000 came back to the market for $1,549,000 and sold immediately. This is serious appreciation. As I said in my last newsletter, I’m watching the four new “bellwether” listings at Snowcreek 5, Snowflower, Mountainback and Aspen Creek, all priced around $900,000. Sales at these properties and prices will indicate a whole new level of pricing. The Mountainback and Aspen Creek properties have gone to escrow. The Snowcreek reduced pricing by $40,000. We are in a classic price discovery phase.
Four more of the brand new 540 Old Mammoth Road units closed and one buyer who had a reservation to purchase a 3 bedroom unit at $675,000 backed out. The unit was immediately resold for $730,000 cash, one week escrow. There were two (2) new Creekhouse closings. There are now four (4) Westin units on the market including one of the awesome penthouse units listed at $1,189,000. It was purchased only two years ago for $875,000.
Single-Family Home Inventory
The inventory of single-family homes is down one (1) to 14. The cluster of homes listed around $1M are sitting, for now. The buyers continue to turn-up their noses at these offerings. The more expensive/luxury segment of the market remains hot. For those watching the per-square-foot (psf) part of the action, a recently built and smaller home in Graybear closed for $795 psf. An older (~30 years) and dated home in Juniper Ridge right on the ski run closed for $919 psf.
Pending Transactions
The total number of properties in “pending” (under contract) in Mammoth Lakes is down seven (7) to 102 at period’s end. And again, the market continues to be starved for any quality, reasonably priced inventory. The total number of pendings in the aggregate Mammoth MLS (which includes outlying areas) is down five (5) to 137.
Market Updates and News
The Ski Week crowd was substantial but certainly not overwhelming. The Mountain conditions are good but not great (maybe for some). But nobody was or is complaining. They’re just glad to be here. The weather has been very nice butMammoth experienced a cold snap and some fresh snow this past week and it resulted in a very sizable crowd this weekend. Last weekend was unusually uncrowded and the mid-week business has been rather quiet. The Covid related lockdowns are slowly being reduced in Mammoth and with the new snow there is some hope for more business in the upcoming spring break weeks. The 24-hour “cooling off” of STR units was rescinded last Thursday. This is sure going to help the real estate industry in showing listed properties that are rented nightly. Especially in projects like the Westin. It has been a juggling act to get buyers in units.
And as of today Mammoth moves into the Red Tier which will allow for more increased activity indoors including indoor dining in restaurants. (I have to tell you, I have sat at my desk this last week and watched people drinking beer outside in sub-freezing temperatures at Distant Brewing. Impressive. At least their beers didn’t get warm.) Restaurants can now open to 25% capacity. Many restaurants have had outside tables for patrons who want to sit down with their to-go food. I’m sure this will continue, probably with table service. This is all going to be part of the future here in Mammoth. Too bad Covid had to force it.
An increasing number of condo projects are getting there spas back into action, with restrictions. Again, just in time for what may become a busy spring. Spas are a big part of the winter recreation experience. It is a true “value add” for STRs. The Mammoth visitor-related business community is hoping for some chance at a rebound. What they don’t want is a madhouse. Please open Disneyland.
About the most exciting thing on any of the Town’s agendas during the period was an electric scooter vendor in front of the Planning Commission this past week. The “Bird” is a an e-scooter vehicle sharing company who wants to bring their service to Mammoth Lakes this summer. Stations and drop-off locations are proposed around the town’s commercial corridors. The service is all controlled through a smart phone app. But it does take someone (a live body) to manage the whole thing, and nobody is sure whether they know what this will really cost. With the chaos electric bikes have already brought to town, e-scooters are sure to add to the fun. And I’m sure they will try to operate during the winter. And can someone get a DUI on an e-scooter??
I’ve been in some mundane Assessment Appeals hearings in the last month but based on what is happening in the real estate market there has to be some serious action happening on the property tax front. The County Tax Assessor has his hands full. First, all of the Prop. 8 reductions from the past 10 years are all going away, fast. Some of these owners from the mid-2000s will be in for a surprise when their property tax bills jump, and jump big. Also, with the sales activity of the last seven months of 2020 the Assessor must be hustling to close out the tax roll. He only has so much time and there was plenty fo sales activity. Luckily he has the actual sales prices to utilize, and there isn’t much of an argument (appeal potential) against this. Ultimately, once the property tax data is in for 2020 and 2021 it will be fascinating to see how much the tax base of Mammoth Lakes and Mono County increases. The County (and State) will be happy, they can use the money.
Now that the Ice Rink/MUF/CRC has been approved and construction contracts signed, there appears to be an increasing number of local residents questioning the wisdom of the project, especially under the current economic conditions. I’ve been writing about this for 4-5 years so everybody knows how I feel about it. But I was visiting the excellent Strong Towns website the other day and found this recently published article Should we do this project? The evaluation asks; Does the project create greater community wealth than the long-term costs and obligations it imposes? The two methods for assessment are Mimic or Do The Math.
Mimic asks whether the project mimics a pattern that has been financially productive for the community. I would say yes to this (recreation). Next, does the project represent the next level of development intensity for the site? I’d say yes to this but point out that it is probably over development of the site. Is this good? And finally, does the project limit downside risk for the community? Here’s where this project fails miserably. The risk is extreme…..The Math assessment asks if the project will produce $30 of private wealth for each $1 of new public infrastructure liability?
The public liabilities for this project are immense. The initial expense is $16M. To bring the project up to somewhere near the original proposal will cost another $5-10M. Based on my original research, the project will run in the negative between $100-250,000 per year and accelerates parabolically after 10 years. So using the Math method, to justify this project, it should create around $800 million in private wealth in Mammoth Lakes over the next 10 years. Will it? Who knows. Maybe our three fanatic Council members can answer the question.
Noteworthy Sales
The sale of 1239 Majestic Pines Drive for $1,960,000 is interesting. This is a modern 4,000 square foot home that is walking distance to Eagle Base. But this is a busy street. It tell me that buyers are willing to purchase $2M homes on high traffic streets (including shuttles). The proximity to the lift must have out-weighed the traffic issue.
An upgraded but not over-the-top 1 bedroom + loft / 2 bath at Mountain Shadows closed for $470,000 (over asking price). A similar sized unit at Sierra Park Villas is about to close for a similar amount. Amazing. These 2-sleeping area condos in mediocre 50-year old projects are bringing half million dollar sales. Telling about the market.
Favorite New Listing for the Period
This isn’t Mammoth but this is worth a look. This is “down valley” in June Lake adjacent to the Double Eagle resort and across the street from the associated estate properties. This is 4 bedroom / 3 bath with additional den and office. This is a totally custom owner-built home with fine details inspired by Greene and Greene and Frank Lloyd Wright. Custom woodwork thought including floors, doors, trim and built-ins. Massive great room with windows galore and views of Horsetail Falls. Entertainment kitchen. Oversized master bedroom. Den and office overlook the great room and view – perfect for work-from-home. Large service porch/laundry room through garage, excellent for mountain living. This is an oversized lot which could support an ADU or additional garage. Here is the video tour.
Listed at $1,269,000
Other Real Estate News
A reader sent me a link to a video of a “real estate expert” who was predicting a massive crash in housing prices once all of the delinquencies and forbearances are forced to be satisfied. I watched even though I am familiar with the concept. The video host had plenty of statistical data. YouTube obviously has numerous videos with a similar theme. Anybody could watch for hours down this rabbit hole. Most of these videos are recent productions. My reader asked me what I thought and how this would affect the Mammoth market.
Part of the presentation pointed out that the greatest volume of properties in forbearance are FHA loans. FHA loans aren’t very common in Mammoth. I’ve never had a buyer do one in 35 years. I’ve seen a few closed and I’m guessing there might be a couple dozen closed here in the past 20 years. Most of the condo projects in town won’t qualify for them. So any significant volume of FHA related foreclosures isn’t going to happen in Mammoth.
One thing I have pointed out in the recent past is that because of the strong upward trend in Mammoth values, if a local property owner is in distress (basically can’t make mortgage payments) now is a perfect time to not only liquidate but to take profits. There can’t be too many “upside-down” property owners in Mammoth, if any. There could be a few distressed owners who are hedging that values will go higher and there are greater profits to be made. But I doubt there are many. And if they are thinking this way they will likely sell in time on the open market.
The amount of leverage to purchase in the past 10 years is very different from the last cycle (FHA loans are all about leverage for entry level buyers). Most buyers, especially second home buyers, are required to put 20-30% down. And I’m sure many Mammoth property owners refinanced in the past couple of years, but most probably weren’t cash-out or high loan-to-value new loans. They simply took advantage of the low rates.
Mammoth also has plenty of cash buyers. In the past nine months many of the buyers in the higher-end of the market chose to utilize financing but in the 50% loan-to-value range. These were financially strong buyers who could have paid all cash but borrowing was so cheap that it made financial sense to structure the purchase this way. The cash versus financed purchases are an important facet of the Mammoth market. This is why I make it part of my reporting.
And as I reported some months ago, I attended a meeting of foreclosure/REO industry leaders and they stated that at this time that the federal government was way ahead of the real estate market conditions. Their belief was that they would never let a 2008 style crash from happening again. And the way the government is throwing money at everything today it is hard to believe they won’t create the necessary programs to work with the owners who are currently delinquent or in forbearance. It will be justified by having “Covid” attached to it.
So is some real estate market crash coming in the near future? Well, once you have lived in Mammoth for decades you learn to never say never. But the market data and trending isn’t pointing in this direction. Quite frankly, it appears to be heading the other way.
Thanks for reading! Please stay healthy.
If you know anyone interested in buying or selling real estate in the Mammoth region, please send them my way!