Sierra Deluge Allows Ski Area To Open And Adds To Spectacular Fall!
Market Summary – October 17 to October 31
The Mammoth Lakes MLS is reporting 22 real estate closings for the period ranging from a low of $245,000 to a high of $1,965,000. Of the 22 closings, 20 were financeable properties and 11 were financed closings. The closings included two (2) more vacant residential lots and 11 condos selling under $650,000. The five (5) closings over $1M were quite a variety; a penthouse suite at the Westin Monache, a Sierra Valley Sites (aka The Ghetto) fourplex, an old double-lot residential property, a Snowcreek Phase V townhome (the high sale of the period), and a plain old 3,100 square foot luxury home. This period last year there were 36 closings in Mammoth Lakes.
The 10-year Treasury yield was almost even at 1.557%. The yield did rise during the period but retreated. Mortgage rates remain slightly higher than recent lows. The 10-year yield one year ago was .86%. Online lender Better.com (who I actually had a very good experience with) pushed a press release this past week that single-family mortgage closing costs increased by 12.3% across the nation in the first six months of 2021. But according to one graph tucked into the release these closing costs have increased another ~15% in the past 3 months. I guess everything is going up.
From the Mortgage Bankers Association’s annual convention last week; “Many of the technology changes announced or advanced here in San Diego are focused on reducing the friction between application and funding. Part of that is the appraisal process, and acting director of the Federal Housing Finance Agency Sandra Thompson announced a change: allowing banks and mortgage lenders to use desktop appraisals in lieu of in-person home valuations. (The change makes permanent a measure that Fannie and Freddie instituted during the pandemic.) In other words, home appraisals conducted without the physical presence of an appraiser will be allowed permanently on loans bought by Fannie Mae and Freddie Mac, starting in early 2022.”
“Desktop appraisals” are an interesting topic in light of the fact that the Dodd-Frank regulations implemented some 10 years ago established that the appraiser is the “eyes and ears” of the lender while inspecting the property. Most appraisers have taken this responsibility seriously, often causing disruption in transactions. But now they will be able complete the analysis of the property without even visiting the property (how do they accurately measure the property?). Even worse, I closed a transaction in this past period that had an “appraisal waiver” on the purchase of an older home (50+ years). I personally installed smoke and carbon monoxide detectors in the property because an appraiser would have demanded them and I wanted my client protected…..The most common question I get today is “Are we at the top of the market?” I’m not sure where we are in the market but the relaxation of appraisal requirements can certainly propel us to higher values.
At the period’s end the condominium inventory is down one (1) to 14. The total inventory dropped into single-digit territory during the period but there was a new listings rally the last few days. There were 10 new condo listings brought to the market in the period and four (4) are already in escrow. I’m betting that several more of them will be in escrow by early this coming week. New pricing is all over the board. The Mammoth market is now entering the bizarre “march to the holidays” period. With the ski runs open and the end-of-the-year holidays less than two months away, we historically see a rush to acquire properties. The problem is low inventory. This time last year there were 37 condos on the market. And we thought that was low.
Single-Family Home Inventory
The inventory of single-family homes is down four (4) to 18. This still includes the two brand new luxury offerings from long-time Mammoth contractor/developer John Hooper. Surprising. The activity (demand) in this segment of the market has been intense the past 17 months. And finding a contractor to build a home in Mammoth is a multi-year proposition at this point. Maybe the current buyer pool is looking for more instant gratification. There are only two (2) homes listed under $1.1M. This time last year there were 24 homes on the market. There are now only 10 residential vacant lots on the Mammoth market.
The total number of properties in “pending” (under contract) in Mammoth Lakes is down eight (8) to 86 at period’s end. The total number of pendings in the aggregate Mammoth MLS (which includes outlying areas) is down 14 to 129. Clearly, there would be more property in escrow if there was more inventory available for buyers. The residential market from Mammoth down into the Owens Valley remains very tight. Recent closings in Bishop are impressive. This time last year the numbers were 104 and 140 respectively. And again, we thought the market was constrained then.
Market Updates and News
Last weekend’s major precipitation event broke several records in northern California. In Mammoth the storm totals were several inches of water with more in the higher elevations. The storm came in warm and windy but it started to snow on Monday morning. By the time the storm blew through Monday afternoon it left a foot of snow at the town level and more on the Ski Area. The result was good for most.
The Ski Area opening brought visitors and pass holders into town this weekend. The opener “buzz” is always good. For others the rain was welcomed as opposed to five feet of snow. This included many construction sites including the Ice Rink project. The mechanical vault that was the lead photo in the last issue was completely filled with water. By Friday of this week they were pouring another concrete pad within the vault. The volume of rain did stress-test many parts of town including significant erosion in certain areas. Mammoth is great at handling lots of snow, but not so good at heavy rain. Thankfully it dries out quickly in this environment.
Since the last storm passed through the weather has been splendidly warm. The forecast remains relatively warm through the next two weeks. While this is the slowest season in Mammoth there should be decent levels of tourism between now and Thanksgiving. Just don’t expect all of your favorite restaurants and bars to be open. There are still fall colors hanging around, and some fishing to be done too. Overall it will be a great time to visit the region. We’ll be praying for snow soon enough. The recent storm fronts are a good sign.
Since it is Halloween, a recent poll indicates that most real estate buyers are more fearful of issues like mold or foundation problems than paranormal activities at the property. Apparently 73% of Americans have experienced some sort of supernatural activities and almost half say that they have experienced increases in this activity since the beginning of the pandemic. But there are a dozen things that concern home buyers more than buying a haunted house. They include asbestos, lead paint, radon, pests, and more. Surprisingly they didn’t list volcanic activity.
From the STR file; a lengthy report issued to the Town Council this past week answered some of the questions I’ve had about the growth (or potential decrease) in STRs in Mammoth Lakes. The information is based on STR business license renewals (the Town) that occur annually. The condominium category in 2019 was 3,147 and only increased by five (5) in 2021. This includes 461 condo hotel units. Total units including Hotel/Motel/Lodge increased by 70 from 4,990 to 5,060 (2019/2021). (This would tell me that some condo hotel properties are in the latter category.) But the net gain of units available for STR from 2019 to 2021 is 75. Part of this presentation suggested the Council could limit STRs in the future to increase the available units for workforce housing. So far none of the Council members seem interested in any limitations. TOT (bed tax) is the life blood of the Town.
Also from the STR file; one rental management company suggested to me that this winter might become the “guests need to bring their own toilet paper” winter…
A 3 bedroom / 2.5 bath / 2-car garage Creekhouse townhome closed for $888,646. This brand new unit was put to contract in January 2021. Today’s market could probably support a dozen sales of this unit at $1.1M or above.
The sale of a 2 bedroom / 2 bath at Aspen Creek for $566,000. My regular readers know I’ve been following the Aspen Creek saga the last couple of years. The project has finalized special assessments equalling ~$60,000 per unit over the next four years. The “rumor” or threat of this assessment had been suppressing values. The 2/2 units had been selling around ~$400,000. One closed recently at $440,000. Now we’re seeing buyers catching on to the real values. But the owners will still have to live through a few summers of construction activity. And none of this is getting any cheaper.
Two nicely upgraded but smaller units (1 bedroom and a Studio + loft) at Sunshine Village and Mountain Shadows closed for $465,000 and $499,000. More proof that buyers will pay high prices for remodeled and “turn key” properties.
Favorite New Listing for the Period
The Summit is a 1970s era project that has gone through major exterior and interior renovations. It is in great shape and the HOA remains well funded. And today’s buyers in the project are purchasing after these assessments and expenditures have been made. This is a bonus many buyers don’t process. The location at the bottom of Eagle Base and running along Meridian Blvd across from the Sierra Star golf course certainly warrants the improvement expenditures. So here is a second floor 1 bedroom / 1 bath with a wrap-around covered deck overlooking a near tranquil forested setting that then looks at a high-end residential neighborhood. All of it is south facing. Sherwin views. The project has brought propane gas into the building so a gas fireplace is a great option. Use it now and remodel it later. Check out the video tour.
Listed at $550,000
Other Real Estate News
Zillow created substantial buzz in the real estate industry this past week. It announced it was suspending their Offers/iBuying program through the end of the year. This program is a sophisticating “flipping” scenario where they purchase properties, renovate them quickly and then liquidate as quickly as possible. The program has accounted for a substantial amount of Zillow’s “reported” revenue but creates a net loss for the company, even in a rising market. Part of their corporate strategy (future) is to make up some of the loss by controlling the ancillary services and fees to the transactions; mortgage, escrow, home warranties, etc.. But like many, they have found real estate to be a very competitive industry. And it is difficult to compete against experience, service and performance.
The immediate explanation for the suspension of the iBuying program according to their COO was “We’re operating within a labor and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces”. Sounds reasonable. Anybody can tell you that getting remodels and renovations completed has become difficult. Skilled labor is one thing, but now delivery of needed materials and supplies is another (I can tell you first hand). They also stated that they were short of staffing to simply process the volume of properties and transactions.
But then all sorts of conjecture began from the industry pundits, including many who aren’t big fans of Zillow. Some are projecting that Zillow is calling a market top because the program theoretically only works in a rising market. Others believe they need to “stop the bleeding”, that the iBuying program is a failed business model and the losses are mounting. Others think they are sitting on too much inventory (and if they are calling a market top that could be disastrous). Many regional Realtors chimed in that they were overpaying for properties in their market and then pricing the properties too high on the back side of the flip, and the properties aren’t selling. Only time will tell who is right.
In the meantime Zillow’s stock valuation is half of what it was on March 1 of this year. Wall St. (of course) says now is a good buying opportunity. And many are watching what the major Zillow/iBuying competitor Opendoor will do next. They may be in the same boat. And commercial real estate listing aggregator Costar says they are building a residential platform to compete with Zillow (they too want to lose lots of money?).
And it also looks like Zillow is about to structurally change their Premier agent program too. Rather than charging Premier agents $10s of thousands per month for the placement (like here in the Mammoth market), they are heading towards a commission split (30-35%) referral program similar to Homelight, Dave Ramsey, etc.. Zillow Premier agents both past and present are complaining about fewer and lesser quality leads. This too may reflect the anticipation of some market slowdown. Paying big monthly flat fees in a slowed market could be painful for the Premier agents. Or maybe it is just another failed business model. Again, only time will tell.
Thanks for reading! Please stay healthy.
** Closed sale data is compiled from in-house files and public records.