Midweek Visitations Die, But Mammoth’s Condo Market Remains Hot !
Market Summary – January 23 to February 6
The Mammoth Lakes MLS is reporting 13 real estate closings for the period ranging from a low of $225,000 to a high of $1,410,000. Of the 13 closings, 12 were financeable properties and eight (8) were financed closings. More impressive selling prices and overbidding. The closings included at luxury single-family vacant lot in Juniper Ridge closing for $1,200,000 and a multi-family vacant lot closing for $225,000. Interesting disparity. There were some very impressive condo closings in the Village/Canyon Lodge area (see Noteworthy below)
The 10-year Treasury yield rose significantly again to 1.93% at the end of the period. The 30-year conventional rates moved well above 3.7%. There is now a rush to close financed transactions before April 1 when the FannieMae and FreddieMac upfront fees for second homes will increase. The fees will jump between 1.125% and 3.875% based on tired loan-to-value ratios. This will impact the cost of purchasing lower end-condos in Mammoth but this segment of the market is beginning to push beyond the Fannie Mae loan thresholds. Imagine having to qualify for a jumbo loan to purchase in the low-end of the Mammoth condo market. We’re heading there quickly. The jumbo rates do remain more favorable at this time, but expect larger downpayment and personal reserves. Time will tell if this has any real impact on the market over the long term. My guess is that there are larger factors at play in the macro market.
Condominium Inventory
At the period’s end the condominium inventory is up another five (5) to 17. Impressive considering where we were just 45 days ago. New listings gather considerable attention and normally multiple offers and over bidding. I can tell you first-hand that listing agents on these properties are bombarded with text messages all hours of the day, including agents from out-of-town whom I’ve never heard of. There were 28 new condo listings in the past two weeks and 16 are already in escrow. About the only thing keeping a property from going to escrow is some sky-high listing price that buyers are rejecting. Or some serious defect or obstacle.
Single-Family Home Inventory
The inventory of single-family homes is up four (4) to 9 (nine).The newest listings are coming on the market in the $800-900 per square foot price range and these are 40+ year old homes with some remodeling but a variety of defects including serious incurable defects.
Pending Transactions
The total number of properties in “pending” (under contract) in Mammoth Lakes is up 13 to 87 at period’s end. The total number of pendings in the aggregate Mammoth MLS (which includes outlying areas) is up 13 to 110. Pretty good activity for this time of year when the action normally slows down (I used to refer to it as the “post holiday decompression”). The actual closings were more reflective of a slowed holiday period. If Mammoth had a 100 condos on the market like it has had this time of year in the past, there would be significantly more properties in escrow.
Market Updates and News
Mammoth’s weather has been gorgeous the past two weeks with almost no wind and certainly no signs of a snowstorm. We had a few days of “pipe freeing weather” this past week but the weather forecast for the next period is for warmer temperatures and with no storms in sight. We can be thankful for December’s snow accumulations. Based on the last month the Mammoth region could simply close for business from Sunday afternoon to Thursday afternoon. This new “midweek” period has been absolutely dead. Great for skiing, snowboarding and recreating but questionable for local economics. Is this collapse in demand a result of gas prices, inflation/stagflation, snobby riders who only desire fresh snow, or what? I’ll take a deeper look at how this may be once again changing the local STR business below in Other section.
Part of the answer may be in national GDP numbers that were recently released. Consumer spending rose significantly in the Q4 of 2021. This increase included the area of “recreation” including recreational services, goods and vehicles. This could be a strong argument for the record TOT (bed tax) numbers Mammoth experienced in October and November of last year. But now the GDP numbers have fallen off a cliff for January of 2022. No rebound is expected. This could explain the recent demand destruction in Mammoth. Based on North American ski reports, Mammoth has some of the best snowpack in the country.
The Town recently announced it received at $38M award from the State’s Housing Accelerator program. This money is for “shovel ready” projects and will apparently be allocated to the first phase of The Parcel which is already underway. This accompanies the $20M grant captured last year. At some point it would be nice to see the accounting (like debits and credits) for all of this money. But I continue to live in a delusional state (or is that State?).
Tax-deferred exchanges (IRS Code Section 1031) aka 1031s have always been a substantial part of the buy/sell business in Mammoth real estate. Especially when the overall market is hot and inflated. The local rental (STR) condos qualify for 1031s under the “like/kind” rules, hence the volume of interest. Inflated markets almost everywhere have recently created substantial 1031 movement. The biggest challenge the past 18 months isn’t selling the original property, it is finding the subsequent investment property. Low inventories in all markets can cause significant stress for the seller turned buyer. Under the IRS rules the seller has 45 days to identify the “up leg” property and 180 days to close. The “clock is ticking.” I have had many stressed clients in this realm in the past 12 months.
A recent article from a major 1031 accommodator explains the trends for 1031 exchanges in 2022; the shortage of replacement properties has increased the volume of “reverse exchanges”, a more expensive and complicated transaction where the Seller actually buys the up leg property before selling the originating property. These transactions are at an all-time high. Next, more investors are looking to acquire properties that include a potential primary residence as well as an investment component too. And, qualifying rental vacation property purchases tend to be in warmer climates (about 50/50 with my clientele). And many investors are relocating their investment assets from high tax states to tax-friendlier states. Imagine that.
Last week’s Town Council meeting was curious. While The Sheet’s reporting focused on the Council’s discussions over limiting STR licenses (see Other below), I found the proposal (and lease contract) with Tesla far more concerning (and I’m in the real estate business). The lease proposal is for 16 charging stations at Mammoth Creek Park West where the new Ice Rink is under construction. This includes 12 Tesla “super chargers” and four “universal chargers”. The Council discussion (righteously) moved to a higher level that compelled discussion of concepts like “climate change and ski resorts”, and “charging electric cars on municipal land” as if we should equally be providing land for gas stations, or the exclusivity of Tesla charging stations versus broader access to other manufacturers, or “private money making money on our public (Town) lands”, and even “nobody is looking at the long term consequences” of this.
But forget actually having some pertinent dialog now, that’s for another day (like when I’m no longer on the Council, or long dead). No, they rushed a 5-0 approval vote through like the fire alarm just went off. But I have some other questions and concerns beyond the lofty questions they don’t want to discuss……the staff reported there will be “no new (Tesla) infrastructure completed until the Ice Rink facility is completed”. But the electrical service to the charging station is apparently part of the electrical service to the Facility. The charging station locations are ironically right in the back corner of the parcel where all of the mechanical/ice making equipment is located (wouldn’t it be more convenient if these charging stations were actually located closer to Old Mammoth Road?). I’m so delusional. Seems like the TC is getting Tesla to help pay for some of the Facility infrastructure. This project is destined to be wildly over budget (especially now). Some further disclosure is really appropriate, I would think.
But I have another concern about all of this. This site is poorly drained. The east end of the site is on the flood maps. I’ve lived near/owned/worked/commuted regularly through this site since the early 1980s. It floods deep a couple times a year. And now the Facility is going to cover the site with more than 60+% of impervious service. And the plan is to handle all of this new drainage through one dry well on the east end. Great. Now bring some high powered electricity into the site sponsored by a company not necessarily known for quality control. What could go wrong? I fear for the public works employees who are going to be dispatched to clear the pine needles and aspen leaves from the dry well cover….
Watching the Council rush through this decision through reminds me of the mindset of people who inevitably end-up in financial difficulties; “honey, shouldn’t we talk about this before we sign all of this paperwork?”…..I guess it is just in the air.
The early United Airlines air service (Bishop) numbers are in; flights from Denver are up substantially, flights from San Francisco and Los Angeles are down with LA down big. I guess all of the airport hassles and the $75 taxi ride from Bishop aren’t incentives to fly from LA.
Noteworthy Sales
Those aforementioned Canyon Lodge/Village sales;
Last issue I discussed a Seasons Four 2 bedroom + loft / 2 bath that sold slightly over $800,000. Another one sold during the period for $845,000. But a at least this unit had remodeled kitchen and baths.
A 1 bedroom + loft / 2 bath unit at St. Anton closed for $800,000. It was originally listed at $715,000.
A 2 bedroom + loft / 3 bath unit at Mountainback closed for $925,000. It was was originally listed for $790,000. Wow! Nothing really special here. Peak pricing in 2005 was in the low $600K range.
A nice home in Sierra Vista Estates closed for close to $1M. This is the area many refer to “behind the Post Office”. Prior to the past 20 months there was never a closing near or beyond $1M in this neighborhood, but not anymore. This specific home has a classic incurable defect; it backs right up to (backyard) Motel 6. Of course, there’s a convenient place for your friends to stay.
Favorite New Listing for the Period
Here is a luxury home that has a true luxury home location (not something less than a 100 yards from the Main St. noise). The two estate lots across the street are the old Dempsey and Frampton parcels. Those gentlemen basically could have had any property they wanted within the Snowcreek Resort. They chose right here. The bluff estate parcels behind are unique in the old Mammoth Camp Tract subdivisions. The Seller will sell the half acre parcel next door for $599,000. All of this affords a special opportunity to be in one of the prime luxury home locations (and quiet) in all of Mammoth. The home design offers tons of natural light, views and a true forest setting. This is 4 bedrooms + loft / 4 baths plus a den and an amazing office. Oversized 3-car garage with large workshop or game room. Location, location, location. Check out the video tour.
Listed at $2,350,000.
Other Real Estate News
The Mammoth STR business is in for more change. Coming off the high of record October and November TOT numbers and a strong holiday period, it is clear something has changed in the past 30 days. There are the GDP numbers to digest but there is my anecdotal observations based on living in Mammoth for 41 winters. My brain is just wired to notice this stuff. The weekends are busy and there is a solid 3-night (Th,F,S) booking crowd. But based on IKON, quality snowpack, weather, etc., the non-weekend demand has fallen like a rock.
Is it gas prices? Covid/Omicron exhaustion? The general inflation/stagflation? Snowboarders (and maybe skiers) less interested in hard and fast conditions? Or what? Nobody seems to be looking at it yet, so I will.
And all of this plays into the STR business and furthers the “quantity versus quality” discussion. The “quantity” operators should doing okay. But they are likely missing out on substantial Sunday through Thursday bookings. This is their “gravy” even though it is typically discounted in some way. They want their units booked even if the net is minimal. The “quality” group may not be hurting either because the Thursday through Sunday crowd is their normal clientele and (multiple) families may have bigger incentives to book a larger or better located unit in this current market. But overall, I’m guessing that because demand is down, rates are down too (is the industry reacting already?). And without new snowfall they may be compelled to become more competitive. Especially for those operators having a strong Airbnb presence (where the price drops as the booking nights come closer).
I’ve been out working (listings) in some of the “hot” projects. The Westin Monache is booked solidly, and there is no discounting. The newly “refreshed” units are bringing premium rates. The demand isn’t as high as it was 20-30 days ago. But new snow always creates higher demand. Conversely, Horizons Four is one of the classic “bread and butter” rental projects in Mammoth. It is packed on the weekend but noticeably slower during the week.
So where might this take us? A big part of it depends on the underlying cause for this slowdown. Is it simply inflation (including the price of gas) hitting discretionary/disposable spending? If so this could be a trend for the balance of 2022 and beyond. The “quantity” STR operators will react according to their own economics. Some may become even more competitive. Other will just find a balance. Gross revenues may decline, maybe substantially. Other may get pinched and need to sell. We’ve seen this all before.
The “quality” operators are a different breed. They are less inclined to discount rates. Most new owners are trying to find the balance. Many who have purchased via 1031s actually want to rent less and enjoy more. “Conversion” in the 1031 realm is a popular theme these days; less rental and more usage (consult your CPA for directions). Others in the quality world develop the “stranger sleeping in my bed” syndrome and hope for less rental too. Outright revenue production in the “quality” market seems to be a lesser concern. Ultimately the current economic trends could push both the quantity and quality operators to extremes. Most are in very different economic positions. But if demand decreases, some portion of the current STR operators may simply change their plans entirely, including removing their property from the rental pool. Mammoth may be at “peak STR units” in this economic cycle.
Which leads to the Council’s discussions about temporarily limiting STR business licenses. One member draws a straight line between the rise of Airbnb in the past 10 years and the housing shortage. Correlation is causation? The numbers don’t really show this. Mammoth has been in the mega STR business for decades, long before Airbnb. (And most people don’t realize Airbnb is becoming a failing business model, just look at some of their most recent stock market assessments.) The other factors affecting the shortage of workforce housing are well documented (and the work-from-home juggernaut in the last 20 months has really ruined it). And there is no direct reasoning (that I’m aware of) that limiting the numbers of STRs would have any affect on the supply of units for long-term rental. Local residents can’t afford the current market rents anyway (is rent control the next proposed “solution?”) The above mentioned economics may prove the opposite; second homeowners want their place to hang-out and really don’t want to rent either short term or long term. This STR ban may die a quick death, or not. But it may just put the cognitive capacity of the our Council members on further display.
And if gas prices continue to increase (like they have during different periods in the past) there is always the debate whether more people will travel closer to home (regionally) where a place like Mammoth actually benefits, or whether more people will “staycation” and simply not travel at all. Or?? One thing for sure, no matter how many marketing dollars are spent the number of guests who can now afford to visit may become increasingly limited. The current midweek business may just be the prelude.
Thanks for reading! Please stay healthy.
** Closed sale data is compiled from in-house files and public records.
