The Winter Season Comes To A Close With An Easter Weekend Snowstorm!
Market Summary – April 3 to April 17
The Mammoth Lakes MLS is reporting 19 real estate closings for the period ranging from a low of $385,000 to a high of $3,837,500. Of the 19 closings, all 19 were financeable properties and 12 were closed with financing. The closings included ten properties over $1M and included seven (7) condominiums. There were two (2) residential closings over $3.5M. There were two (2) more Creekhouse resale closings at $2M. This period last year there were 28 closings.
The 10-year Treasury yield climbed again substantially (~0.5%) to 2.828%.
A notable quote from the beginning of the period, “Purchase mortgage applications are down an astounding 40% from a year ago, according to the Mortgage Bankers Association. ‘We are at a turning point in the market. Offer activity is slowing,’ said Patrick Veling, CEO of Real Data Strategies. ‘Homebuyers, especially in the $1.1 million to $1.4 million price range, are saying we’re mad as hell and we’re not going to take it anymore.’” The substantial rise in rates during the period should only continue this trend.
Meanwhile, one of my favorite (and local) loan officers blasted out an email that addressed the rising rates, “…since a lot of clients are getting ‘sticker shock’ once they get into contract and see where the current rate market is…. It’s important to note that the average 30 year fixed rate for a primary residence (assuming 25% down, single family, conforming loan) has now moved above 5%. Jumbo loans are typically going to be lower than this (depending on the scenario), but second home and investment rates will be even higher averaging about .75% higher than primary rates.” Rates have only moved upward since this email. And as of April 1 there are increased fees (points) of 1-4% now attached to the second home and investment property mortgages. This time last year the 10-year yield was at 1.666%.
At the period’s end the condominium inventory is even at 33. There were 15 new condo listings in the past two weeks and six (6) are already in escrow. It surprises me that some local listing agents put new quality listings to contact (and escrow) so quickly. Sometimes within a day or two of exposing the property to the market. In this present era of overbidding I would think sellers would want their listings to “marinate” on the market. But some agents and owners must just be anxious to move towards closing as soon as possible. But there could be money left on the table.
There are now seven (7) units at The Westin Monache on the market (two went to escrow in the period) including a new top-floor Studio that has not been refreshed and is priced at $450,000. This could be an interesting opportunity to do a premium custom remodel and do offsite rentals. Top floor units are very desirable. The view is looking over the Village and down valley. There are now five (5) Village units on the market. There were two new listings that came to the market in the period and sold quickly but have now come back to the market. Obviously buyers are making blind offers on properties only to discover undesirable aspects upon inspection. Interestingly, this time last year there were 33 condos on the market.
Single-Family Home Inventory
The inventory of single-family homes is up three (3) to 18. There were a few nice homes brought to the market in the period. They have reasonable per-square-foot pricing, at least compared to the last six months. The average and median pricing has now dropped to $2.7M and $2.1M respectively. This time last year there were 16 homes on the market.
The total number of properties in “pending” (under contract) in Mammoth Lakes is up two (2) to 66 at period’s end. The total number of pendings in the aggregate Mammoth MLS (which includes outlying areas) is even at 91. This time last year it was 96 and 145 respectively. For the Mammoth market specifically, this would normally be the time of year we see sales activity slow (ski season and heavy tourism is essentially over for now). And listings normally increase as STR owners thinking of selling know that revenue will drop off until summer, and melting snow will make properties look more attractive. All part of the normal cycle, but what is normal anymore? We’ll see if there is any return to normalcy in the market.
Market Updates and News
The ski season clearly petered-out during the period. Tourism last week was the quietest since early December. The Easter weekend crowd was blown out with a modest snowstorm on Saturday. But any precipitation at this point is welcome. Today was glorious. Without a few inches of new snow the Eagle Base runs would have been almost all dirt by today’s closing. The ski and snowboard action will now all be focused out of the Main Lodge area but will include Chairs 10 and 5 for now. The STR owners and operators all report a dramatic drop-off in bookings after today. Local business owners and residents are sure to be planning vacations.
Things are quiet on the Town side, maybe too quiet. Very little is happening at the construction sites at Mammoth Creek Park West (Ice Rink) and The Parcel (workforce housing). Conversely, the Sierra Nevada Inn improvements are for real. The old Ocean Harvest building is long gone but a variety of projects are visibly in the works. The miniature golf course is about to be removed, there are multiple improvement projects happening at the Rafters restaurant and there are air conditioning units being installed in guest rooms.
The Mammoth Lakes Laundromat opened during the period on Main St. and it is very nice. The big deal? This is telling about commercial real estate and demand in Mammoth. This space used to be prime retail space in the Outlet Mall and housed one of the “draw” outlet stores for years. Those days are over. The Mall has been rebranded and the landlord decided the highest-and-best use is now a laundromat. A big part of the demand is to service the custom bedding and towels in STR units. Guests don’t want the standard sheets and towels from the commercial laundries anymore. They want something better. Many owners now have multiple sets of their custom sheets and towels and they need to be laundered in a more individual manner. This has created incredible demand. All new machines. Looks like a great place to launder bulky items like comforters. There are variety of beverage opportunities within short distance.
Redfin was back for more reporting on the slowdown in the second home market this past week and the major business news outlets all picked up the story. But according to the report, “Demand for vacation homes was still up 13% from pre-pandemic levels, but it’s declining after a pandemic-fueled second-home boom last year. Still, we expect demand for second homes to remain above pre-pandemic levels in the future, as remote work is here to stay for many Americans.”
“Ross’s Crosses” (see photo above) have an interesting back story. Bob Ross passed way in 2020 but owned the lumber yard on Sierra Manor Road and various other construction related businesses in Mammoth for decades. He was a crusty Mammoth old timer and I remember him coming in front of the Planning Commission in the early 1990s and basically yelling at us. Over the years I learned he was a very nice and likable man. He just had little tolerance for government restrictions. The transition in Mammoth (1984 and beyond) from the County to the Town governance was just too much for him. Many envisioned his lumber yard property as the perfect spot for a supermarket competitor to VONS, but at the time the Town wanted a potential project to have costly underground parking.
After a variety of trials and tribulations with Town government (specifically planners) he erected the crosses on his property right on Meridian Blvd.. This is right across the street from the driveway to the Town offices. His hope was that the Town employees would have a reminder every day when they left from work. The Ross family still owns the property and they have a pretty good tenant, so the crosses are likely to remain for the foreseeable future.
As for what the future of Mammoth’s real estate market is, this Mammoth Real Estate Q&A ran in this weekend’s issue of The Sheet.
Two nicely remodeled 1 bedroom condos at The Summit and Viewpoint Condos sold for $600,000 and $695,000 respectively. Similar 1 bedroom upgraded/remodeled sales occurred in 2005 at $375,000 and $420,000 respectively. These are 50 year old condos.
Another The Pointe townhome closed in the ~$1.2M range, all closings were a good $500,000 more than the peak closings of the 2005-06 era.
A Snowcreek Phase 4 townhome closed for $1,270,000 and it doesn’t have either a garage or a creekside location.
Favorite New Listing for the Period
This just came on the market. When buyers are looking at condo hotel properties I have always recommend that they try to purchase one of the best 25% of the units in the building. Not all units are the same. Features like top floor, corners, oversized floorplans, views, special locations, etc. can make a big difference in enjoyment and rental revenue. This is an oversized 2 bedroom / 2 bath in Grand Sierra Lodge. It is also on the 5th/top floor and overlooks the smaller plaza area of the Village. It has nice mountain views and sun. The unit has some upgrades but owners can remodel these units any way they like. We’ll see how long this lasts and if it gets overbid.
Listed at $1,029,000
Courtesy Mammoth Village Properties
Other Real Estate News
This marks the real end of winter season and it’s a great time to review the state of the local STR industry. This past week I spoke with numerous participants from off-site STR managers to multiple property owners. There continues to be a wide variety of operational styles and goals. Overall the winter of 21/22 was very successful including comments from one major management operator, “BOOMING, from occupancy rate, revenue, reviews and repeat clients.”
But before I dive deeper into the current state of the industry, I want to link to a new article from last week that is an excellent summation of STR tax strategies; How Short-Term-Rentals are Taxed. Some key points; STR comes in two types –– “Business” Short-term rentals that typically file on Schedule C or via a S Corporation, and Passive Short-term rentals which typically file on Schedule E.
Both STR classifications are determined by the average rental days of the guests. Stays that average less than seven days make the property qualify as a ‘vacation hotel’ and all typical rental property rules don’t apply.
From there the tax classification depends on the level of service the owner provides to guest; substantial versus insubstantial. Based on the definitions, this is where the different classifications can get a little murky in Mammoth. All of this tells me that STR buyers should consult with their CPAs before they decide what type of property they purchase. And how they establish their initial rental scenario. The tax ramifications can be a substantial plus or minus.
Meanwhile the Mammoth STR market continues to be a story of quantity versus quality. There is a small percentage of owners who are hardcore quantity owners. They are compulsive about micromanaging their vacancies and rates. They have their favorite dynamic pricing software but also have their other channels of information (social media groups, etc.). They have their bottom line rental rates and will go there when local occupancies drop to rock bottom off-season lows. Owning an STR is strictly a business for them and their business doors always need to be open in order to produce revenue.
The bulk of the STR market in Mammoth lies somewhere in-between quantity and quality. There is still a strong luxury market but competition has increased in the past 24 months. These owners appear to be less aggressive (or simply busy themselves) and are comfortable with static, take-it-or-leave-it pricing. An increasing number of the luxury properties may just leave the rental pool, or only rent during the absolute prime rental periods.
The in-between market is significantly represented by the variety of offsite rental agencies who are continually striving for more occupancy, higher rates and better service. Their management fees are becoming increasingly competitive. The “50%” model of Mammoth Hospitality and Snowcreek is coming under increasing pressure and competition. The in-between market appears content with good revenue during prime periods and less wear-and-tear on the property. And enough owner usage (to work on the property, of course).
Most owners and operators agree that the post pandemic pent-up travel demand has dissipated but still remains strong. But in Mammoth it is still seasonal. Demand from guests looking for more appropriate work-from-home accommodations has fallen dramatically. Larger luxury properties are typically booked further in advance and smaller properties less so, especially in shoulder seasons. Some owners and operators are finding success with 3-night minimum stays. Sunday is a “dead” night so offering discounts for it can make sense. Higher travel costs may encourage longer stays through the balance of 2022 and beyond. Housekeeping costs are on the rise.
The fall of 2021 and the winter of 2022 have proven to be strong revenue periods for Mammoth STR owners. They may prove to be peak periods. And the market participants expressed they are dreading the possibility of summer smoke again.
Thanks for reading! Please stay healthy.
** Closed sale data is compiled from in-house files and public records.