Mammoth Real Estate Q&A — Surprise, Surprise

This Mammoth Real Estate Q&A appears in the 4th of July weekend 2022 issue of The Sheet.

Q: Your past couple of columns have focused on forecasting the future of the market. But my wife and I are curious about what has surprised you the most about the Mammoth real estate market in the past two years? We know it has been crazy.

A: This is a great question. It has been an amazing market to be an active participant in. There were many unexpected and surprising aspects to this recent market. How we will look back at it is a great unknown. And as we have seen, not all segments of the local market are equal or react equally. 

The biggest surprise is that the whole thing happened in the first place. The 2019 market showed no real potential for any future boom. It was reminiscent of 2005 before the Starwood acquisition announcement in October of that year that launched the market. The early 2020 market was sluggish at best and the Covid lockdowns froze the market and there was incredible uncertainty as to what would happen. The immediate post lockdown months were a combination of panicked sellers and motivated buyers, all with a reasonable balance. Then it went hyperbolic with demand far exceeding supply. 

I’ve referred to the period as a great “movement” of people, including those moving into and out of the Mammoth and regional market. But the buyers have clearly outnumbered the sellers over the past 20 months. And hence the appreciation in values. Ridiculously low mortgage rates and huge infusions of cash into the economy helped fuel the madness. The local real estate industry including brokers and agents, escrow and title companies, loan officers and appraisers, and other participants like home inspectors all worked at a blistering pace.

During all of the upward move in values over the past 24 months, the most surprising micro-market trend, to me, has been the performance of the older condominiums in Mammoth. These are mostly condos that were built in the late 1960s and 70s. The units with significant upgrading and remodeling sold at almost staggering upward price levels, especially in the past six months. And many of the buyers were rather indiscriminate about the extent of the upgrading. Looks can be deceiving. Some were classic pig/lipstick. Others were really quality remodels.   

These vintage properties are at the point in their useful life where they need major infrastructure upgrades including major electrical and plumbing upgrades, windows, heating, roofs, etc.. Any serious kitchen and bath remodeling should trigger infrastructure upgrades. Some units even have the dreaded “dangerous” electrical panels (even though they have been in service for 50 years). Depending on the size of the property, these properties take a good $100-200,000 to properly upgrade. And today’s remodeling costs continue to push higher. It can be done for less but that will equate to less than desirable shortcuts and compromises. 

But these older condominiums have many redeeming qualities and can be super popular for many reasons. Especially if they are nicely upgraded. First, many have attractive locations whether it be downtown, in the Meadow, near the Village or close to the lifts. Many are in lower density projects unlike so many of the newer developments. Many have larger floor plans with extra storage and even private garages. Many have extra HOA amenities like pools, recreation rooms and tennis courts. And many of the projects have decades of successful STR operations and proven rentability.  For most of these older condominium properties, “the defects are curable.” And many have that classic Mammoth “feel” that some people have come to appreciate and desire. 

Most of the recent selling prices of these properties has been far higher than the peak of the mid-2000s. Some per-square-foot selling prices have exceeded $1,000 and higher. This can be higher than more modern built properties. Some of these higher sales prices can be attributed to simple affordability. There is a large inventory of these older condos that are smaller units; Studios, Studio + lofts, 1 bedroom units, etc. These units make great STR properties, although their return on investment (ROI) was far better when they were selling at $250,000 than at $450,000. But super low interest rates helped.

Beyond the incredible performance of the older condos in the past 24 months, the volume and appreciation in the luxury market has been impressive too and quite surprising. Many economic pundits are now reflecting on the post lockdown period as a “rich got richer” period. This may explain what has happened in our own little micro-market. The demand for high-end homes and condos was simply something this market has never seen. But it wasn’t just in Mammoth. It was the whole east side of the Sierra and many parts of the nation too.

Prior to 2020 the sale of properties in excess of $1M was not that commonplace in the Mammoth market. Especially in the previous decade. Many luxury townhome prices would be at this level or slightly higher. Single-family homes selling above $1.5-2M were not that commonplace. In the past year they have almost been the norm. The strongest appreciation has been in the luxury townhome market. Some recent recorded sales in this segment of like-properties show a doubling in value during the past two-year period. Amazing.

The luxury single-family market, say everything selling for more than $1.5M, didn’t necessarily see similar appreciation. But what was so impressive was the volume of sales. Properties that previously may have sat on the market for many months were gobbled up immediately. I can think of properties that had significant days-on-market (DOM) in the past five years that returned to the market at higher prices and sold immediately. 

And not only was the closed sales volume at incredible never-seen-before levels, but so was the number of inquiries by buyers who never closed escrows in the marketplace. The total “busy-ness” of local brokers and agents was maybe double, or triple, or even beyond the number of buyers who actually closed sales. Some (many) of these buyers are still watching the Mammoth market with the intention of buying if market conditions (or personal conditions) become more favorable.

Dovetailing on the demand in the luxury market was the impressive number of single-family home lots that sold in the past two years. This has always been a quirky part of the market. Mammoth is a very expensive place to build. There are many contributing factors. Structures have to be engineered for snow load and seismic. This adds additional materials including steel and metal tie-downs, strapping, etc.. There are also the additional costs of getting all the materials to Mammoth (which remains a pretty remote place). Then there is contractor availability and a labor shortage. All of this drives up the cost of new construction. 

For owners looking to build their own homes there is also the challenge of managing the project from a distance. And it is a delayed gratification process. Building a new home in Mammoth can easily be a multi-year experience. The more custom features, the longer it will take. And once the home is actually finished it can take another couple of years to get it “finished.” All of this has suppressed the vacant lot market for decades. Many buyers just decide a better path is to purchase something that already exists. For most of my real estate career there has been a nice selection of affordable residential lots available. This inventory has been bought-up in the past 24 months including the lots of many indifferent or legacy owners who became motivated to sell because of the strong demand. Today’s vacant lot buyer has very little to choose from.      

The final surprise for me was the business itself and the participants. Real estate agents were deemed “essential workers” during the original lockdown but there wasn’t much to do. But clients were calling and strategizing. The whole thing was weird. I remember shooting video in the Westin Monache lobby just days before their reopening. The place was ghost town and it was a maze of precaution signs and plexiglass. But I had a new listing and the seller wanted it sold.

Showing property in face masks and booties was surreal too. Many times I thought to myself “Is this really happening?” It seemed like episodes of the Twilight Zone. But once the market launched it became like a merry-go-round that kept going faster and faster. It has just slowed down the past month. 

Not surprising was how most agents and other market participants reacted. Experienced real estate people know to “make hay when the sun shines.” Escrow and loan officers and appraisers were double buried because of the refinance boom that coincided with the sales boom. The brokers and agents were buried with inquiries and multiple offer scenarios. Sorting through it all takes enormous amounts of time. I’m sure most look back and see a big blur.

And here we are. One of my former associates would say we are back to “blocking and tackling” in the real estate business. Soaring interest rates and a dubious stock market have called the cops on this party. I can’t say it is a surprise. Maybe all of the out-of-town agents will stop showing up pretending they know the Mammoth market.

I can’t help but think there may be one more surprise. Mammoth real estate demand and development boomed in the 1970s during an ugly economic and stagflationary period. It seems counterintuitive, but it happened. The evidence is all over this community; the condos and homes that were built in that era. So maybe the Mammoth market is in a reactionary pause and there is even more demand coming in the near future. There are still plenty of good reasons for this. The volume of tourism in early summer could be just one indicator. Time will tell if the future of Mammoth real estate will resemble the past.

Happy 4th of July!!

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