This Mammoth Real Estate Q&A appears in the Labor Day Weekend 2023 issue of The Sheet.
Q: We liked your “surprises” column from last year, but more than a year has gone by and we think things have changed. What are today’s current surprises in the local real estate market?
A: Life is full of surprises and the Mammoth and regional real estate market has not been spared. But on this Labor Day weekend of 2023, the bulk of the surprises are probably for the best.
The first is what I’m calling the “exit and excitement factor.” The winter of 2023 scarred the community in many ways. There are numerous old timers, as well as new comers, who have simply bailed out, or plan to leave. The have sold or plan to sell their properties and relocate (and hopefully they didn’t get flooded out by Hurricane Hilary). There are others who are contemplating a move and another big winter would certainly push them over the edge. And there are others who are trying to make repairs so they can get their properties on the market. Big winter do this. The biggest winter, definitely so.
Almost all Mammoth property owners have paid out significant amounts for added snow removal and damage expenses. HOA special assessments have been significant, and the way-over-budget costs really need to be recouped, and the sooner the better for most. It’s the old “pay me now or pay me later” scenario for HOAs adhering to real budgets. Very few single-family owners have been spared significant added expenses either. And the settling of insurance claims has become a new nightmare.
A perceived rush-for-the-exits could clearly run the single-family and condo inventory significantly upward. But it hasn’t. The inventory remains relatively low and rather balanced, and Labor Day weekend historically represents the peak of the annual inventory. This lower inventory is the result of the new excitement factor in the market driven by the incredible snow of the winter of 2023. There are just as many people who are excited and enthused about the overwhelming snow amounts as there are those motivated to leave the hassle and expense behind. And these are excited buyers even in the face of increasingly higher mortgage rates. All of this really comes as quite a surprise. But maybe I’ve been here too long. And early snow (God forbid!) and Ski Area opening may create even more excitement, including for real estate.
Some of this continued interest in purchasing is also people looking to get their money out of banks, and into something tangible like real estate. And some are looking to complete a purchase before more lockdowns come, or before more election year mayhem occurs.
There is more surprise—the continuation of demand for luxury and high-end real estate in Mammoth and the region. This really started post-lockdown and has now gone on for three years. Besides real estate purchases in this market segment, there is tremendous, ongoing construction of high-end residential real estate. This is surprising because most (all) of these homes are being built on “time and material.” The cost and availability of materials is in constant flux. And labor too. And none of it is cheap. Building new is very expensive. It is impossible to have a real contract (that is unless you are dealing with the legendary you-know who). But I’ve probably beaten this impressive luxury home construction topic to death, so enough said.
Another real surprise for me is how slow tourism has been in Mammoth in the summer of 2023. This may also be quite surprising to many local business owners. Especially after the last three summers of crazy-busy tourism. But maybe the breather is okay for most. The slow down is really visible and will certainly show in the TOT and sales tax numbers, although I’m betting there will be an attempt to muddle the numbers for various reasons.
In one of my recent newsletters I pondered whether we have seen peak STR, or maybe we reached peak STR last fall. This raises a new dynamic for the owners of STR real estate. The reaction will be very individualistic. Many need to sort out their own quality-versus-quantity equation (I’ve probably beaten that to death too). There was certainly more quantity than quality the last three summers. Not we are seeing some of the balance, and it makes everything far more pleasant.
The slowdown will allow STR owners to reassess the direction of their business. And it may perhaps shake-out some sellers. The slowdown may also offer STR owners to enjoy more quality “maintenance days” in the properties—that is tough to do with high demand. And many of these STR owners have very attractive mortgage rates or purchased with 1031 (exchange) money. These owners aren’t likely to be going anywhere.
I have also contemplated whether a slow down in tourism would help alleviate some of our housing demand; the demand for employees was in part driven by the high levels of tourism.
And the housing demand may also be impacted by the changing demand from work-from-homers (WFH), many who may now have to go “back to the office.” This crowd certainly drove housing demand in the region post-lockdown. But ultimately, slower tourism and a slower velocity of money flowing through town may resolve some of the housing crush. Guess what? It has happened in the past. Between increasing supply (please keep The Parcel development going) and slowing demand, maybe we’ve also hit peak housing crunch (for now), and we don’t even know it. This would be a pleasant surprise.
This slower tourism also questions the true effectiveness of Mammoth Lakes Tourism. Think about it, if their marketing efforts are so ground breaking then why has Mammoth’s tourism dropped so significantly? The recent, past high demand now appears to be just a whim of the macro economy. Can we now legitimately question why we are spending so much money? (They will certainly argue we aren’t spending enough.) I’m guessing the expenditures may prove to be uneconomic at this point in Mammoth’s lifespan. But there will have to be some real pain before the consensus agrees. Not surprisingly, this may be true about many things in the future.
There is also continued push by Council members on the topic of restricting STR properties to open up more workforce housing opportunities. This concept is surprising to me. I’ve covered this ground before. I guess the idea just feels too good. I have argued in the past that one of the reasons Mammoth has seen such strong TOT numbers in recent years is because so many enterprising property owners (namely condos) have worked to provide improved and polished accommodations for our guests.
I’ve been involved in the local rental industry in a variety of ways for almost 40 years now. The whole Airbnb/STR momentum of recent years has radically improved the quality of the accommodations being offered to our guests. Most people simply don’t realize it. The online visual representations entice the visitors and the improved product ultimately satisfy our guests. But it has come at the risk, expense and effort of these STR property owners (and the “profits” people like to talk about are actually just covering some costs). One key to the local STR success is that the Mammoth community (and Town) have been a friendly and reasonably regulated environment to do business. And the result has been a massive increase in tax revenue in the Town’s coffers.
I emphasize a friendly and reasonably regulated environment to do business. This is increasingly lost on our government overlords (oops, I sometimes forget Mammoth Lakes is in California). All of this recent tourism generated “stupid money” has allowed for a $30M ice rink (will there ever be a true accounting for the entire project?), the prospect for new supersized Town offices, and an upgraded cultural arts complex, maybe a golf course, and plenty more. Now they want to kill the goose that lays the golden eggs? Don’t forget, we elected these people.
And now that we have successfully attracted all of this new capital into the community, and just ~10 years after we made national news for the Town filing for bankruptcy, we want to curtail it? It isn’t a good look. It does’t make sense either. And all of this as we are likely facing some bumpier economic times? And even more oddly, restricting STR properties and operations could actually make some existing properties more valuable. How does that improve housing opportunities? They used to call this “shooting yourself in the foot.” But is anyone really surprised?
The “theory” of restricting STRs in a mountain resort community to improve the workforce housing supply is likely to be a false premise. But it feels good and might garner votes. In March of 2022 the Jackson Hole News did a three part series on mountain town housing. They looked at the efforts of Colorado towns (ski resorts) to limit STRs with the goal of improving housing opportunities. JH News made the conclusion there was no effect. And wait, Mammoth is also quite different from these Colorado towns.
As I have pointed out before, many of the 1960s and 70s built condo project (most built by Tom Dempsey) were designed for STR; “front desk” style offices with rental charts, towels, etc. and common area recreation rooms, all adjacent to coin-op laundry, pools, spas and changing rooms/restrooms. Many of Mammoth’s legacy condo projects were specifically built for STR and decades before Airbnb or VRBO came along (and there was a workforce housing shortage back then too). The majority of Mammoth’s condo projects have been historically ZONED for STR for decades. All of this existed long before the Town incorporated.
This is quite different from the Colorado towns where small downtown homes where locals lived in the past have been converted to STRs driven by the Airbnb craze. The zoning and regulation wasn’t in place. Just because it is fashionable in Colorado, doesn’t mean it should be here. Apples and oranges. The naïveté is surprising.
And lastly, and not surprising, we need to thank all of those who labored through to keep Mammoth safe and functioning in the year 2023. I hope most have caught up on their sleep.
Happy Labor Day!