Mammoth Real Estate Sales Report – February 4, 2024

Latest Storms Save The Winter of 2024, And Tax Referendums Coming!

Market Summary –   January 21 to February 4 

The Mammoth Lakes MLS is reporting 13 real estate closings for the period ranging from a low of $240,000 to a high of $1,680,000. Of the 13 closings, 11 were financeable properties and six (6) were closed with financing. The closings included two (2) more vacant residential lots and three (3) Creekhouse townhomes. There are only five (5) Creekhouse properties remaining to sell and/or close. As the construction comes to completion, that little section of town looks nicer and nicer. It needed it. Now, where to put the new cell tower?  
 
The 10-year Treasury yield was down at the end of the period to 4.03%. Yields were actually under 4% this last week. Friday’s very questionable but seemingly positive jobs report pushed mortgage rates higher, but they are still being quoted under 7%. Jumbo rates are being quoted higher. And the FHA rate (that rarely applies to any Mammoth purchases) is in the low 6% range. 
 
 

Condominium Inventory

At the period’s end the condominium inventory is up three (3) to 56. There were eight (8) new listings in the period and one (1) has already gone to escrow. The new listings included some nice Snowcreek townhomes and a newer Mountainside unit across from Canyon Lodge. What condos went to contract/escrow in period? They include a two (2) Westin units and units at Sierra Megeve, Snowcreek 5, L’ Abri, and Mammoth Estates.
 

Single-Family Home Inventory

The inventory of single-family homes is down two (2) to 16. There were five (5) new home listings including one at $7.2M in Greyhawk. There are now only two (2) homes listed under $1M.  And what homes went to escrow in the period? They include a $3M+ home in the Ranch, two (2) homes on Forest Trail, and a small home “behind the post office.” An older fourplex and a vacant lot in the Knolls also went to contract.
 

Pending Transactions

The total number of properties in “pending” (under contract) in Mammoth Lakes is down three (3) to 34 at period’s end. The total number of pendings in the aggregate Mammoth MLS (which includes outlying areas) is up five (5) to 61. Two of real estate’s most revered and trusted sources of information recently made very positive statements about the future of the residential real estate. Jonathan Miller of Miller Samuel believes any Fed rate cuts in 2024 will “provide the termination of any housing recession.” In one of his recent Housing Notes newsletters, his data emphasized the continued strength of the Los Angeles and Orange County markets—over a third of sales are overbids. This normally bodes well for Mammoth.
 
Bill McBride of the Calculated Risk blog, who is most noted for calling the crash some 16 years ago, was quoted this last week “The bottom line is there will not be a huge wave of distressed sales as happened following the housing bubble. Most homeowners have significant equity, were well qualified, and have a mortgage with low rates that they can afford. The distressed sales during the housing bust led to cascading price declines, and that will not happen this time.” He made these comments along with plenty of charts in the National Housing Conference newsletter last week.
 
Of course, if you go to YouTube you can find all sorts of experts who think differently.
 

Market Updates and News

Big weekend crowds continue and productive snow storms last week and currently ongoing will significantly improve on-mountain conditions for the upcoming President’s weekend and Ski Week crowds, and beyond into all of the spring break weeks in March. It is finally starting to look like winter in Mammoth.   

The real estate news of the times is the STR moratorium and the resulting process. And the true, end result is still quite unknown and may be for many months, or years. With the release of the consultant’s (BAE) STR Study, we now have the potential evidence for something “concocted or conjured”, but it all seems to be falling on its face. My early analysis of the report is down below in the Other section. The STR Committee work is now completed and they have made their recommendations to the Council (they had the BAE report for only a couple of days and it really wasn’t discussed at any length.) There were apparently no more threats to the members, and they congratulated themselves for “completing the mission.” I’m sure they will issue some honorary plaques or participation trophies.

The new Certification process for STR properties is almost a slam dunk. The real questions that remains; Can the Town execute on it? As I’ve said in the past, they haven’t proven capable of this in the past (look to different fireplace ordinances, misc. code compliance, etc.). They are proposing re-inspections every four years. That means ~four inspections and subsequent processing every working day through the year. In the private sector, no problem. For the Town, we’ll see. The bulk of STR owners do not need to fear this, they are already in compliance, and an updated health and safety review is always a good thing for liability purposes.

Beyond that, the Council is going to likely push forward one, or both, of the following referendums on the November ballot; a ~2% increase to the TOT, or a ~1.5% tax on STR revenues attached to the annual license. These new tax revenues will be allocated to housing programs including rent subsidies, down payment assistance, etc..

Zoning changes? At the Jan. 23 meeting the question was asked of the Town staff; What are the benefits? It was like the Three Stooges answering. I’m guessing this idea has died. STR caps? Nobody could adequately answer the “Will this really help?” question. The BAE Report and the Housing Utilization Graph down below also seem to have ended this idea.

One interesting public comment was asking about a Vacant Property Tax on all of the big homes that sit empty? This has happened in other resort areas. Nobody on the Town side seems interested in this idea, for now. This would be interesting. Do they know how many really high-powered attorneys own these homes in Mammoth? The Town could be strangled in lawfare for decades.

Meanwhile, different factions of STR owners are exploring ways to register to vote in Mammoth. And/or get their kids registered to vote here. Because of the population dynamics, this could be impactful. The winning margins of local elections and referendums can very small. These proposed referendums will require a 66% affirmative vote. A few dozen “stuffed” votes could make the difference.

Outside of Mammoth, the STR world may be even more topsy-turvy. The recent LA Times article about Palm Springs/Desert and STR moratoriums and crashing property values made national news and mention. Plenty of hyperbole. What the journalists failed to grasp—these are STRs in violation of the zoning code. It is a distinction most are missing.

In Colorado, STR owners are facing a Senate bill that would increase the STR property’s property taxes by ~400% if they are rented for more than 90 nights (talk about motivating an owner to quality not quantity). But the “Will this really help?” question needs to be asked.

And from Hawaii, there is a new proposal to ban STR/vacation rentals altogether. All for the sake of workforce and local resident housing. The proposal could include STRs in legally zoned areas. The article’s comments are an enlightening read.           

Late last week the Mammoth Town Council made the decision to hire the current Finance Director as the new Town Manager, starting March 1. It certainly is a “path of least resistance” move. Could work out, or not. He has strong finance background (private side CFO), which is good. He has no city manager experience and little public side experience. I’m thinking there is a possibility we could turn the marketing department over to AI in the future and save a lot of money. They need to hire a competent and experienced Planning Director soon. That alone could have saved us from all of this nonsense

And of course one of my favorite topics, electric vehicles, were in the news during the period. The local video of a Tesla and a F150 sliding backwards down Davison Road went viral. And following the reports (weeks ago) of non-operational electric buses in Jackson Hole, there are electric buses sitting unused all over the country. Some fleets are being abandoned altogether. And now they have determined that our nation’s highway guardrail system is inadequate to handle the heavier electric vehicles. But not to worry, I’m sure that most snowbanks in Mammoth can handle them.

Noteworthy Sales 

And speaking of Davison Road, a residential lot on John Muir Trail closed and I suspect it is for speculative purposes. Good luck. This street has some of my least desirable features; power lines, substandard street (narrow with poor snow storage), difficult winter access, etc.. It has classic incurable defects. You get what you pay for.

And speaking of steep roads, another Mammoth Ski & Racquet closed. The ownership turnover is amazing.

Other Real Estate News

The BAE STR Study is out and I have no idea how the 60+ page report will influence the Council’s future decisions. It looks impressive but there is no new or profound information in the report. Looking at the extensive recommendations, what comes to mind is MAI. MAI? This is an old real estate industry acronym with a side meaning. An appraiser with MAI credentials is a highly educated and experienced appraiser and a member of the Appraisal Institute. The designation is an almost automatic requirement for large commercial appraisals, appraisals for adjudicated hearings, and of local interest, appraisals for properties involved in Forest Service exchanges. I’ve spent plenty of time listening to and reading from MAI appraisers. 

The inside joke is that MAI stands for “made as instructed.” Appraisers for these types of projects often get hired solely for their ability to deliver the results that the sponsoring party is looking for. Appraisals of non-cookie cutter properties can be swayed lots of ways. I’ve sat through four days of two MAI appraisers debating the value of Mammoth Mountain Ski Area. This BAE report and the recommendations appear MAI to me. But what do I know? This whole process has been lacking trust since day one, so would it be a surprise?

The report constantly reminds the reader that the findings are from “Academic and Professional Literature” and the bibliography is extensive but the direct citations are minimal at best. The findings are all quite vague. And the tone of the writing implies the readers are all of inferior intellect to the authors. There are basically two “Summary of Literature Review Findings…”. The first compares properties in Lisbon, London, Barcelona, Sydney, Washington D.C. and others. How does this relate to Mammoth Lakes? The second includes places like San Bernardino County, SLO County, Mariposa County, but also includes Truckee, Breckenridge and So. Lake Tahoe. This is close, but no cigar. How many of these places have over 6,500 condominiums, representing 68% of all improved properties within the town limits, built over the last five decades that were specifically zoned and conceived as available for STR? I’ll wait for the answer…

The BS starts right on page 1 of the report, “The landscape (in Mammoth) of the short term rental market changed drastically starting in the mid-2000s with the introduction of HomeAway (now VRBO) and Airbnb, the first online platforms for booking private short-term rental accommodations.” Changed drastically? There are no citations or facts to back this up. Was the author here? The current Town Manager, Finance Director, and three of the five Council members weren’t even living in Mammoth at the time. The STR industry was full throttle in this period, especially with the introduction of Intrawest’s new condo hotel properties in town. Most STR properties were being managed by one of the large off-site agencies, or by the on-site rental company, or they were marketing themselves via their own websites or networks. The total number of additional STR units today compared to then is relatively small, and hundreds of new units have been added to the total inventory including some very specifically designed for STR. If anything, the Fannie Mae redlining of “condo hotel” properties in ~2011 had far more impact on the industry. 

Let’s look at some of the “Recommendations” nonsense that has no meaningful origin to the current situation in Mammoth Lakes (and this is my hot-button list, there is plenty of additional garbage). 

#3 Update Code Language on Vested Rights. The authors are suggesting replicating revised language used in El Dorado County “Vacation home permits shall not be construed as providing rights or vested interests and entitlements in continued operation of a vacation home rental. Vacation home rental permits are revocable licenses which expire annually. Vacation home rental permits shall not run with the land.”  Again, what does this have to do with Mammoth? The right to do transient rentals was part of the zoning Code pre-incorporation (1984—isn’t that ironic?).  It remains in place today and the owners of these properties purchased their property knowing this zoning right was in place. In this case, I don’t think the authors know the difference between apples and oranges. So much for their academic or professional insights.

#7 Establish a Waiting Period for New Home Purchases. “Establish a waiting period of at least one year following the purchase of a residential property before the property is eligible for an STR permit and be added to a potential waiting list….This may reduce the premium that investors are willing to pay for housing that is not intended to be a primary or second home.” Again, I would love to see a citation that proves this would do anything positive. The law of unintended consequences is blaring a warning. It could kill this segment of the market, or provide new opportunities for savvy investors, and would certainly further compromise the Town’s revenue. But again, what positive would this do? It is all fairy tale conjecture.

#10  Register Rentals of 90 Days or Less.  I knew this would happen, going after the MTR (medium term rental). They can’t stand the idea that an owner could rent in an MTR scenario and NOT pay TOT. “The intent is to discourage the illegal avoidance of STR regulation” There is currently no requirement for an MTR (more than 31 days) to follow STR regulations. The authors are implying so. It would be interesting to see if they could actually enforce this.

#11 Establish a Cap or Caps on the Number of Permitted STRs.  “Consider limiting the total number of STRs that may be permitted within certain areas including the RMF-2 zone or portions thereof….and may be adjusted over time.”  While this seems to have been put to bed at the final STR Committee meeting last week, this is something all future Councils will have to consider—limiting Town revenue potential while constantly increasing their hamster wheel spending. #12 suggests Create a Mechanism to Reduce Permits When Needed. “BAE recommends the number of active permits then be allowed to decrease through attrition…this would be less heavy-handed compared to revoking active permits.”  These recommendations completely ignore the fact that STR owners have expenses, taken risk, and actually expend energy to maintain their STR property. Again, no bonafide citations, just more lunacy.

#13 Consider Fewer Restrictions on Hosted STRs.  Maybe the authors didn’t read any of the Town’s documents. Hosted STRs are less than .05% of Mammoth STRs. How could this even be relevant? ***As a side note, so many of these consultant documents (especially EIRs) are just “cut-and-paste” jobs with some specific fine-tuning. The drafts can have some funny “catches.” #13 was probably in the last document they wrote for some other community. 

#14 is Consider a Cap on Nights Rented in Non-Hosted STRs. Oops, that would include almost 100% of Mammoth. And again, no specific citations or examples of success. 

There is other nonsense like Geographic Targeting of STR Regulations, STR Density Limits, and other boilerplate recommendations that are just cut-and-paste rhetoric (most of the items the Town has already done for decades). Hopefully, this document doesn’t influence the Council to make any irrational decisions based on its “academic and professional” foundation. But we’ll see what the future brings.

Here is the graphic image from the document that shows the housing stock utilization. It is a great visual and displays quite clearly that STRs have not overwhelmed this community.

Interestingly, a client/reader sent me a recent document from the Milken Institute Staying Power: The Effects of Short Term Rentals on California’s Tourism Economy and Housing Affordability.    The executive summary states “Short-term rentals (STRs) are critical to regional economies, offering unique and affordable experiences to visitors, generating significant tax revenue to support local governments, and providing hosts significant income. In some places where hotel inventory is limited due to land constraints or other development challenges, STRs expand the number of visitors a region can accommodate, helping bring more money into a region. STRs were also more resilient towards the COVID-19 pandemic due to increased preferences for more isolated, home-like stays—helping regions to maintain a level of tourism in a time when the world shut down.

But STRs are often cited as major contributors to growing housing shortages across California, which has led to various regions adopting or proposing strict regulation on STRs, such as permitting caps, zoning restrictions, and bans. Yet STRs account for about only 1 percent of California’s housing stock and most are expensive single-family homes that would not otherwise add to needed affordable housing supply. STRs are not a significant driver of increasing housing unaffordability and availability, which is instead driven by decades of underdevelopment, especially of affordable multifamily units. 

Furthermore, skyrocketing housing costs in large cities like Los Angeles and San Francisco and increased remote work resulting from the pandemic are pushing people out to more affordable, rural communities.”   

And further “There is no evidence that restrictive STR policies could effectively mitigate California’s critical housing shortage, especially in regions dependent on tourism. This claim only distracts from the core issue: the need to provide more housing—particularly affordable housing for workers earning below the area median income.”

This work is California specific which makes it interesting, and of course, it might have been sponsored by Airbnb (more MAI?). But unfortunately they didn’t include Mammoth Lakes at all. And maybe for the reason that Mammoth is so unique‚ those ~6,500 condo units within 4 square miles that were expressly designed and built with an STR option for second homeowners. People think that the solutions in other communities should apply here without understanding the history and the inherent property rights of the STR zoned properties.

And as our longest-standing Council member likes to say “STR is in the DNA of this community.”  I guess in this new era of people wanting to alter DNA, isn’t it appropriate they want to start doing so here in Mammoth Lakes? It might not work out so well.

Thanks for reading!

 
** Closed sale data is compiled from in-house files and public records.

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