Mammoth Broker’s Report, January 12, 2010

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Mammoth Broker’s Report, January 12, 2010––I can’t end the decade without the cursory look back and I can already hear some accusations of cynicism. But in reality there are many positives. The Mammoth real estate market is once again so aptly summarized by Intrawest’s marketing department; with them fire-selling their last remaining holdings (mainly the Westin Monache and Woodwinds) the hyperbole is now “BUY LOW. LIVE HIGH.” It’s nice of them to exit this way. The decade started with promises of “it will be amazing” and ended with buying low and living high. In the end, Intrawest probably followed that philosophy during their whole tenure––buying low and living high. But many of us who remain have the opportunity to live high, and buying low will help. And some of us will be buying low again.

What’s left after the “decade of development” are plenty of good things. I didn’t say they were all good, but we have many new in-the-ground improvements to enjoy and seize opportunities with. From a pure real estate standpoint, we now have a large inventory of modern (not perfect) properties. It will be years and maybe decades (and maybe never) before that volume of inventory is ever built again. The improvements at the Ski Area in the past decade are profound, and despite the Gondola-to-nowhere, the half-assed base lodge facilities at Eagle, and the loss of Michelin rated food, the ski experience is better than ever and is quite affordable to regular customers. The decade also brought amazing improvements in public services and amenities­­––from the hospital, public transportation, college/schools, library, airport, fire stations, road improvements, and more. And the community has voted in the commitment to the development of an advanced trail system.

So as Intrawest exits stage left, they leave us our current real estate declaration: Buy Low and Live High. Today’s authentic buyer of Mammoth real estate clearly sees the value. Add in discounted ski passes and an increasingly more efficient drive from Los Angeles, and the value increases. We all know the chances of real estate prices coming down even further are in the hands of the gods, but each segment of the market is clearly different and the fundamental lack of supply continues to confuse many market watchers. One thing has become crystal clear: for every distressed seller who is losing a property to foreclosure or is trying a short sale or is filing bankruptcy, there is another (and maybe more) holding cash and/or possess cash producing assets, and are poised as vulture-like buyers wanting a piece of Mammoth. How impatient they become depends on what segment of the market they are watching, or how many good properties they have failed to move on and lost out on, or if they don’t mind hiring a contractor to redo a junk heap. And there remains the occasional and poorly informed “cash bully” who thinks they are the only one still holding cash and think they are going to buy an A+ property at a few pennies on the dollar.

The modest trickle of foreclosure and bank-owned properties continue to set the pace of the market. The bank’s asset managers now have the luxury of favoring the cash buyers in almost all REO listings. As I’ve said before, buyers with cash aren’t getting substantial discounts, but they have the best chance at getting the deal. Some REOs continue to be listed on the high side, but sooner or later the market speaks and the price comes down. Again, there’s no seller emotion, just tons of paperwork and files that need to substantiate actions. The REOs that are listed at good prices typically see multiple offers including cash buyers. Lately, the cash buyers who offer slightly over asking price usually win. But sometimes they have to lose out on a couple of properties before they realize that. And once again it’s a game of “expect the unexpected.”

The most significant market activity remains in the sub-$500K condo market. Any agent showing potential buyers in this segment of the market is frustrated by the lack of inventory. Oh, there are properties to see but rarely good ones, only seriously overpriced ones or poorly maintained ones. And don’t let the Mammoth inventory on the Internet fool you––there are dozens of properties sitting in “active-backup” status that the public sees as available when they are actually tied up in protracted short sale negotiations. These may or may not close depending on the myriad of variables. The condo inventory is statistically low but further scrubbing is required to get a real feel. Try to find a relatively modern condo with three sleeping spaces at $400K. Good luck. And now the buyer pressure is moving into the $500-600K range. Financing in condo projects with obvious rental programs continues to be a significant issue. Oh yeah, there’s been a few loans completed, but wait until the lender has to buy the loan back, that will be the end of that. FannieMae sent back a few billion in loans last year to the four major lenders––that has them thinking twice. The lack of financing in particular projects has created opportunity for cash buyers in these projects, but again, supply is limited.

Buyers seeking single-family homes are frustrated too. Anything listed under $500K has major deficiencies or trade-offs and probably needs a contractor too. But there are performing buyers for these properties. This is a key support level. Decent homes are listed and selling in the $600K range. From there on up the buyers are still dictating the market. The inventory is generally stale and most seller expectations exceed buyer motivation. (That is a nice way of saying overpriced.) But the good properties do get offers. Many of these sellers either don’t have the equity to reduce their price or just lack real motivation. And short sale opportunities for million-dollar investment homes are a mystery. There are also plenty of antiquated properties with the sellers holding on to visions (and delusions) of late 2005. Then there are a host of homes built on speculation (“spec homes” in real estate lingo) that there are buyers for, but these potential buyers are vultures and are looking for deep discounts of 50% or more. And any home listed over $800K that is more than 10 years old is really compromised in the eyes of the buyers––simply dated. The potential higher-end home buyers, and there are plenty of them too, are all playing a big poker game––just watching the table to see who is faking, who folds, and who moves. So far these buyers have jumped on a handful of high-end foreclosures and bought fabulous homes at well below replacement. But again it comes down to a matter of supply, or lack thereof. And as in any poker game, there will be winners and losers.

So what else stands out? Commercial and residential income properties are coming in the foreclosure pipeline. Not a great number, but the foreclosures will give focus to what the real values in this segment are. The buyers will be cash buyers and they will command a discount. Residential rents have stabilized (40,000 ski passes hasn’t hurt) but commercial rents should continue to soften especially based on the increased expenses and risks to operate a business in Mammoth. It has been interesting to watch the capital improvements on the Clearwater/Old Mammoth Place development parcel­­––we've got Frosty's, a miniature golf course, and a re-opened (and highly upgraded) Rafters restaurant and bar. And the Sierra Nevada Inn has a beautiful new sign that almost makes you want to stay there. Just think, true redevelopment without government subsidy, no divisive contention, no lawsuits and no public vote. Expect that to continue.

2010 and beyond will be an excellent time to build or remodel in Mammoth, and more and more people are taking the opportunity. With the extensive condo remodel projects completed at Summit and 1849, some of Mammoth’s best carpenters and construction people will be looking for work. These are the very experienced and skilled. Many potential condo buyers are now seeing this as a viable option––many of the older condos have great locations and spacious floorplans and are ripe for remodel. Just in the past few months we’ve watched buyers purchase REO condos and basically have new condos in a short timeframe.

The Village continues to struggle upward. The special events are quality and well attended. But special events are only one component in moving the whole forward. The parking is critical and the lot where Starwood intended to build the “1” is working pretty well. But the powers that be should be making all of the vacant land surrounding the Village into viable parking. I’m not suggesting clear-cutting and paving, just make it usable and user friendly. And yeah, I know, let’s get everybody into the wonderful public transportation. Well, it does work well, but right now our customers want to drive, especially the ones who are likely to spend discretionary dollars. The vacant property owners better figure out that an impromptu parking lot will make their land more valuable in the future, because if this version of the Village fails the land may be worthless for a long time to come. 

The sales tax and bed tax numbers and other indicators aren’t in yet, but Mammoth experienced a healthy holiday period. The good pre-Christmas week snowstorm really helped. The MVP program is an economic lifesaver for everyone involved, and right now that is everyone. I also got the impression that the recent holiday visitors were looking to expand their recreational opportunities, even if it just meant taking a walk. Many just need to chill-out.

I thank all my readers who have followed along the past 20+ years of writing about Mammoth real estate. Today’s electronic format makes it the most fun ever, but also the most challenging. Despite my deliberate attempts to keep a modest distribution and maintain a narrow focus, the numbers show the readership is high. I strive to make the content better all of the time. Now if I could just get my associates to read here.