Mammoth Real Estate Q&A, April 2008

Asleep At The Wheel? Q: In a very recent column you stated that the spring buyers “have exited for the most part and there won’t be any volume of buyers looking until late summer”. I was told from somebody in the industry that business was picking up. Can you explain your perspective? A: Since the year 2000 there are clearly two primary selling seasons for Mammoth real estate. There has always been a pre-winter push driven by the anticipation of skiing and positive rental income. The other busy and productive period has become the late winter/early spring when Southern California families are here for extended vacations. Those weeks are more spread out due to the schools being on “tracks”. During these weeks there is no rush, no “weekend warrior” mentality. Mom and dad (and grandma and grandpa) relax a bit and can spend some quality time looking at real estate. So with the spring break period over, the ski season winding down, and thoughts of the beach and the River on people’s minds, the Mammoth real estate market historically takes a pause. And yes, there will still be some buyers poking around and Fourth of July always brings great expectations, but as I said, I wouldn’t expect any volume of buyers until late summer. But it is an important time of year for real estate types. Our minds go from skiing and snow management to summer sports and landscape and repair. The contractors are already moving here in town and Mammoth puts on a delightful face for summer. But here’s what is important––between now and Labor Day the inventory traditionally moves up in numbers. This typical increase in inventory will once again expose the real sellers from the not-so-real sellers. For me, I’m paying attention to the possible “gems” that may come to the market––those really choice properties that are prized and few-and-far-between, or the really good buys of quality properties. And some that after 90 days or so of marketing may become good buys. Again, for market watchers it’s an important time to observe. So the inventory is going to increase?? Let’s look at some of the current numbers. But let me first state that there are dozens of properties that have been listed in the past 12 months that have expired or been withdrawn from the market. Many of these listings won’t reappear. This is characteristic of the Mammoth “don’t-have-to-sell” market. As of this writing there are only 65 homes listed for sale––a relatively low number. Some are very attractive high-end homes and have been on the market for years. And some are really the dregs and their owners are still living in a Starwood induced delusional state. I think some just like the attention of a (pretty) Realtor®. We’ll see some newcomers to the market, some rehash, and maybe even some price reductions. I do know thing, in this market segment there are lots of folks (wannabe buyers) watching. And as I drive around the neighborhoods this spring I see some major remodels starting. The condo inventory has been sitting right around the 300 mark for some time. Over 10% of the condo inventory is in the Westin Monache. Another 10% is condo hotel product in the Village, and another 10+/-% is in the Snowcreek Phase 6 (The Lodges) or in Intrawest or other developer’s new inventory. That leaves about 200 of the regular old resale condos in the today’s inventory. Again, this is in no way excessive from a historical perspective. The bulk of the truly motivated sellers are those that bought in the 2004-06 timeframe, and typically bought with 100% financing (with rapidly increasing “toxic” payments). Many of these owners will simply end up in foreclosure and those properties will end up being good buys for someone else. Oh, and there are a few motivated sellers who just couldn’t resist refinancing every penny out of their properties at the height of values. And as we head towards the second half of 2008 there are some interesting unknowns and uncertainties that may generate activity and some good buying opportunities. The first is the Presidential election. God only knows what could happen. While one candidate proposes raising the capital gains tax, a backlash of support arises for eliminating it for a window of time to stimulate the economy. Capital gains taxation is a serious underlying driver for Mammoth real estate––both in and out of the market. And yes, tinkering with either way will have ramifications. And what about mortgage rates? Who knows? Those buyers with down payments and good credit can get loans. Appraisals have been unpredictable––some higher, and some lower than expected. Some appraisals have queered transactions. Some have made sellers renegotiate. But the mortgage rates have been bouncing around almost arbitrarily. Now is an even more important time for buyers to have a top-notch mortgage professional working for them. Yes, a seasonal lull in buyer traffic is all part of the sales cycle here in Mammoth. The sales push for the Ritz is having nominal, if any, effect on the balance of the market (not like in the past where these sales efforts created whirlwinds of activity). Serious market watchers will be perusing their favorite search engines and watching their segment of the market. I can already see a big difference coming between some segments. It’s all about supply and demand. In the meantime it is time to finish off some spring skiing, get the bike tuned up and maybe even think about a trip to Mexico.