Fall Colors and Really The Quietest Time of The Year!!
Market Summary: September 25 – October 9
The Mammoth MLS is reporting 15 real estate closings in Mammoth Lakes for the period ranging from a low of $60,000 to a high of $1,285,000. The low was a manufactured home in the Ski Trails Park and the high a brand new home in the Gray Bear subdivision. Of the 15 closings, 13 were financeable properties and 12 were conventionally financed.
At the period’s end the condominium inventory is down five (5) to 140. There were 11 new condos brought to the market during the period and they are all new to the market. The net change in inventory was due to expired listings at the end of September.
Single Family Inventory
The inventory of single-family homes is down five (5) to 68. Again, net change mostly due to the expiration of listings. With winter approaching some sellers will remove their properties from the market.
The total number of properties in “pending” (under contract) in Mammoth Lakes is down again by four (4) to 61 at period’s end. And that includes two airport hangars, a storage unit in the industrial park and a cheap Forest Service cabin in the Lakes Basin. Fourteen (14) of the properties in escrow are condos listed under $300,000. This is not the time of year that pendings normally decrease in the Mammoth market. I’m blaming this whacky presidential election we are suffering through. Of the 61 properties in “pending,” there is one (1) “contingent short sale” property and 48 are in “back-up” status. The total number of pendings in the aggregate Mammoth MLS (which includes outlying areas) is down 2 for the period at 86.
Market Updates and News
Cooler weather comes and goes but it is definitely fall. Mammoth is absent tourists and the local residents are busy getting ready for winter, or taking pre-winter timeouts (by the time your read this I should be on the waters off of southern Baja). It is too early to pray for snow but a big dumping would be welcome. We all hate to see summer go but winter brings a new level of enthusiasm, and business. Bring it.
The Town Council is on a brief hiatus so there is nothing new to report on their front. Hopefully they return with enlightenment.
I was out showing property last week and my clients mentioned they were staying in a particular condo project to “try it out.” I asked them if they like climbing two flights of stairs to get to the front door of their accommodations. They laughed and said “it was three flights” and no it wasn’t that great.
That is a criteria I discuss with buyers; how is the accessibility of the front door from the most common or assigned parking area. It is something many buyers don’t think about on a summer day of condo shopping. The experience can be entirely different after a long drive and in a blizzard. The access is critical for personal enjoyment and the success of rental, especially repeat renters. We laughed about it but ultimately it became a discussion point at each property we looked at. Later, I scratched my head and thought I should write a column about that topic. Then I remembered, I did almost 10 years ago. Where does the time go?
A few items hit my inbox that were curiously timed. First was an article about Airbnb and the new “Superhost” program. The conjecture of the industry analysts is that the Superhost program would separate the marginal accommodations from the ones that are more professionally managed. Essentially, Airbnb “is finally admitting that a good number of people actually don’t want to do all of the work it takes to manage an Airbnb” and they are “also not-so-subtly acknowledging that guests actually prefer a more professional and businesslike service.”
The Superhosts are really full-time vacation rental managers. Again, the industry analysts point out that Airbnb is working on a percentage of the booking fees and not by the volume of listings it has. So the Superhost is the one likely to max out the calendar and optimize the rental, and thus provide more income to Airbnb.
The article also points out that the VRBO model (now that HomeAway was purchased by Expedia) has moved from listing fees to a percentage of the booking. So now who is VRBO going cater to? (The answer is above.) So the two big companies that helped build the self-renting industry are now turning their backs on mom-and-pop. Even worse, Airbnb recently raised another $555 million in financing. The money came from Google who just released a new app that aims to “revolutionize” how we vacation. Jeez. The industry is changing.
Meanwhile I received a mailer (via the post office) from Vacasa–vacation rentals made easy®. Their motto is Earn More, Work Less. They also guarantee a net increase of $5,000 in your first year. The letter also states “And if you are currently self-managing, we’ll guarantee that you’ll make just as much with Vacasa, even after our management fee.”
Wow! Vacation rentals are red hot business. But then I received an email from one of my readers who is an original owner of a 1 bedroom in the Village. He is also an experienced multi-unit investor.
I have 15 nights in October booked and paid for already at $100-$125 / night and the month hasn’t started yet.
You can realistically net a true $30K after all expenses on a $45K gross in a village one bedroom – which makes it a 9 cap at a $330K purchase price.
This is an academically interesting situation – these cap rates are not supposed to happen with prime location vacation real estate. Something is wrong with the market – these should trade at maybe a 4 cap being vacation homes near a ski gondola. Maybe a 5.5, maybe. Which puts value at over $500K.
The caps have risen because the variable income has shot up the last few years while the big fixed expenses like HOA have not.
Either the income has got to drop, or prices must rise – or a real hotel must get built to expand supply.
….And one last tid-bit in this ongoing vacation rental evolution, the local State Farm agent announced at a recent Realtor® event that they will no longer be “writing” (insuring) condos that are being used for transient rentals. Grandfathered units will be okay. But the nightly rental mode creates a “who’s there every night?” level of uncertainty. He laughingly said he can still insure motels. And that the local HOAs (State Farm insures a majority of the HOAs in Mammoth) are fine. But no more new policies for transient rental condos.
And more Aspen-like pain. With all the success in the hospitality industry, one would think life is great for Barry Sternlicht (the “owner” of Mammoth Resorts). In a recent article titled “Billionaire Capital Turns Into Ghost Town; Home Contracts Down 80%, Trophy-Cars Pile Up In Showrooms,” Sternlicht was quoted “the rich are being maddeningly frugal, you can’t give away a house in Greenwich.” Apparently the rich are all moving to income tax free states like Florida after Connecticut continues to increase both income and luxury taxes. Sternlicht has taken his former home off the market after price reductions….I’m guessing he might be underwater.
And finally I got another ear-full of how great Mammoth’s Internet broadband is. Getting real personal stories is the best example. Sure streaming stuff is great for the masses. And I value not having to plan my day around a video upload. The Tech Initiative could have a wide range of benefit to the community if it really does evolve. But the impact to many second homeowners is just being realized. Doctors have told me they can spend another (valued) day or two in town because they now have the confidence to accurately read MRIs while here in Mammoth. What is that worth? And thrown at me this past week; quality video conferencing. This client conferences with people all around the world. A poor or even marginal broadband connection compromises the whole experience and most likely the outcome. So now he and his family can spend more quality time in Mammoth. And he can still get his work completed.
The long-term effects of the Digital 395 project and the Suddenlink infrastructure improvements in the summer of 2015 are just beginning to be realized.
With half the sales during the period being condos under $305,000 and four residential sales between $925,000 and $1,285,000, the selling profile was very typical of the past 18 months. Mammoth has become a tale of two markets.
An upstairs 2 bedroom at Eagle Run closed for $675,000. This is good news for this premier location project. Now that years of construction defect litigation is over and the majority of the re-construction work is completed, the values should return to some norm. The true ski-in ski-out location, the unbelievable views that most of the units have, and the access from the “flat” part of town make this a very desirable project.
An average location 2 bedroom / 2 bath unit at the Westin Monache closed for $550,000. The Westin units have been hot property in the past two months. In spring there were almost 20 units on the market and now there are just a handful. One thing I always point out to prospective buyers of the Westin units; at the earliest it will be four years before there is a competing luxury hotel property built and opened. It takes at least a year of planning and approvals and takes three years to construct. Or maybe longer. All of the new proposals want greater density and more height.
Other Real Estate News
The National and California Associations of Realtors® (NAR and CAR) are serious lobbying entities. Legislative attempts to change real estate related laws are always on their radar. They often suppress any adverse attempts well before they gain momentum. They often rely on the thousands of active Realtors to make individual and influential comments to legislators. But the need for governments to raise more tax revenue remains.
On the national level there are attempts (among others) at eliminating the mortgage interest deduction, the capital gains exclusions on the sale of primary residences, the itemized deductions for state and local taxes, and eliminating or curtailing 1031 like-kind exchanges (a popular Mammoth buy/sell strategy). The NAR lobbying efforts to maintain these are and will remain intense.
In California, there is increasing momentum to overturn Prop. 13., the 1978 ballot measure that limits property tax to 1% (plus .25% for local bonds, etc.) of assessed value and caps the annual increases to 2%. My father, who was a Los Angeles based real estate broker for decades, always claimed that Prop. 13 substantially “stabilized” real estate and real estate values in California.
A recent report from the CA Legislative Analyst’s Office claims “The majority of Prop. 13 tax relief (in dollar terms) goes to high-income households.” And they question the fairness in that. The value to renters from landlords who benefit from the tax savings is “speculative.”
The report states that cities are “locked into its 1978 service level” and have been forced to find other revenue sources like sales tax, bed tax, utility taxes, etc. (Mammoth sure fills that description.) These taxes have apparently increased six times faster than property taxes. But these taxes are “regressive,” meaning they have a higher burden on low-income residents. These local tax structures are even influencing land use decisions (build more condo hotel units, build car dealerships, etc.).
And now it appears these ancillary taxes might be at a maximum tolerance level. So coming around full circle to assure increased taxation is the whittling away of Prop. 13. The first attack is on commercial property assessments. Corporate shuffling has allowed many commercial property “owners” to maintain their low tax basis and subsequent low taxes. And next might be non-primary resident properties (like so many in Mammoth).
The ramifications for California real estate could mean significant de-stabilization at some point in the future. For now it is a slow moving war on Prop. 13 but it is gaining momentum. The propaganda machine will inevitably convince the low-income voters that change is necessary. In the meantime, the California Association of Realtors® lobbying efforts will certainly be doing all they can to oppose and diffuse the potential changes.
This is a timely discussion since most of you just received your property tax bills.
Thanks for reading!
** Closed sales data is compiled from in-house files and public records.