This Mammoth Real Estate Q&A appears in the 4th of July Weekend 2020 issue of The Sheet.
Q: Okay Paul, the obvious question is: Where do you see Mammoth and the Mammoth real estate market going from here?
A: Mammoth is anticipating a busy summer. The change from lockdown to the crowds of the past week seems like an invasion. The reality is this could be good news or bad news. The lodging industry and the tourism people have confirmed strong demand, barring any hiccups. Hopefully we get to the next Stages of reopening and beyond and everybody stays healthy. It will be different in some respects, but the mountains and the forests are still the same. And we’ll have to have fun without “events.”
The science-minded types are observing the concept of “emergent behavior.” It is what emerges from the conditions in the environment. The conditions have changed dramatically. It is somewhat unpredictable at this point, and subject to more change. Mammoth and the local real estate market are going to be affected by a multitude of conditions in the environment. One of the most profound is the changed attitudes of our guests, customers and clients who reside in SoCal. And how these changed attitudes will impact Mammoth are a little uncertain, but it is fascinating to think about them. Let’s look at some of these emerging conditions.
We are already seeing people who have had interest in Mammoth real estate being “pushed off the fence.” The past four months have changed their psyche in a multitude of ways. For some, or many, waiting around for a “better deal” or that perfect property no longer makes any sense. Or waiting period. Their personal values and appreciation for quality-of-life have been altered. These are very individual decisions and can be messy. But we are already seeing the impact on the local market. Many people have new motivation.
The move towards and greater acceptance of work-from-home and telecommuting is a condition that may have a serious affect on Mammoth and the local market. Mammoth’s broadband service upgrades make it extremely viable. Earlier in the the decade it would have been impossible. But we can thank the Digital 395 project and Suddenlink’s major investment in the local infrastructure. It isn’t perfect (nor cheap) but no Internet service is. It works well for many who need lots of bandwidth. The demand for this service is growing daily thanks to the events of the past months.
Another significant and accelerating demographic trend is the migration towards less congested areas including suburbia, rural areas and attractive small towns. Mammoth is like all three. There were plenty of second homeowners hunkered down here in Mammoth Lakes the past few months. Others came and went but stayed for extended periods. For non-owners there was and is strong demand for extended summer and fall rentals. Some are here now. Others are coming. And if the virus isn’t contained in the city or civil unrest flares-up again, the demand is likely to increase. Barring any sorts of disasters, Mammoth and the eastern Sierra are destined to be an eventual location for this migration.
Another emerging condition; Mammoth may not be the perfect place to live 12 months out of the year, especially for older people (myself included after 39 winters here). The winters can be brutal, and long. But it is rather perfect for many months out of the year. My real estate experience has shown me that there is interest in, demand for, and an underlying desire to have what I refer to as “duality”. It is the concept of having homes in different locations, and not necessarily one in a large city (anymore). It is more like having two second homes.
Mammoth is the perfect place for one. And there are many options for a second or third home. Even within driving distance; the desert, the beach, Mexico, etc.. They can certainly be modest homes and/or properties available for short term rental (STR). Many residents in SoCal have substantial equity in their city homes. That purchasing power can afford some interesting and exciting options. This duality trend may grow significantly for those who now want out of metropolitan life, especially for those retired or able to work-from-home.
Mammoth as some sort of destination resort has another advantage. In the foreseeable future “drive to” resorts are going to be very popular. Drive-to also means drive-away. The autonomy of being able to come or go, or go here-and-there, has become especially valuable. We saw this after 9/11. This condition may compromise the air service plans our local communities have worked so hard for, but it may actually increase business. More destiny.
And for now, more than ever, people are going to be seeking fresh air, open space and plenty of vitamin D that doesn’t come out of a bottle.
All of these emerging conditions will certainly impact Mammoth’s future.
In late 1991 I wrote a real estate column for the Mammoth Times (The Sheet was more than a decade away from existing) titled “Destination Resort or Resort of Destiny”. At the time the general economy was bad. And several years of drought had made it worse here locally. Real snowmaking was just being invented. Summer business was almost non-existent. The Mammoth community was beat-up. But the glimmer of hope was the private and public planning of the North Village and a gondola into town. And the aspirations for other resort related amenities. It gave the recently incorporated town hope for the future (bed tax revenues were a small fraction of what they are today).
But the purpose of the column was to remind people of the tremendous inherent qualities of the Mammoth region. And these are what will always attract people to the area; to recreate, to re-create, and to remove themselves from the stresses of metropolitan life. Fancy hotels and amenities are great, but the incredible natural environment is the draw. The irony today is that we spend millions of dollars marketing to these people, almost like a hamster wheel. The lead from that 1991 column was “‘We’re looking for something that has already found us”. We might be back to this.
If we dig into the micro-economics of Mammoth’s future, the hospitality related businesses including lodging, restaurants, retail, salons, etc. are hurting. Without diminishing the negative impacts caused by the lockdown, the timing was substantially during a normally slow period of tourism here in Mammoth. It could have been worse. Hopefully a big summer and fall can allow the businesses to heal. Mammoth business owners are a resilient bunch. They have to be. There will be inevitable failures (and retirements). But that is nothing new to Mammoth either.
There are important soon-to-be answered questions about the local economy. First, Will capital flow into or out of the Mammoth area, or just remain stagnant? The emerging conditions may suggest that capital, especially private capital, will flow into town. Recent real estate activity would indicate this. Mammoth had a very strong economy up until a few months ago. The Town had record tax revenues in 2019. Commercial vacancies were probably at all-time lows. We may not have a “V” shape recovery in the short run but most of the local economy should be able to rebound. But if we lose businesses will there be anybody willing to replace them?
Larger capital is another question. In the past 12 months there were several presentations by potential hotel developers. Can any of these projects go forward in this new environment? We’ll see. And how long will Alterra delay capital improvements on Mammoth Mountain? The local geothermal plant is moving on a major expansion. The have commitments to provide electricity to customers in the Bay Area and the grid at-large. The emerging conditions may bring surprising new investment. Time will tell.
The pressing question for the local real estate market is; Will supply (on-market inventory) exceed the buyer’s demand and purchases? Or will supply exceed demand at some point in the near future (there are swirling vultures who believe so)? Right now the inventory numbers are almost exactly equal to this time last year. There has been no major moves by STR owners to dump properties. There have been a handful but no major rush for the exits. Did they panic sell too soon? Rental demand looks very positive for the summer and even fall. The STR algorithms are pushing up rental rates. Many STR owners also captured multi-month leases for stability. There was strong demand for this in the past 60 days. Again, all of this is barring any future hiccups.
One micro-trend is that buyers will be looking for larger properties than they once anticipated. Second homeowner extended-stays and “hunkering down” are now part of the thought process. They need room for the home office and the Peloton. Private garages may become even more valuable. Existing owners may be looking to move-up to larger properties, especially if they were here for the lockdown.
And what about the threat for inflation or even hyper-inflation? Believers of either will want to be in hard assets like real estate, especially in perceived “safe” communities. At today’s very low interest rates, this might be a reasonable hedge. There is no doubt some are thinking this way.
We’re seeing plenty of new emerging and converging conditions. And some have been in the background of this market for decades. Mammoth’s odd destiny is about to be played-out in new directions. Meanwhile, the ski industry is already anticipating how they will operate next winter. And the ski runs are already one place where face masks have great acceptance.
Happy 4th of July! And please support our local business community.