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Q: I read the things you write and you are always referring to periods of surging appreciation when Intrawest is in the process of marketing a new project. Does this really happen or is it coincidence? What other factors exist that attribute to these surges in value? And can an investor time the market based on these surges?
A: I'm not a statistical junky like some of my local broker/owner competitors, so I don't have "scrubbed" data to back my theory. I prefer to have my finger on the day-to-day pulse of the market. Since 1998 the Mammoth real estate market has clearly surged in reaction to certain stimuli. We are in one of those periods right now, with strong market activity in several segments of the market including the high-end properties and excellently located properties. And higher and higher sales prices are being supported in those market segments.
Coincidently, Intrawest is currently preparing for the "launch" of the Westin Monache. The first sales event is scheduled for April 9. Interest is so high that they shut off taking reservations and they expect the first phase of 141 units to sell out easily. Intrawest has heavily marketed this property to its "owner list"–previous buyers and owners of Intrawest properties. They have also marketed heavily to a massive list of potential buyers accumulated over the past years.
In the past Intrawest would mail tens of thousands of expensively produced brochures and promotional materials and have their sales force return tons of phone calls. Today, the marketing is done mostly through very cost effective electronic means and it is simple to "drip" on the potential buyers with regular updates. Both the Intrawest sales force and the balance of the agents working in Mammoth have used email to bombard potential buyers with information regarding this Westin development here in Mammoth.
The market penetration of information that used to consume lots of dollars and manpower can be completed with a few keystrokes. And it can be easily updated and completed again tomorrow or next week. Add to that a few well placed articles in the Los Angeles Times and other key publications, and the interest level for this particular project as well as the whole Mammoth real estate market can skyrocket.
The Westin name itself generates great interest and brings a new level of affluent, interested buyers to town. And it brings increasing credibility to the Village and Mammoth itself. Other top hospitality operators like Four Seasons and Ritz-Carlton are sure to follow. Many times the potential buyers who are attracted by these new offerings come to the market and see other properties they become interested in, including high-end homes in the best neighborhoods. Others become multiple investors by tying up a property that will be built in the years following (like the Westin) and buying one to enjoy now.
Other potential buyers will be disappointed at the sales events and miss out on the opportunity to purchase. Often they end up deciding to buy in another project. We already see this happening. Those prospective buyers hoping for a Westin unit who are not in a priority buying position are settling for a resale property in the Village or at the Eagle Base area. The newly completed Grand Sierra Lodge in the Village is beautiful and is certainly attracting that kind of buyer. And they cane enjoy it now.
Others potential buyers are reasoning they should have both. The Westin will take upwards of three years or more to complete. Why not tie one up there and purchase another unit to use in the meantime? If you believe in the continued appreciation in the market, in three years the one you buy today will make a nice 1031 tax-deferred exchange property to roll into the Westin. All of this activity creates action and appreciation in the market.
Low interest rates are one of the factors that attribute to these surges. From late 2002 to March of 2004 we experienced a 30 to 50 percent appreciation in the local market. Some segments were higher and some lower. The Village and the adjacent gondola were rising out of the ground, but we had new, low interest rate levels that created demand, activity and appreciation. The hot weather of last March quickened the end of ski season (especially in the minds of southern Californians) and the oncoming contentious presidential election put an end to that substantial market surge. But once the election was over and Mammoth had early snow, the market picked right back up even though the end-of-the-year holidays aren't usually a heavy sales period. Very low interest rates and consumer confidence have clearly driven the recent market activity.
Two other factors that create market surges are rather simple but often overlooked. Sales in Mammoth are always a function of people in town. The ebb and flow of potential buyers is consistent with that of tourists in general. Serious buyers often return shortly after tourism peaks to finalize sales. But overall, the number of properties going to escrow usually surges after peaks in tourism. The other factor is a phenomenon that appears to be growing each year. The winter visitors and buyers are increasingly affluent and are prepared to buy quality properties without great hesitation. The demand for quality high-end properties is escalating and the values are following. Money is clearly following money in this market.
Lastly, you question whether an investor can use this timing in the market to his or her advantage? My answer is pretty simple. The way to time the market is while you still have the physical strength and stamina to enjoy the incredible recreational opportunities the Mammoth area affords, and maybe while you still have the good eyesight to take it all in.
Paul Oster is Broker/ Owner of RE/MAX of Mammoth. An archive of his past Q&A columns can be found a www.remax-mammoth.com. You can send him your real estate related questions to P.O. Box 2618, M.L. 93546-2618 or email him at pauloster@earthlink.net. All questions will be researched and presented with the greatest care but accuracy is not guaranteed. For legal, accounting, construction, etc., advice, seek out the appropriate professional.
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