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Q: There is more and more talk about a looming real estate
bubble, so my question is, do you think there is one coming for
Mammoth and when?
A: This is a question that is on many minds, both those of
potential buyers and sellers. Admittedly, we all know that markets
tend to cycle, so that is why a bubble seems inevitable. But there
are some new factors that predict the end of such wildly swinging
cycles, and maybe not a bubble at all. And the bigger question for
Mammoth is if there is a bubble, will the bubble represent a downward
trend in real estate values or just some flattening? Let's look at
issues at hand.
Just a couple of weeks ago some prominent real estate
economists met in Los Angeles for a housing summit. Without going
into great detail, the consensus was that immigration and
demographics will sustain the U.S. housing market over the next 5,10,
20 years. One very interesting point made was that demographics
combined with "quality of life issues" will "carry the housing
market forward". In the Mammoth area, we know that most buyers
purchase here for some sort of quality of life issue.
MONEY magazine has spent the last couple of years anticipating the real estate bubble, and low and behold they came out in the December issue with their own real estate Q and A. They gave many thumbs up to real estate investing including a big thumbs up to buying vacation homes-again much of it predicated on demographics and Sept.11. The article does point out that not all markets are the same. The most significant thing for me in that lengthy article is that since the stock market crash, more people are allocating more of their net worth to real estate. And that has inherently increased demand.
So the economics are simple; more and more people, more money
invested towards real estate, less available land to develop, and
more costs related to building. Sounds a lot like Mammoth. The other
thing, many people are finally figuring out the great tax benefits
associated with owning real estate. Interest deductions,
depreciation, tax deferred exchanges, etc., all make the investment
that much more attractive. All of those factors apply to Mammoth.
As for Mammoth in particular, there is certainly no sign of a
bubble. The first indicator is inventory. Inventory remains very low
in Mammoth. What is more amazing to me is the absorption (sale) of
new listings, even the ones priced substantially higher than the last
comparable sales. Another key factor, people who have purchased in
Mammoth in the past few years are typically owners who plan on being
owners for a long time-maybe for generations. Buyers aren't buying on
the speculation of "flipping" the property sometime in the near
future. They are buying because they want to spend quality time here.
So while additional new condos and homes are built every year, the
demand to own is outpacing the supply.
But let's look at the demand a bit closer. I have ranted
about baby boom demographics for years. Just look at one of
Intrawest's public reports, especially an older one, and you will see
it is their driving force. The MONEY magazine (Dec.2002) that focused
on real estate also had an article about the Best Places to Live.
Many of the top places are within a half-days drive of Mammoth.
Mammoth has a tremendous immediate market. And many of the people who
have been drawn back to Mammoth in the past few years now realize
what great recreation, natural surrounding environment, and climate
the area offers. And all enhanced by the isolation of the area.
Simply a great place to recreate, relocate, or retire. That is lots
of demand for three-and-a-half square miles of privately owned land.
Another potential bubble indicator is foreclosures. Haven't
seen one of those in a long time. Many of the buyers in the past few
years have been cash buyers, and many have done tax-deferred
exchanges. These aren't the typical owners who get foreclosed on. And
yes, the very low interest rates are fueling the housing boom all
over the country. But what indications do we have that the rates are
going to go up at any alarming rate? Nobody believes that. There is
no sense in the Fed doing that.
And many people who travel to other world class mountain
resorts will point out that Mammoth is still comparatively
undervalued. Mammoth was a bargain for many years. Probably still is.
But wait until the Village is cranking and the airport is flowing and
some of the other impending improvements get dialed in. And you'll
still be able to easily hike or bike into isolated areas. Then we'll
really find out where this market is going. In the meantime, let's
hope we can keep Mammoth more on the "Just For Fun" side
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