The resort community looks to wealthy buyers to shore up second-home sales.

By Diane Wedner, Los Angeles Times Staff Writer
March 3, 2008

Talk about putting on the Ritz.

Never mind that most of Mammoth Lakes’ second-home market is crawling as slowly as a car in a blizzard. The luxurious, soon-to-be-built Ritz-Carlton Residences, Mammoth and the recently opened Westin Monache Mammoth condo-hotel have many in the resort community ready to haul out the finery and celebrate.

“The Ritz and Westin bring in a certain caliber of people who’ve never been here, and we’re excited about that,” said George Fowler, a Mammoth Lakes Coldwell Banker broker who has represented Westin condo buyers.

It’s a small niche, but it packs a financial wallop. The Ritz’s two- to four-bedroom, furnished attached units in 1,200 to 4,000 square feet will come with mud rooms, full kitchens, steam showers and walk-in closets. The development will have a pool, a spa, a library and a group living room, plus it’s a short walk to the shops and restaurants at the Village at Mammoth. All for $1.7 million to $6.5 million.

The buyers — not your typical Mammoth jeans-and-sweat-shirt crowd — are putting down $10,000 refundable deposits on the homes. Construction is scheduled to start in May on the first 60 of 130 units, said Kathy Richardson, sales director for the development.

The Westin, which opened in November, offers upscale condos that buyers can rent out. The 230-unit complex — 131 units went in just hours in an April 2005 pre-sale and the rest four months later — last week had 18 condos for sale, from $419,000 for a studio to $1.25 million for two bedrooms, said Stephanie Cook, the broker at Mammoth Realty Group.

While new construction is banking on the resiliency of the wealthy, most of the mountain resort’s buyers and sellers are experiencing a market that has tumbled, as has most of California, like a novice skier on a black-diamond run. In 2007, 278 condos sold, 22% fewer than the 358 in 2006, according to the Mammoth Lakes Multiple Listing Service. Single-family home sales also decreased to 42 in 2007 from 55 in 2006.

The mortgage meltdown has exacerbated the vacation-home slowdown. Owners tend to sell second homes before shedding their principal ones when the going gets rough financially, so resorts have more inventory than usual.

Despite the sales downturn, prices haven’t entered the bargain realm. The median sales price for a Mammoth area house in 2007 was $900,000, according to the MLS data, compared with $895,000 in 2006. Condos sold for a median of $540,700 in 2007, only slightly off the $550,000 median in 2006.

Prices aside, one major concern of many would-be second-home buyers is the rental market for their properties. Here the news is mixed, depending on the rental term.

Long-term rentals (six months plus) are on the slide, said Bill Wagner, a Century 21 Mammoth Realty agent who specializes in such housing.

“This is the slowest year ever,” Wagner said. “In winter, I never have an opening. Right now, I have two and am getting another the first of next week.”

He attributes the slowdown to the state’s economic turbulence.

On the brighter side, nightly rentals are up 40% from last year, said Kathie Tipton, owner of Mammoth Premiere Reservations. Occupancy “is running at least 95% every weekend and at 20% to 40% midweek.”

She added that the snowpack — at 12 feet in January, it was the fourth-greatest on record for that month — bodes well for a strong ski season and demand for rentals through April.

Buyers, however, are stuck in a holding pattern, said broker Steve Schwind of Mammoth’s Prestige Properties. “Some are waiting for the market to bottom out, some are waiting for a resolution of the nervous economy and some are waiting for the expanded-airport approval.”

The proposal for Mammoth Yosemite Airport would transform a maintenance building into a commercial passenger terminal. Only private aircraft land there now.

Approval for Horizon Air to begin service to Mammoth Lakes — two flights a day between LAX and the resort during the winter — is awaiting a final environmental-impact statement, which is near completion. The decision could come this spring or summer, with potential commercial airline service up and running next winter, said Charles Cox, a technical specialist for the Federal Aviation Administration. If it goes through, visitors who don’t love the 5 1/2 -hour drive from Los Angeles to the resort would be able to fly there in about 45 minutes from LAX.

“The airport could draw a big range of folks to Mammoth,” Schwind said, “beyond the drivers’ market from Southern California.”

Meanwhile, sellers are hoping this season’s deep snow and good attendance will spur residential sales.

Mammoth Realty Group agent Sue O’Brien recently represented a buyer who purchased an in-town two-bedroom, three-bath town house for $400,000. The original listing price in July was $485,000, which then dropped to $448,000.

“Motivated sellers are willing to negotiate prices,” O’Brien said.

The lowest-priced condo currently available, a 1969 one-bedroom fixer in 700 square feet at the Sierra Manors development, is listed for $209,000.

The venerable 101-unit 1849 development, built in 1971 and within walking distance to a ski lift, has two-bedroom, two-bathroom units listing for an average of $525,000.

For those who love the shopping and other amenities the Village at Mammoth offers — including the gondola ride to Canyon Lodge — there are units available at three housing developments: Lincoln House, White Mountain Lodge and Grand Sierra Lodge. Buyers can find condos ranging from $429,000 for a 601-square-foot, one-bedroom unit at White Mountain Lodge to $1.5 million for a 1,425-square-foot, three-bedroom unit at Grand Sierra Lodge.

For “ski-in, ski-out” folks who want condos on the slopes, there’s Juniper Springs, with more than 300 units.

“Juniper Springs is the mountain equivalent of ‘beachfront property,’ ” Schwind said. “It’s for skiers who want to be right in the action.”

The development was built by Intrawest in 1996. There currently are 28 listings at the three main complexes. The average price of a condo is $773,275, for a two-bedroom, two-bathroom unit at Eagle Run.

Scott Meek, 56, a consulting engineer, and his wife, Julie Smith-Meek, 49, an aerospace worker, visit Mammoth year-round. They waited until last summer, traditionally the slowest time of the market there, and when the prices fell low enough, they bought a condo.

The couple, who are avid skiers and hikers, had rented over the years and jumped at the chance to buy a two-bedroom Snowcreek Resort home in 1,800 square feet in the $500,000 range, after years of spiraling prices kept them out of the market.

“It’s still expensive in Mammoth,” Meek said, “but prices have definitely dropped.”

Snowcreek is a newer, 355-acre development with 755 units, located a couple miles from the village. The company launched its latest phase, CreekHouse, which offers 118 single-family homes, duplexes and tri- and four-plexes, in July. Currently, there are 23 homes for sale in the entire development, from $369,000 for a one-bedroom condo to $1.25 million for a four-bedroom home, said Julie Wright, a Snowcreek Property Co. broker in Mammoth Lakes.

Even pricier is a four-bedroom detached town home in 3,400 square feet for $2.5 million at Stonegate, a luxury development on the sixth fairway of Sierra Star Golf Course. It comes with a golf-course view and is a short jog from the Village.

“We’re not trying to be Vail or Aspen,” despite the new expensive housing, said broker Schwind. “Mammoth is a place where the fur folks and jeans crowd all come together.”

By Sue Kirchhoff, USA TODAY

WASHINGTON — Mounting home foreclosures will have “profound” effects on the economy next year, reducing job growth, bleeding billions of dollars in tax revenues and hitting consumer spending — but shouldn’t push the country into a recession, according to a report Tuesday.

Financial analysis firm Global Insight, in an study for the National Conference of Mayors, predicted at least 1.4 million homes will enter foreclosure next year. That will worsen the already sharp housing downturn, with ripple effects on hiring and spending.

Overall, businesses will create 524,000 fewer jobs next year. Tax receipts will fall by $6.6 billion in ten select states, the report predicts. Nearly 130 cities around the country will face sluggish growth, as economic activity expansion is reduced by more than a third in 65 metro areas alone.

FIND MORE STORIES IN: Foreclosures

The housing downturn will shave a full percentage point off growth, with the economy expanding at a tepid 1.9% annual rate, the report says. Property values will drop by $1.2 trillion, as foreclosures mount and the housing market remains in the doldrums. Home prices will fall by an average of 7%, but price declines could range as high as 16% in California, the report says

“Everyone has some culpability but we have to fix the problems,” says Mayor Douglas Palmer of Trenton, N.J., president of the U.S. Conference of Mayors. “We can’t afford not to do anything. We’re losing tax revenues, have to maintain foreclosed property and we’re going to see more and more homeless families.”

Federal, state and local lawmakers have struggled to respond to a growing wave of foreclosures among borrowers with higher-cost subprime mortgages. Nearly 17% of subprime adjustable rate mortgages are delinquent, a number that looks to rise as adjustable rate loans reset in coming months, often to sharply higher interest rates.

Federal Reserve Chairman Ben Bernnanke in testimony to Congress earlier this month noted that, on average, nearly 450,000 subprime mortgages will reset every calendar quarter from now until the end of 2008.

“Avoiding the payment shock of an interest rate reset by refinancing the mortgage will be much more difficult, as home prices have flattened out or declined, thereby reducing homeowners’ equity, and lending terms have tightened,” Bernanke noted. He said rising foreclosures could reduce property values, weaken struggling housing markets and the economy.

The House has passed legislation to give federal housing agencies more freedom to lend to borrowers who would otherwise turn to the subprime market, while setting tighter standards for future mortgage lending. The Senate has yet to act on the bill. Federal and state banking regulators are trying to help loan servicing firms find ways to quickly restructure large groups of loans, instead of considering each mortgage on a case-by-case basis.

Palmer says the mayors are looking at ways to modify existing loans, strengthen counseling services and other steps in line with what Congress is debating. The mayors will also be meeting with lenders to assess the situation.

The Global Insight report says the housing market financial fallout will be widespread. New York City is forecast to lose more than $10 billion in 2008, followed by Los Angeles at $8.3 billion, Dallas at $4 billion; Washington at $4 billion, and Chicago at $3.9 billion.

In percentage terms, Myrtle Beach, S.C., could suffer the biggest hit, growing 1.7 percentage points less than it would have. California will suffer the most distress.

In other findings the report predicts that job growth will average 75,000 per month during the next six months. That’s more than 100,000 fewer new jobs per month than the 2006 average. Consumer spending will expand by just 2% in 2008, buffered by falling home prices. And new home construction will fall through the spring of 2008, declining about 20% from current levels.

October 12, 2007

The US housing bust is like a leaking ship. You may still be able to stay afloat, depending upon where and how bad the holes are.

Will the home market continue to sink, or is it just bobbing around, waiting for buyers to rescue it? With odds almost favoring a recession due to the housing and mortgage meltdown, it’s a good time to examine what makes local markets weak or robust.

There was no single cause that burst the housing bubble. Demographics, economics, and mass psychology - what I call demoeconology - merged to create a buying frenzy that was like a meme, a contagious mass information pattern that infects minds with new ideas.

If you understand the dynamics of these powerful forces, you can then begin to see which markets will have more painful price declines and which will experience appreciation.

For now, it’s fairly easy to conclude that most home markets are in a funk and won’t pull out of it soon.

In August, housing prices posted their biggest drop in almost 40 years, and pending sales fell the most on record. New-home sales declined to a seven-year low. There are more than 5 million homes sitting unsold. The behavioral economics of this market are tugging buyers to the sidelines, for now. And with the possibility of 2 million more homes coming on the market due to foreclosures, the supply is outpacing demand.

Mass psychology anchored home buyers to the myth that homes were endlessly appreciating wealth vehicles. Now the sentiment has shifted.

As Yale University economist Robert Shiller wrote, home buyers fell prey to a “social epidemic” and a “widespread perception that houses are a great investment.”

Shiller found that “residential investment as a percentage of gross domestic product has had a prominent peak before almost every recession since 1950.”

In the last quarter of 2005, he notes, home investment rose to 6.3 percent of GDP, “the highest level since 1950.”

Will this downturn be like the 15 percent decline between the third quarter of 1989 and to the fourth quarter of 1996, or the 42 percent rout in Los Angeles between December 1989 and March 1997? Since real estate is a conglomeration of local markets, it depends what area you are considering. Location is everything in surveying this moribund market.

To get an idea of how overpriced a market may be, you need to compare it with some benchmarks. Until the recent decline, Florida had been well ahead of the pack in terms of price appreciation - up more than 95 percent over past five years. The US average over the same period was almost half that at about 51 percent.

Now six of the 20 worst markets are in Florida, and all of them are located in desirable areas on the coasts. Fort Pierce, for instance, is feeling the pullback with a 21 percent drop in its condo market.

The most important truth is that buyer sentiment, rising population, demographic changes, and supply/demand ratios all need to be weighed when you try to divine which housing markets are headed for more pain and which may be good investments.

Will the markets that are benefiting from demoeconology continue to grow if the United States enters a recession? Probably not, unless they continue to expand their labor pool, find new buyers, or see an influx of brain-burb residents or retirees.

Markets glutted with housing may sink further. Like too much water in a ship, excess inventory doesn’t contribute to buoyancy.