Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Originally posted by Bruce Norris:
By the way, I'm not trying to convince a soul to believe what I'm saying. I just study the market to wisely spend my own money. We have a following in California that wants to know what we think. I just thought I would put it on bigger pockets as well.
Best of luck,
Bruce
"A Following" is quite the understatement! Do not listen to what Bruce has to say At Your Own Peril! Believe it or believe it not, charts don't lie and I would consider Bruce to be a God at locating, finding, and understanding charts. Add to it the fact that he has an uncanny ability to take the info from the charts and decipher what results will come in the future.
I think I have just created and coined a new nickname for Mr. Norris A.K.A. "Mr. RE Crystal Ball"
Residential Real Estate Agent · Chandler, AZ · Member since 2009 · 1k+ posts · 928 votes
13y
I would like to open the discussion as well, but I'm not sure what it means by being 2004 again. Are you saying prices are back to 2004 levels, or the level of appreciation we are seeing is like 2004, or we are only 4 years away from another market crash?
BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votes
13y
Justin S. - That's why I asked to see the data or presentation. It could be a positive remark or a negative one . . . not sure yet. Perhaps Angel, Shawn or Bruce will pop in with more info.
Aaron Norris - Think you could jump in on this to help out?
It's always hard to be accurate when you take one sentence out of a two hour presentation. Just as an overview, We buy and sell houses in Southern California; about 150 a year. We usually have 50 at any one time. Usually the 50 are split evenly with 1/3 being under repair, 1/3 being available, 1/3 in a sale escrow.
Gradually since the spring of this year, the middle catagory has shrunk. The middle catagory, properties available, is quickly going pending and joining the pending group. We either have propertes just bought or they are in escrow.
Then, we began to see so many offers that the winning bidder was considerably over what an appraisal could come in at. So, we added a clause to some of our listing saying the appraisal would no longer determine sale price. Nothing changed other than we sometimes made 100% more on a property.
What normally pushes prices coming off of a down market is construction, which creates jobs in other catagories, which attracts migration, which creates demand and the circle continues to reinforce itself.
This time, we do not have any of those factors in place and yet we have major price movement...why? That's what the presentation covers. It far to general of a statement to say it's 2004 in your area. I know my area and what I meant by that is we will experience the price movement in my area that will mimic 2004 in 2013. '
If you can watch the presentation, it will give you a pretty good idea of how that conclusion was drawn. Also for reference, we wrote a report called The California Comeback in 1997, Why Prices Will Double in the Next eight Years and in 2006 wrote The California Crash, predicting in advance the price declines and foreclosure glut.
BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votes
13y
Thanks for filling in the blanks, Bruce Norris . . . nice to see you around these parts as always! When you get a sec, definitely do fill in your profile and upload a personal profile pic so we can see that smiling mug of yours!
Otherwise, if there's any way to get that presentation, I'm sure many folks here would be interested in checking it out. Maybe Aaron could help with that?
Real Estate Investor · Lake Forest, CA · Member since 2011 · 49 posts · 21 votes
13y
Hey Josh and friends,
We livestream all of our meetings of Investors Workshops and then make them available to view the archive. I will leave it up to you Josh to let me know if I can link it here because I don't want to be "advertising". Suffice it to say it's been a long time since I watched an entire room full of local Southern California investors paying such rapt attention to charts and historical data. The word "unprecedented" is something to pay attention to.
Lender · California and Florida · Member since 2008 · 319 posts · 194 votes
13y
Great Shawn Watkins. Bruce Norris also covers some of this in our "I Survived Real Estate 2012" presentation from October. You can listen to the audio via our podcast on itunes right now or watch the video. It's not the two hour presentation Shawn will post. It's a 20 minutes condensed version that opened up the event and it starts on the second video at:
If you haven't seen this series before, the panelists are made up of some heavy hitters from different real estate sectors including the Appraisal Institute, National Association of Realtors, Mortgage Bankers Association, Fannie Mae, and Carrington Mortgage (hedge fund). Definitely worth a listen.
It's easy to take one-liners out of context. The amount of research Dad does for anything he says is incredible. I Survived Real Estate alone produced 8 hours of info publicly. Each panelists was interviewed BEFORE the event and each of those interviews were thoroughly researched. Not all of it is in chart form, but for those not familiar with his work, it's not light.
It's all on the podcast on itunes for those really interested into why he's predicting what he is. Well worth the investment in time. The content is free.
I think one of the reasons people like his work is he gives sources to the charts and he's always open to feedback. He doesn't want any one to take him at his word. He'd rather them look at the same data and grouping of charts and find their own conclusions. Having put together his last report which had over 400 charts and 200+ pages of information, I see what DOES NOT make his predictions.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Aaron Norris and Bruce Norris Thanks for the additional info and the reminder for this CA investor to visit the TNG site. Such great info!
If you are seeing all your current inventory go pending asap, even when you aren't allowing an appraisal contingency, does that mean you have no retail sales? I've never allowed an appraisal contingency but I never end up selling retail. Are you seeing any retail cash buyers?
Lender · California and Florida · Member since 2008 · 319 posts · 194 votes
13y
It isn't just our inventory, most Realtors in our area are having the same issue across the board. There's just noinventory. As far as I know, we have mostly retail sales and occassionally all cash. We've gotten into some higher dollar markets. It will be interesting to see what happens with the house we're building in Riverside right now.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Aaron Norris I'm confused about Bruce's comment above. He says that that most everything you guys have goes into escrow asap, often with bidding wars, with no appraisal contingency allowed. How could that be mostly retail buyers, as a retail buyer's lender won't let them buy for more than appraisal?
Lender · California and Florida · Member since 2008 · 319 posts · 194 votes
13y
Good to clarify. That just means the buyers is bringing in extra cash to make up the difference. Once that is booked as the sale price, it's a new comp.
Aaron is correct. However, when we get more for the property it's never an FHA buyer. Yes, we still see all cash occupant owners. Had one this week i heard.
Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes
13y
i can't see why anyone would want to pay out-of-pocket above the appraisal - even in the heyday.
i bought a house in the summer; appraisal came under the agreed price. my lender told me, in the 10 years he's been in this business, he's only had 1 buyer pay over the appraisal.
I just watched the video. While I have tremendous respect for Bruce Norris, I have to agree with the other panelist that you can’t call a market bottom until employment and incomes improve, which we have not seen to any significant extent. The current price increases we are seeing must be result of something other than a fundamental improvement in the economy, therefore unsustainable and impossible to know if we are at a bottom.
i can't see why anyone would want to pay out-of-pocket above the appraisal - even in the heyday.
i bought a house in the summer; appraisal came under the agreed price. my lender told me, in the 10 years he's been in this business, he's only had 1 buyer pay over the appraisal.
Scott W., the appraisal industry is out of whack right now, as pointed out in the video by the president of the appraisal institute, to make a long story short, an appraiser will come in with a artificially low appraisal either because they are unfamiliar with the area or to ensure another assignment from the lender who's untrained appraisal reviewer always seems to come in with a lower number. The contract price is the FMV, not the appraisal, and buyers know it thus willing to pay out of pocket.
Last thing I'll comment about the subject and thanks for the kind words.
If you get a chance watch the video from the club meeting. What people say about a bottom of the market being found with improved employment etc. is normally correct but incorrect this time for all of the reasons mentined in that talk.
When you have one month of inventory and 6 months of buyers, you have a price war no matter what the employment is doing. When you have a 3.25% interest rate and one months worth of inventory, buyers correctly figure out they better buy before prices or interest rates go up. And by the way the price monthly for a $50,000 price increase has never been smaller on a monthly basis.
When you have one months of inventory and you forclosed on 12 months worth of former owners three years ago, many of those former owners want back in. So, you can tack on this unprecidented pile of former owners on top of normal demand, on top of investor demand, on top of Wall Street demand.
I believe this boom is being reverse engineered; prices up by way of nothing for sale. All of the policies are taking inventory to the sidelines; bulk sales with ownership retention of Fannie, bulk note sales from FHA with restrictions on when and if you can foreclose, etc. Please tell me how you go from one month of inventory to 6 months? I don't think that level of inventory happens next year in many Southern CAlifornia areas.
Prices rise to the point of construction making sense, construction improving paves the way for manufacturing and financing jobs to return etc. Fix the job market and you attract migration. Attract migration and your tax base goes up and your negative budget closes the gap.
By the way, I'm not trying to convince a soul to believe what I'm saying. I just study the market to wisely spend my own money. We have a following in California that wants to know what we think. I just thought I would put it on bigger pockets as well.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Originally posted by Bruce Norris:
By the way, I'm not trying to convince a soul to believe what I'm saying. I just study the market to wisely spend my own money. We have a following in California that wants to know what we think. I just thought I would put it on bigger pockets as well.
Best of luck,
Bruce
"A Following" is quite the understatement! Do not listen to what Bruce has to say At Your Own Peril! Believe it or believe it not, charts don't lie and I would consider Bruce to be a God at locating, finding, and understanding charts. Add to it the fact that he has an uncanny ability to take the info from the charts and decipher what results will come in the future.
I think I have just created and coined a new nickname for Mr. Norris A.K.A. "Mr. RE Crystal Ball"
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Scott W. Palm Springs is a real estate island that has little to do with RE in CA. It's resort based, live-able only part of the year, and the employment is service sector and much of it is not stable as it is seasonal. So Cal and Central Cal is flooded with investors and little inventory. It's not surprising to me that retail buyers will pay more than appraisal. I just wasn't sure how it was done with FHA, but of course it's not, as Bruce pointed out.
As for cash buyers, they are everywhere in my part of CA, including retail buyers. I don't know what it's like in the higher end markets, but there are retail cash buyers with $100-150K in my market.
Investor · Rancho Cucamonga, CA · Member since 2008 · 1k+ posts · 684 votes
13y
Bruce Norris gave a pretty bitter-sweet talk for me. I wish I would have bought more in 2008-2011, but I cannot complain watching the stuff I was lucky enough to get rise.
He showed a house his company bought in 2008 for ~65k added ~35k in repairs and rented it. Now it is easily worth ~190k+.
If you're not in the market every day you might not believe it but that house would get multiple offers if it was listed at 190k and people would be fighting to own it.
With 20 days of inventory in most of my farm areas, it's pretty tough to see how that house is going to go anywhere but up. A 20k price increase only costs an FHA buyer 87.04/month with a total payment that still makes it substantially cheaper to own compared to renting.
Even so, where would the big pile of inventory come from? Banks are probably so proud of themselves they've found a way to see prices actually go up... they're not motivated to flood the market. Short-sales still take forever. I think that accounts for 30-40% of Riverside/SB county inventory alone. So we think equity sellers and move up buyers to support a lion shares of the current and increasing demand?
Thanks for doing all the great research, Bruce. It made a lot of sense to me.