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Real Estate Analyst Predicts A 20 Percent Increase In Median Home Prices In California During The Next Year

Bruce Norris, The Norris GroupRIVERSIDE, Calif., Dec. 10, 2012 – Remember the days when residential real estate gained equity each year?

It’s happening again in California, and a year from now homeowners could see as much as a 20 percent increase in the median price of homes across the state, according to Bruce Norris, a Riverside-based real estate analyst and principal of The Norris Group.

“My best guess is that California we will have significant price inflation. Prices could escalate so strongly that we will think we are in 2004 instead of 2013.”

Some may ask how this is possible.

But Norris has experience predicting the unpredictable.

A real estate consultant, investor and educator for the past 30 years, Norris publicly predicted the current sub-prime lending and foreclosure crisis in January of 2006, more than a year before the nation’s leading economists and real estate industry analysts would even acknowledge the possibility of a downturn. Norris also correctly forecast both the real estate boom that began in 1997 and the subsequent doubling of home prices.

Norris now says he has identified three reasons why median home prices in California will go up.

For starters, he said, policy decisions have resulted in record low inventory levels.

“In many areas,” Norris said, “there’s one month of inventory. Inside of that one month of inventory are very few REOs and a lot of short sales that may or may not really be available to buy and close anytime soon. The properties that would normally be purchased by owner occupants are being snapped up by billion dollar hedge funds. These hedge funds, unlike the smaller investor types, are keeping all of the properties as rentals. There’s a little inventory for sale by ‘normal sellers with equity,’ but, right on cue they are getting the idea their property just might be worth more than the last sale.”

With the absence of inventory, Norris predicts, prices will escalate.

A second factor paving the way for the rise in median home prices in California is the return of the former homeowner who was foreclosed on in 2008 and 2009.

“The numbers of trustee sales in those years were staggering,” Norris said, adding, “As a percentage of whatever had happened in the past, 2008 and 2009 will go down in history as the California Real Estate Collapse of all time. The numbers differ across the state but the percentages are similar. In San Bernardino, the numbers of foreclosures exceeded the number of sales in 2008 and 2009. Fast forward to 2012 and you now have those same people ready and capable of buying a home again.”

So, how is it these people can buy homes so soon after going through a foreclosure? The answer, Norris says, resides with FHA, which will now make a loan to a buyer who lost their home via foreclosure after three years. “Buyers have realized that their house payment would be less than their rent, and that’s fueling demand and pushing up home prices,” he said.

The third factor setting the stage for a significant increase in median home prices is interest rates. “Interest rates are at all-time lows, and that allows for price increases to take place without significantly increasing mortgage payments,” Norris said, adding that he expects California’s median prices to up by as much as 20 percent during the coming year.

Norris plans to share the results of his findings Tuesday, Dec. 11, during an 7 to 9 p.m. workshop at the San Diego Creative Investors Association meeting at the Scottish Right Center in San Diego. See The Norris Group calendar for other “Poised to Pop” speaking engagements all over California.

Reporters wishing to schedule an interview with Bruce Norris in advance of next Tuesday’s presentation should contact Aaron Norris at (951) 780-5856 .

For more information about the Dec. 11 workshop or to learn more about Bruce Norris and The Norris Group or to access to podcasts of Norris’s weekly radio interviews with lenders, economists, builders and other housing experts, visit www.thenorrisgroup.com.

About

Bruce Norris is an active investor, hard money lender, and real estate educator with over 30 years experience. Bruce has been involved in over 2,000 real estate transactions as a buyer, seller, builder and money partner.

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6 Responses to “Real Estate Analyst Predicts A 20 Percent Increase In Median Home Prices In California During The Next Year”

  1. Ana says:

    Mr. Norris is wrong about all three reasons:
    1. Hedge Funds buying most of the properties for rental will sell them soon or later. Too many rentals will unevitably bring down the rents, and make them less attractive as rentals rather then sell’em, and invest the money somewhere else..
    2. Since Freddy and Fanny are set to be closed some time in the future, the foreclosed owners are less likely to be able to provide 20% down payment, especially with rising prices. Simply it is not going to happen.
    3. Interest rates will go up as long as Bernanke goes away (in one year).

  2. Bruce Norris says:

    I guess we’ll wait and see. Thanks for the input.

  3. Rich says:

    Well Ana, let’s take the other side of your argument.

    1) While I agree hedge funds are buying a lot of properties, there is still an awful lot of retail buyers out there and they are helping push prices higher right NOW. In fact, the inventory levels are pretty low and will more than likely stay that way. That in itself will drive prices up a little. I agree the hedge funds will “eventually” sell them as that is what they do. However, most of the houses will not be sold to the tenant or another investor. The tenant will be offered to buy the house and the majority will not do so. Their lease will not be extended, they will be required to move to another rental, and the house will be spruced up and sold to a retail buyer. Remember, since many of these hedge funds bought at really low prices, they will continue to get pretty good returns on their money well into the future.

    2) At this very moment, we can not predict exactly when Freddie and Fannie will be shut down. So in the meantime, buyers with good credit as well as the owners that were previously foreclosed upon will be able to get an FHA loan in 2 -3 years after “their” foreclosure and buy again. There are a lot of people in that category right now. In addition, there is not another organization in the private sector to pick up what Fannie and Freddie offer to the housing industry.

    3) When Bernanke goes away, it won’t be for at least another year or so. So, if your opinion about rising interest rates were to come true, it will be a slow movement and will extend beyond Bruce’s 1 year projection.

    4) And then there is the affordability index that has risen tremendous amount in the last several years. I realize it has started to creep down, but there is a lot of room for it to go before it negatively impacts pricing.

    With that said, I do believe Bruce may very well be pretty close when he suggests a 20% increase in the next 12 months. Remember, his prediction was for the next year, not the next decade.

  4. Kelly says:

    Well, considering that California’s “median” home priced has already appreciated 24.7% (Nov. 2011 median price $279,910 vs. Nov. 2012 median price of $349,100) it’s certainly possible (heck…it’s already happened) and when you factor in the reasons noted by Bruce Norris it seems likely the trend could continue.

  5. [...] Norris effectively concedes his prediction could be a little conservative. [...]

  6. Bruce Norris says:

    Kelly! So nice to see you here. In some areas, it’s happening very quickly.

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