I Survived Real Estate 2010
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September 17th, 2010, The Norris Group returns with its award winning event I Survived Real Estate 2010. The video also now available on The Norris Group website.
The Norris Group has assembled an incredible line up of industry experts to discuss the state of REO from the inside. Topics will include regulatory intervention and aftermath, bulk buying, myths and facts, and opportunities emerging for real estate professionals. 100 percent of the proceeds support the Orange County affiliate of Susan G. Komen for the Cure. This event would not be possible without generous help from the following platinum partners: Foreclosure Radar and Sean O’Toole, the San Diego Creative Real Estate Investors Association and Bill Tan, Investors Workshops and Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobby Alexander, Claudia Buys Houses, The Business Press, Frye Wiles, MVT Productions, and White House Catering.
This week The Norris Group Real Estate Radio Show is broadcasting the first segment of I Survived Real Estate 2010.
This is our 3rd I Survived Real Estate event. Over the last few years we have covered the reasons for the meltdown, ever changing legislation, government stimulus, and possible industry solutions. That is part of the conversation for I Survived Real Estate 2010, but this year we are focusing on “the state of REO from a multi-sector viewpoint.” We are proud of the ensemble we have put together for this event. Thank you for listening online. We appreciate your support.
The benefactor for this event is Susan G. Komen. Susan G. Komen is the world’s largest grass roots network of breast cancer survivors and activists, which works to save lives, empower people, ensure quality care for all, and aid science in finding the cure. As of 2pm on September 23, 2010, our sponsors raised $63,000 for Susan G. Komen. That brings our 3 year total to over $160,000.
I Survived Real Estate 2010 would not be possible without out platinum sponsors, who allowed us to dedicate 100% of the ticket sales to Komen. Those sponsors include Foreclosure Radar and Sean O’Toole, San Diego Creative Investors Association and Bill Tan, The Investors Workshop, Shawn Watkins, Angel Bronsgeest, Frye Wiles, Invest Club for Women and Iris Veneracion, Bobi Alexander, The Business Press, MVT Productions, San Jose Real Estate Investors Association and Geraldine Barry, Claudia Buy’s Houses, White House Catering, and The Nixon Library. Thank you as well to all our gold sponsors. Their information can be found on www.isurvived2010.com. We are grateful to all who have participated.
We would like to thank two heroes. First, we would like to thank Marsha Norris. Her 17 year fight with cancer has been nothing less than spectacular. Its not just about strength, but its also about attitude. “Surviving is important, but thriving is elegant.” Second, we would like to thank Bruce Norris. Thank you for giving us an incredible example of what it means to be a great partner through thick and thin, and through better or worse. You show incredible grace when under fire.
Our host for this evening is Bruce Norris. He has been in real estate for almost 30 years as a builder, money partner, and investor. He has over 2,000 transactions under his belt. He is most known for his market timing predictions and his research.
This event would never have occurred if Aaron Norris had not developed our radio show. When Aaron originally told Bruce that The Norris Group should have its own radio show, Bruce asked, “Why in the world would we do a radio show?” Aaron responded saying, “I think it would be a great service to our industry.” It has been on of the best things Bruce has ever done in his life. Every week Bruce is challenged to interview someone who is an expert in their field. He has to read and work a lot to prepare for those interviews. We now have the opportunity to put a panel of those interviewees in front of you, and discuss solutions for our industry. Two of the panelists gave Bruce home work assignments. He bought those books and did his homework, so we will be discussing some of the issues in those books. Christopher Thornberg is back. When Bruce recalled memories of last year’s event with Thornberg, he decided to buy head gear just in case Thornberg’s speech gets rough again.
Bruce wants to be able to share good ideas for good questions during this event. Bruce has been a part of panels in which he did not feel like anything was accomplished, because no one was willing to cross a line or two. With this group of panelists, we may need more than one set of head gear. One of the hardest things for Bruce to do is disagree with a conclusion that is probably correct but not understood. Tonight, Bruce is going to do that. Bruce is going to be asking questions about issues that he does not fully understand.
Are we going to inflate or deflate? That is a very important question, because investors do something very different if they expect one or the other. Thornberg and Bruce will be discussing that issue. Thornberg gave Bruce a book to read, but Bruce still doesn’t agree with him. This event is about getting answers to important questions for real estate investors. Bruce would like to develop his business plan for the next few years based on what is said during this event.
Bruce would like to thank his company for the hard work they put into preparing this event. Aaron and Diana did as much work for this event as most people do for a wedding. Bruce gets to show and get a standing ovation because of their work. It doesn’t get any better than that.
Bruce and Marsha recently moved after living in the same home for 25 years. One of the first problems that came up during the move was what to do with the wheat? For those who have not heard that story, Bruce would like to tell it again. In 1975, Bruce got married and bought his first house. During that time, he read a book called The Coming Bad Years. The book claimed that if you are concerned for your financial future, then you need to buy 200 pounds of wheat per person in your family, so that you will have food to make it through the coming rough times. Bruce only had 4 people in his family at that time, but he bought 1,000 pounds to make sure he had plenty. So 35 years later, Bruce had to decide what to do with what is left of the wheat. He sill has a bucket of about 5 pounds of wheat, and he doesn’t want to give it up, because that wheat taught him something. First of all, it taught him that wheat lasts a long time. The second lesson was that when you get input from somebody else, listen to them, but don’t just let their input determine your opinion on the issue. Your informer may not be right. Bruce managed to build a house in a very nice neighborhood during a time in which he falsely expected a depression.
We have an important year coming up. We’ve experienced the great recession of real estate, and we are now in its aftermath. Just 24 months ago, Lehman Bros failed and set off catastrophic losses on Wall Street. Just like the wheat example, we now have groups of people overreacting. Policy changes are about to be made that could have very negative outcomes. The title for a recent article in the Los Angeles Times read, “Rethinking Homeownership: Why Owning A Home May No Longer Make Economic Sense”. That is not the mentality we want to have as a country. The little house purchase that Bruce started with was a “subject to” deal before Bruce knew what a “subject to” deal was. He bought the home with 500 dollars down, and he probably couldn’t have qualified for the financing on his own. Many good things happened in his life because he bought that property.
In the article titled “Rethinking Homeownership: Why Owning A Home May No Longer Make Economic Sense”, the author claimed we should take all tax benefits away from real estate. The article said, “there is only one affect that seems consistently caused by homeownership. Owners invest more time and money in the physical upkeep of their homes. They are more likely to make repairs and guard it.” Isn’t that called pride of ownership?
Tommy Williams once said that whenever he auctions off a house, that house stops being loved by somebody. An auction finds somebody that will love it next. We all want to live in a neighborhood that is well kept. Society is better off when the majority of us have a chance to own a house.
Some people are in positions were they can make policies. Raphael Bostic is the Secretary for Policy Development and Research for HUD. This is a statement from HUD: “There is this notion that being housed well is synonymous with being a home owner. That narrative has got to change.” That is an interesting statement coming from people who provide a lot of houses. The Chairman of the Federal Deposit Insurance Corporation said, “Clearly there is a strong correlation between the amount of skin in the game a borrower puts up front and how that loan performs. Its only common sense. If you put 20 percent down, you are committed to that house. If you walk away from that house, you are going to lose a lot of money.” Her solution would be to go to a 20 percent mortgage, but Bruce does not feel that is necessary.
In the mailing business, there is something called a control piece. A control piece is something that gets a known result when used. People in advertising use control pieces all the time. They send mailers designed to get a specific response repetitively. If they want to change something, they do the changes one at a time. If the change improves their control piece, then they add the changes to their mix.
We already have a control piece that has worked for 40 years. This control piece is called low down payment purchases. We have statistics showing that the damages caused by low down payment purchases have not been consistent over the past few years. Giving someone a VA loan with no down payment does not cause society big losses. Look at 1970 through 2002. During that time, we had FHA loans with only 3% down, but we did not have many foreclosures. Foreclosures were between 5 to 10% during that time. Foreclosures did not significantly increase until after 2003. The low down payment deals did not cause the problem. The subprime, low qualification, and option-ARM deals that caused the problems. We already know what works. We don’t need to reinvent our control piece, and we don’t have to practice over kill.
From 1975 to 2005, you did not have significant price decreases. If low down payment programs were causing the problem, why don’t the statistics show it? Bruce thinks that changing the low down payment policy would be a big mistake. Right now, a decline of ownership is occurring, and that is probably healthy. If the Chairman of the FDIC has her proposition in place, then homeownership will probably dip below 60%. Sellers are not netting very much when they sell properties. It would be difficult to crank up 20% from this price.
If we get rid of low down payment programs, you will have a lot more vacant properties. There is not enough financing for investors to absorb this inventory. You will have less stable housing costs for people who don’t own. When you buy a home, it can be rough at first, but once you’ve owned for a few years, you adjust to the cost, and it becomes easy. If we have more vacant homes, then we will also have lower quality neighborhoods with more unkempt houses. We will also have less equity to access other investments with.
Right now, Bruce believes that a zero down payment program would work perfectly. Warren Buffet believes that when other people are greedy, you should be fearful. If he had been in the loan business during 2006, he would have gotten out. In 2010, he would probably suggest making a lot of loans, because the payment on these loans is probably less than rent. If you are ever going to take a risk, you should take it in 2010 and 2011, because interest rates are at all time lows. Right now, people between the ages of 20 to 30 are underserved in the mortgage industry. Under Bruce’s proposed program, people would still have to qualify, but they wouldn’t need a down payment. Some people think this is crazy, but if you think about it, we’ve already done this for people with the $8,000 tax credit. We were giving homebuyers tax credits, so that they could make an $8,000 down payment. 48 percent of the 2 million people who received the tax credits will have to pay the $8,000 back.
People over the age of 35 have a homeownership rate of over 60 percent. People from the ages of 20 to 30 are underserved, and they probably did not receive the credit damage that many of their elders received from losing their houses. What is wrong with giving these younger adults a shot at homeownership? You must have 2 different criteria for Bruce’s no down payment program in order to prevent foreclosures. The reason why this program will work is because it is set up to serve 3 borrowers simultaneously. Yes, you are going to have a failure rate with a no-down mortgage, but you pick the percentage. When your payment is less than rent, is it going to be 20 percent? Bruce doubts it. But for the sake of argument, let’s say that foreclosure rates are at 20 percent under this program. If 2 million people sign up for the no-down program, and 400,000 people walk away, then let that loan get assumed by the next buyer without qualification. The likely target buyer will be the person who lost their house in foreclosure during the past 3 years. They can’t get new credit, but they might want to return to those “pride of ownership” homes. They will write a check, and save the system from 1 more foreclosure.
For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.
Thank you for being a Gold Sponsor for I Survived Real Estate 2010: Adrenaline Athletics, Benton Investment Group, Community RE-Invest Group, Delmae Properties, Elite Auctions, Entrust California, Everlast Photography, Inland Empire Investors Forum, Keystone CPA, Landwood Title, Las Brisas Escrow, Leivas Financial Services, Mike Cantu, North San Diego Real Estate Investors Association, Northern California Real Estate Investors Association, Personal Real Estate Investor Magazine, Realty 411 Magazine, San Jose Real Estate Investor Association, Rick and LeeAnne Rossiter, San Jose Real Estate Investor Association, Starz Photography, Summit Solutions, Tony Alvarez, Wealth Point, and Westin South Coast Plaza.