The Norris Group Blog

California Real Estate Headline Roundup

Posts Tagged ‘LAEDC’

By Bruce Norris .

262-TNGRadio – Robert Kleinhenz 1-28-12

Friday, January 27th, 2012

Robert-Kleinhenz

Robert Kleinhenz

Chief Economist for LAEDC


(Full Bio)

streamitunesdownloadrss

This week Bruce Norris is joined once again by Robert Kleinhenz. Robert is the Chief Economist of the Kyser Center for Economic Research, which conducts research on regional, state, and national economies. Dr. Kleinhenz has a Bachelor’s Degree from the University of Michigan, a Masters and Doctorate from USC, all in economics. Prior to joining LAEDC, he served as Deputy Chief Economist at the California Association of Realtors and taught economics for over 15 years, most recently at California State University Fullerton.

Bruce said he recently poked around at a refi and quoted a rate that he could barely understand. He said it was something like 3 7/8 for a 30-year mortgage. Bruce said going back 30 years when he became an investor and had refinanced his house at the time to get the money; it was perfect timing back in 1981 when he paid 17 ½ % fixed. Robert said there may have been a couple recessions in between, but what a difference two decades makes. Bruce wonders if when you are 22 and just starting out if you are thinking that it is in any way normal where you are only accustomed to seeing numbers that start with a 5 or a 4, and he wonders how different the future will be with the particular rate going forward. In this case you are comparing what happened back in the early 1980s to the interest rate situation today.

Robert said if he were to place a bet on what was likely to be more normal in the foreseeable future, he would look at the interest rate climate of today and not of the early 1980s. Back in that time we had high rates of inflation, and we had an economy that was in transition and stagnating in several sectors for several reasons. The main thing was we had a lot of inflation, partly driven by high oil prices. This in turn led to high interest rates and at the time the Paul Volcker of the Federal Reserve Bank of New York led efforts to bring the reign of inflation down. One of the ways it did that was by increasing rates by making it very difficult to borrow. This was a much different climate, and hopefully economists have learned a little bit about keeping inflation in check. Hopefully policymakers have listened to the economists who talk about it, and we are most likely going to stay in an environment over the next few years that either has low or moderate inflation and not double-digit inflation.

Bruce read a quote saying, “Experience is something that lets you recognize a mistake when you make it again.” What is interesting about not being concerned about the people that are in charge of policies is their opinion of how benign the housing problem was going to be. This bothered Bruce; and Robert reiterated saying policymakers are humans like us and sometimes don’t get the information right and sometimes still make poor judgments. We definitely have to be concerned about the fact that mistakes are made on the policy side just as mistakes were made on the business side of things. This gave rise to the situation we face today.

Bruce wondered if Robert was concerned about deflation if not inflation. He said it is not that he is not concerned about inflation, but he does not expect to see high levels of inflation over the foreseeable future, and that is predicated on policymakers and their ability to make the right decisions. It hinges on the ability of the Congress to come up with a credible plan to take care of these federal deficits over the long term. Somebody has to be interested in a bond that the risk-level seems appropriate with the return. What is interesting is the one-year T-Bill in Greece is paying 402% as of yesterday, which would probably give you an idea that you should not invest in it as you are not going to get your principle back.

The likelihood that the United States would find itself in the same position that Greece finds itself in is very low, so we should not be too alarmed. There is a very real possibility that we may face a debt situation, but there are several moving parts here. Fortunately, the ace in the hole that we have here in the United States is the fact that the U.S. dollar is the reserve currency, and our Treasuries tend to be the flight to safety for so many investors around the globe when things go awry elsewhere. Bruce did not know how profound an effect this would have because this is exactly what happened when you talk about a ten-year T-Bill. Most of us would have anticipated seeing something under 4% was pretty astonishing, and then it was under 2%. If someone has not already refinanced their house, you definitely need to be sitting up and taking a look at rates today because those rates are fundamentally driven by what is happening with the yield on the ten-year treasury, which nobody would have expected would fall below 3 or 4%, and here it has consistently been under 2% for quite some time. All of this is courtesy of something that is really outside of our borders. Part of this also stems from the Fed’s commitment to maintain low rates over the foreseeable future through the middle of 2013. There was this policy move and effort to insure that long rates stay low partly to help the housing market and to get investors to pay attention to the stock market where it would theoretically be better returns. There are a number of angles behind the Fed’s move, but this has served to also keep rates down.

To insure that something like what was aforementioned is in the Fed’s control, they would have a limited ability to do it. If the market moves in a big way, they may not be able to buck that trend. However, it does accomplish that end by buying or selling securities in such a way as to maintain rates at the levels that they are targeting at this time. We have a 0-fit fund rate and a mortgage rate under 4%. If we were to have an issue where the Euro zone went into a tough recession, Bruce wondered if there would be a domino effect here that could possibly kick us into a another recession. Robert said the cards we are looking at in 2012 include the situation happening in Europe. If their economy is weakened or there is some concern that we have already seen of economies tipping into recession; then that could jeopardize the situation here in the United States. We’re out of the recession and growing and now in the expansionary phase coming out of the recession, so that could tamper the growth or lead to a stall out in the economy here in the United States. This is economic linkage between the European economies and the U.S. economy.

The other linkage is the financial linkage. If the sovereign debt problem in Europe, not just in Greece but also Italy and possibly France, give rise to problems with banks not unlike what we had a few years ago at the height of the financial crisis, then that could stymie activity in the financial world once again. As a result of that, it could have a feedback effect on the real economy and either slow the growth pattern of the U.S. economy or tip it into recession. You have two things coming out of Europe that have the potential to either slow down or derail our current expansion. When the United States had defaults on the mortgages, mortgage-backed securities, and the CDOs, it had quite a direct effect on the people that invested in the banks.

Bruce wondered if the United States has as much of the investment there in Europe, or is it mostly contained inside of their own banking system. Robert answered that it was incestuous in a way in that there are flows capital that go across international boundaries through commercial banks; so if there is a problem that shows up over there, it may also show up on the balance sheets of banks over here. It is through this particular conduit or channel that we would see problems occur. Robert said he would be very surprised if we have something as calamitous as what we saw in 2008. To look at this situation in the financial sector, we have to recognize that so many financial decisions rest on some confidence of what is going to be occurring in the future. If you lack confidence in the future or just don’t know, then you are unlikely to make a decision or make a decision to do nothing. The problem with financial crises that we went through in 2008 is that they have long-lasting effects and wreak havoc on consumer and business confidence. They then leave businesses and households to sit on their hands until they get a sense that the coast is clear. That is one of the reasons this recession was so deep and continues to keep going as long as it has been. There is a real concern about the outlook, and it is reflected in consumer confidence and business confidence that has just not really shown marked improvement over the last couple years.

Bruce wondered if there is real concern about the oil world and if there is fear about aggressive actions such as the closing of the straight. Robert said if we take a step back to 2011 for a moment and think about all of the wild cards that played out in 2011, there are a lot and a number are still playable in 2012. There was earlier discussion on the European debt situation, which is a wild card that has been played several times over the past few years. The Greek debt crisis seems to be the one that is played most frequently. If you take a look at the Arab Spring, that gave rise to disruptions in the flow of oil and gave rise to higher oil prices. There is always the chance that something in the world of energy that triggers an increase in the price of energy, oil or otherwise, there is always the chance that this could slow down economic activity if not derail a growing economy. The other wild card that we have to contend with in 2012 that we also dealt with in 2011 was political. This year the big political wild card is what will happen in November with the election. It does appear as though we are going to continue to be stepping carefully through 2012, hoping that these wild cards do not wreak too much havoc on the economy. If they do, then they have an adverse impact on confidence. If there is an adverse impact on confidence, then the growth we anticipated is just not going to materialize.

In the employment sector, Bruce wondered how important construction is to the improvement of the unemployment. Robert said it is an important segment of the economy but is essentially flat on its back right now in California and elsewhere around the country. If you look at residential activity in the state of California, permits for example, they are just a fraction of what they were in years past. They have been at this very low level for just a fraction of any long-run numbers for the last few years, but it makes sense. If so many foreclosed or distressed properties are available for sale at a fraction of the cost of new construction, it is going to be sometime until after the backlog of distressed properties gets substantially moved before we see construction pick up in a noticeable way. There is a broad market for housing where distressed property values are probably way down on other properties. Things are also the same way with commercial construction. There are a lot of high vacancy rates for office buildings these days; less so for retail and certainly much less so for industrial. Industrial in Southern California is actually outperforming markets around the country. It has less than a 5% vacancy factor, so it is very much a mixed bag. However, construction is going to be recovering slowly, so meanwhile we should take a step back.

In a general sense, the labor market seems to be at a turning point where in order to produce more in 2012, it seems very likely that employers are actually going to have to add people, not just ask their existing labor force to work longer hours. There should be a general upturn in employment in 2012 compared to 2011. It is just a question of how much of an upturn there will be. We need somewhere around 300,000 jobs added per month across the nation in order to bring the unemployment down in a noticeable way in a reasonable amount of time.

The most recent report, the one for December, showed that we added 200,000 jobs, which was a great number based on the recent history. It is just not a high enough level of growth to bring the unemployment rate down. At 200,000 jobs per month, it could take 4 or 5 years for us to get back to a 6% unemployment rate nationally. At 300,000 jobs per month, it would only take a little less than two years, which is a huge difference. At the present time, we should be banking on the 200,000 jobs per month, barring any of these wild cards being played. If that happens for a few months time, then we might actually see the economy gain some ground.

The sector that is in the driver’s seat here is the consumer sector. Consumers are weighed down by uncertainty about their jobs and their economic outlook. The fact that are assets are not worth what they had been worth and the fact that they may have some credit constraints, access to credit may not be what it had been, especially with respect to buying homes. All those things are constraining growth and consumer spending, and that is really the main thing that we need to look for in terms of the driver behind the overall economy. If consumer spending picks up, then we are going to see job gains pick up as well.

In looking at a chart for mortgage equity withdrawal in 2002-2006, it was responsible for a lot of GDP growth. This driver has certainly been diminished if not eliminated from most people’s possibilities. As we go forward, it is certainly going to be the case that the American consumer is still going to have a place for the use of credit. They may not have access to the same amount of credit that was available when they were able to use their home equity in order to finance so many things. This is not a bad thing because it does seem to have created problems, especially problems that have spilled back into the housing sector. We do not want to go back this way, but we do expect to see that some loosening of credit access on the part of consumers would probable enable the consumer sector to get a little bit more steam and give a little bit more push to the overall economy.

Another issue is shadow inventory. Bruce wondered what Robert’s thoughts on what shadow inventory contains are. The definition of shadow inventory has changed over the last couple years, so Bruce wondered what Robert feels is the shadow inventory and what the best resolution for it is. Robert said it is useful for us to get a sense of how long we are going to be dealing with large numbers of distressed properties. If we use that as the definition and ask what things going to be like two years out, then the shadow inventory is the inventory that is on the books, such as MLS inventory for existing homes plus unsold new homes, and the unsold inventory for existing homes in the state of California, which is about 5 months inventory. Five months inventory is enough to actually sustain increases in prices and not decreases in prices because the average is about seven months, so we are at seven months if we are under five. By then we would go through the foreclosure pipeline, and the thing we would pick up would be the number of REO properties that are held by banks in inventory. This is equal to about another 2 ½ months of inventory. Now you are getting over seven months when you take the five mentioned earlier and add 2 ½ months, then there properties that are scheduled for auction and also another 2 ½ months inventory. However, the timeline for that is a much longer timeline.

For the REO properties, the point in time they go into inventory might be about 6 months or so before they are prepped and sold. The relevant shadow inventory number to use for current market conditions and understand what is happening in the current market is probably MLS based inventory plus new homes plus REOs in inventory. If we are asking the question about how long this is going to be with us, then we are going to go further up the foreclosure pipeline and pick up the properties that are in a pre-foreclosure state, such as an NOD or delinquent property. If this is the case, then you are looking at another 2 ½ months inventory. This is simply by taking the number of properties that are in pre-foreclosure state, which is roughly 100,000, and looking at that relative to total annual sales. You also have to look at the timeline. An NOD that is filed in January of 2012 is probably about 18 months away from going into the REO inventory. These numbers are roughly 100,000 in REO inventory and roughly 100,000 NODs plus delinquencies at the present time for the state of California. The timeframe is not anywhere close to normal as the statutory timeframe is about 6 months. Because of different kinds of policies and other factors, this timeline has been stretched out; and a number of lender and servicers have encountered a number of problems along the way.

The bottom line is as we are going further up the ladder and actually including more and more things in this notion of shadow inventory, we also have to figure out how long it is going to take to push all the properties through the foreclosure pipeline and out through the new home market. Therefore, we are looking all the way into 2014 before things get any closer to normal levels of distressed properties. The housing market is going to feel like it has recovered before that period of time, but we are going to have substantial numbers of distressed properties working through the housing market over the next three years. In Riverside, 62% of the sales are either short sales or foreclosures, which means when you sell 1,000 homes, only 380 buyers emerge. Everyone else is credit damage. This is going to take a while to heal.

If you want to learn more about Robert’s company, the Kaiser Foundation, go to LAEDC at www.laedc.org. Here, you can find out about the annual forecast event that will be happening this February 15th in downtown Los Angeles. This is a ticketed event.

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.

261-TNGRadio – Robert Kleinhenz 1-21-12

Friday, January 20th, 2012

Robert-Kleinhenz

Robert Kleinhenz

Chief Economist for LAEDC


(Full Bio)

streamitunesdownloadrss

This week Bruce Norris is joined by Robert Kleinhenz. Robert is the Chief Economist of the Kyser Center for Economic Research, which conducts research in regional, state, and national economies. Dr. Kleinhenz has a Bachelor’s Degree from the University of Michigan, a Masters and Doctorate from USC, all in economics. Prior to joining LAEDC, he served as Deputy Chief Economist at the California Association of Realtors and taught economics for over 15 years, most recently at California State University Fullerton.

The Kyser Center is within the Los Angeles County Economic Development Corporation or LAEDC, which among other things is interested in promoting the local economy and doing what it can do to help local businesses to streamline permitting processes and promote a long-run vision of where the region is headed in terms of the economy and related issues. The Kyser Center’s economic research function is in support of this. They carry on what is happening in the economy and what is happening with key sectors in the economy. They also produce forecasts, one coming up on February 15 in downtown L.A. They have an annual forecast that comes out at the beginning of the year in February and a mid-year forecast update that typically is released in July. This is the one that Bruce took a serious look at a few nights ago, and one of the things that really impressed him was it was not in the least bit promotional. He said it was very informational and quite candid if it had to be negative. This is one of the things that have given rise to the reputation of the Kyser Center and the LAEDC have established over time. Their forecasts have really maintained their objectivity when looking at issues pertaining to the regional economy; so they have a lot of credibility, which they had even before he came on board.

It’s a great asset for the community to have this kind of document. When it becomes promotional and inaccurate, it does not help anybody map out a proper business plan. We are certainly at a key point here. 2012 is a pivotal year where potentially we can see the local economic situation and the national situation accelerate if the right things fall into place. You have to have an objective view on things as business people so that these business people can make smart decisions about their future and the future for their businesses. When you are dealing with the local economy, even one as large as Southern California and Los Angeles, you also have to determine how effective we are by state and federal level decisions. The most obvious impact that we have seen over the last couple of years is that the budget problems that have popped up at the state and have filtered down to the local level have given rise to real job losses in the public sector. Therefore, the private sector is adding jobs that are much needed jobs.

We have unemployment rates that continue to be stubbornly high. The economy and the labor market have both been very slow in recovering from this most recent recession. Anything that detracts from growth is problematic; and unfortunately one of the very weak segments of the labor market over the last couple years has been public sector or the government labor numbers. They have been declining even as the private sector has been taking off, so that is certainly one constraint that we have to deal with in the immediate term. The longer term issue that we need to bear in mind is that the state and county government agencies are often times responsible for so many infrastructures that we rely upon, both physical infrastructure and the education of our young people. Both of these are things that concerns Robert as they look at the longer timeframe and the role the government plays.

Bruce wondered if education needs have started to shift. One of the things Bruce read that was very interesting to him was the manufacturing sector. It is not something we think about being a major player; yet it really is, but there are shifts occurring. As far as education is concerned, you go to high-school through college. Bruce wondered if you emerge as a useful participant in the manufacturing sector in any of the training to where you can take on a high-tech manufacturing jobs and function. Robert said it is safe to say that the jobs that the people who went to high school and college will be taking on through the course of their career are jobs that we know nothing about right now. The most important thing one gets from a college education in particular is learning how to think and to adapt to what is a changing workplace environment. There are really dramatic changes that take place both in the consumer side and in the industry side. You have a sector of the economy that is quite dynamic and is one of the leading sectors here in Southern California. Putting it differently, Southern California is one of the leading manufacturing centers here in the United States. At the same time, in the United States manufacturing is still one of the leading GDP. It is a high-value added segment of the economy, but it has experienced a trend decline in the number of people working in that sector over time because much automation has taken place that has displaced some workers. Manufacturing on a wide, broad scale such as mass production of goods, frequently goes offshore because they can produce at a much lower wage or lower cost of goods produced outside of the United States and certainly outside of Southern California.

When Bruce read the document, he said the thing he found interesting was the number of jobs was down, the number of products produced was way up, and the earnings per worker was up. The people who are working in manufacturing have to be more skilled today than their predecessors had to be ten or twenty years ago. They probably have some training in computers and other types of automation, so it is no longer that you have strong hands and a strong back. You also have to have a pretty nimble mind to be able to do what is necessary in these jobs, which are increasingly automated and require some knowledge of sophisticated machinery. The first question was really if in the education process if we are taking people through it, do we need a college degree to understand how to operate that particular piece of machinery even though it is technical? Do we have trade types of training that are taking that on?

Robert said that particular aspect of education in the United States, which is typically provided by trade schools and community colleges, is one that is often overlooked. However, Robert believes it is very important to training people for jobs that don’t require a college degree but do require something more than an unskilled background. You have to have skilled workers. One of the things we are contending with now and really have for quite some time is that we probably do not dedicate enough of our resources and educational resources to training people for those kinds of jobs. There is so much emphasis and so much pressure on seeing people complete their Bachelors Degree, which is important for the reasons that he mentioned at the beginning. However, it does not really create someone who has a great deal of versatility. However, there are a lot of other jobs. Robert had just spoken with one of the business assistant managers, and he said there are a lot of jobs for which you have to have a certain set of skills. Many people who are running businesses right here in Southern California right now have job openings for skilled workers, but they cannot find people with the appropriate skills to fill those spots. It is a challenge right here and now, and it is an ongoing challenge for years to come.

We also have an aging workforce who with those skills will be retiring, and there will be even more of a need for those replacement skilled people with very high-paying wages. The fact of the matter is the baby boomer generation, particularly the oldest members of the baby boomer generation, turned 65 last year in 2011. In terms of numbers, the first few years that are marked by that boomer generation have fairly small population numbers. However, as you see people who were born in the early 1950s to the mid to late 1950s, you see that this is where you have the real bubble in terms of population growth in that particular generation. In the next 3-4 years, we are probably going to be looking at what could be a fairly large number of people going into retirement. There are probably not as many people choosing to retire as would have been the case before the recession. Still, large numbers of people will at least consider retirement or maybe going to a part-time schedule. This may lead to a void in the workforce in terms of many skills, not to mention the experience that these individuals have accumulated over so many years of work.

Bruce said when you do have this baby boom generation begin to retire, it brings up more pressure on the budget. The California budget and the national budget both have their share of problems. Bruce wondered if we solve it by aggressive cuts and austerity, or do we solve it with some type of growth program that makes sense. Robert said that as far as the budget situation at the national level is concerned, it is important for us to break it into two parts. You have the budget deficit at the federal level, the $1.3 trillion deficit, and the corresponding level of national debt. The high deficits that we have seen over the last couple years stem in part from the weakness of the economy, which has lead to reduced tax revenues. At the same time, especially with the stimulus program that actually came and went the high expenditures that were a part of that stimulus program and other programs has driven a wedge between the amount of money that the government was bringing in and the amount of money that was spending. However, as the economy improves, that wedge should narrow. Robert believes this will improve over time, so he is less concerned about that and more concerned about the Social Security program and Medicare, both of which could escalate out of control and dominate the budget before too long. It would be in the 2020s by which time it might happen, but certainly changes will take place between now and then to prevent that from happening. Robert does not think we would sit back and just let it happen.

There was a joint committee that worked on the aforementioned suggestions; they produced a document, then when it got to Congress it seemed both sides were not interested in the conclusions and looked like they pushed it forward to 2013. Because of that, this was one of the things that pushed rating agencies to downgrade the United States credit situation. Bruce found this interesting because since he is connected to real estate; his assumption would have been that we have a downgrade and an interest rate hike. However, this was not what happened. If we are talking specifically about the downgrade and what happened at the time back in August of last year; that downgrade and the anticipated impact on interest rates for T-Bills and Treasury notes was trumped by what was happening in Europe, specifically the sovereign debt crisis. This was a much bigger problem; so instead of having a spike in treasury rates as a result of the downgrade, we had a flight to safety globally to U.S. government securities. This pushed yields down, not up.

We are fortunate in that we continue the dominant and reserve currency that so many countries around the globe rely on, and we continue to be the safe haven for investors not just around the globe, but also here in the United States. That worked to our advantage that time as it pushed yields and pushed rates down at a time when rates otherwise might have increased. Robert said he is not terribly concerned about the downgrade, but he does think we all need to be worried about the reaction in Washington D.C. to problems with the deficit and the fact that they are not willing to take action. The credit markets are most likely watching this carefully. If after the 2012 election we do not see a real concerted effort and a real plan to take care of these long-term concerns with respect to the federal budget, then he would be more concerned about downgrades of our credit.

If we get to this is 2013, Bruce wondered if we are going to go the route of austerity and how we would produce GDP growth from this. The kind of austerity programs that have been talked about and implemented in the European economies, unfortunately, do damage to the economy in the near term so that they can get their financial house in order. The levels of indebtedness and sovereign debt in countries like Greece and Italy, relative to the overall economy, are much higher than here in the United States. If there was a belt tightening that was required in order to set things straight in the United States, it would certainly hinder a growing economy and could slow down the pace of expansion. For the record, it does not feel like we are out of the recession, but we have been expanding and our GDP is higher now than it was in the last peak. Technically the economy recovered from a recession and started to expand. If we do go through an austerity program of sorts, it would either slow down that rate of growth that is mediocre at best right now; or it could tip us back into a recession. These are things we have to be very concerned about going forward a year or so out.

The GDP numbers have actually accelerated past the former peak, but we had 8 million jobs lost and have only rehired 2 million of those people. This is one of the quandaries we find ourselves in this particular economic cycle, and we should not be surprised by it. We had the recession, and it was the Great Recession; so it was the worst recession in the working lifetimes of many people. It was a large recession with unemployment rates that have risen to levels we have not seen since the Great Depression of the 1930s both in California and in the United States. When that recession hit and when the job losses occurred, the companies became very lean with respect to their workers and their workforce. They also took advantage of technology, which has been partial of the economic story really for the past 30 years, beginning with the PC and going forward. As a result of that, they were able to repair their workforce and replace some of the functions with some kind of technology. Now that the economy is coming back, some of the jobs that used to be there are no longer there because of the displacement by technology. This goes back to the point touched on earlier that people have to be adaptable and have to be able to move in to the jobs of 2012 and 2013, which might well be different from the jobs of 2002 and 2003. Training is very important for these kinds of transitions from the job climate that existed ten years ago to the job climate we have today.

Bruce recently looked at a report that talked about rankings as far as business friendly states, and California was almost at the bottom of the barrel. Robert is in the Los Angeles County Economic Development Corporation having to attract people into an environment that you maybe did not create. In other words, Bruce wondered how you attract people to Los Angeles and Southern California for jobs in a negative environment and it has that reputation in place. This is indeed one of the challenges that we face across all of California, especially in Southern California, with the high cost of labor relative to other parts of the country. This also includes the high cost of other resources, not the least of which would be buildings and land. The perception, if not the reality is that there is a fair amount of red tape that one has to navigate in order to establish a business here. Fortunately, there are entities such as the LAEDC that provide assistance to employers who are interested in locating here to Southern California to help them work through that. The reputation that California has as not being a terribly friendly business state is certainly a hurdle to be overcome. This is something that is a long-term concern and has been a concern for a few decades; and it continues to be a challenge that we have to work on.

Bruce believes Texas might be the favored state and wondered why it is so different with them. Robert said that Texas has, among other things and from the workforce point of view, income tax at the state level and is also a right-to-work state. The presence of unions is not quite what it is here in the state of California and other states around the country. Their permitting and regulatory requirements are also not what they are here in California. When you are in the predicting business, you have to really pay attention to the whole country. Bruce stays up until midnight now seeing if Greece is going to default. It seems to be much more complicated than it ever has been. There is no doubt about the fact that our local economy is more closely tied to what is happening around the state and around the globe than it ever has been in prior years. To begin with, you take a look at things such as mortgage rates, which are determined in the global financial system. A problem in Greece, specifically their sovereign debt problem, will indeed cause difficulties for someone who is trying to finance the purchase of a new home or refinance a home. This is one example of how we are so much more integrated today as a global economy where local meets global in a way we did not really have to worry about or be concerned.

If you go back 40 years in the early 1970s or even the 1960s, which was not terribly long after World War II had ended, you would have seen that the U.S. economy was really the only economy that was untouched by World War II. Its infrastructure was in place, and it was the dominant economy around the globe. Over time it gave way as different economies and different countries rebuilt and then saw Germany and Japan and other economies that had been industrialized become re-industrialized and become more important players on the global scheme. You look at the 1980s, we had another wave of economies that have come onto the scene.

Tune in next week for the second part of Bruce’s interview with Robert Kleinhenz on The Norris Group Radio Show and be sure to visit our website, www.thenorrisgroup.com, for more information on trust deed investing and our loan programs.

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.

The Norris Group Real Estate News Roundup 7/21/10

Wednesday, July 21st, 2010

Today’s News Synopsis:

MDA DataQuick reports 70,051 Notices of Default were filed during the second quarter. The weekly survey from the MBA shows mortgage application volume increased by 7.6 percent this week. Some analysts fear the new financial reform may significantly damage the mortgage industry. The LAEDC believes Orange County will experience a building boom next year.

In The News:

DQNews - “California Mortgage Defaults Hit Three-Year Low; Foreclosures Rise” (7-21-10)

“A total of 70,051 Notices of Default (“NODs”) were filed at county recorder offices during the April-to-June period. That was down 13.6 percent from 81,054 for the prior quarter, and down 43.8 percent from 124,562 in second-quarter 2009, according to San Diego-based MDA DataQuick.”

Mortgage Bankers Association“Interest Rate Drops Spur Refinance Applications in Latest MBA Weekly Survey” (7-21-10)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending July 16, 2010. The Market Composite Index, a measure of mortgage loan application volume, increased 7.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 19.5 percent compared with the previous week, which included the Independence Day holiday.”

Housing Wire“The Nickel and Dime Impact of Financial Reform on Mortgage Servicing” (7-21-10)

“there are several aspects that directly apply to the mortgage servicing industry, and this is mainly due to several minor points through out the reform that add up to one big problem: COST. Considering that the entire bill is drafted as a systemic de-risking manifesto, these changes may actually streamline operations, not work against it. So it’s likely margins will improve, right? No, the biggest impact of the financial reform will be to nickel and dime servicers. As a research note from Deloitte says, ‘it is no exaggeration to suggest that Dodd-Frank will trigger a realignment that is set to challenge financial firms in fundamental ways. They will likely have to reexamine their business models.’”

Housing Wire“Dodd-Frank Reform Bill Extends Tenant Act through 2014″ (7-21-10)

“PTFA, originally enacted in May 2009, allows renters whose landlords have lost their properties to foreclosure the right to stay in the home for 90 days after the foreclosure or through the term of their lease. Without the new extension in the financial reform bill, the law would have expired at the end of 2012.”

Bloomberg - “U.S. Regulatory Bill May `Flash Freeze’ Asset-Backed Market, Industry Says” (7-21-10)

“The U.S. financial-regulation bill may halt the already diminished market for asset-backed securities by increasing liability risk for credit raters, a securitization-industry group and bank analysts said. The legislation, set for signature by President Barack Obama, eliminates credit-rating companies’ shield from lawsuits when underwriters include their assessments in documents used to sell debt. Moody’s Investors Service and Fitch Ratings have already told Wall Street that because of an increased risk of being sued, they will no longer let underwriters use ratings in bond-registration statements.”

Bloomberg - “U.S. Mortgage Brokers Get Criminal Check, Tests Under New Rules” (7-21-10)

“Brokers in the nation’s most populous state will be required by July 31 to have passed criminal-background and credit checks, as well as licensing exams. California, along with about a third of U.S. states, previously didn’t require mortgage sellers to have individual licenses. Brokers will be assigned identification numbers to enable regulators and borrowers to track their lending histories.”

Orange County Register – “Forecast: O.C. homebuilding up 51% in ‘11″ (7-21-10)

“Orange County builders will start a home construction surge next year, growing the number of building permits filed for future construction by 51% vs. this year’s expected total. That’s a bold projection — especially considering all the mid-summer angst about the economy — within the Los Angeles Economic Development Corp.’s latest regional forecast. LAEDC sees Orange County builders pulling permits for 2,600 units of housing in total for this year. And that’s a 19% improvement above last year’s highly depressed level. Local building permits have fallen 5 out of the past 7 years.”

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.

78-TNG Radio – Joel Singer 7-26-08

Friday, July 25th, 2008

Joel-Singer

Joel Singer

Executive VP for The California Association of Realtors

stream

itunes

download

rss

Bruce Norris is joined this week by Executive Vice President for the California Association of Realtors, Joel Singer. Joel will also be a panelist at the I Survived Real Estate 2008 event. Bruce and Joel discuss how financing helped the huge California boom, the psychology of demand, the trade-up market, cheap money, lending standards, the last boom markets, down payments in last cycles, no documentation loans in this cycle, if lenders compensated too far the other way, lending practices today, the ease of borrowing, the long boom and the consumer forgetting about risk, home ownership for those that can afford it, speculation throughout the system, putting blame on certain groups, the current finance market, FHA, Fannie, and Freddie, seller financing in a down market, simple assumptions of the past, the unlikely chance it will come back, the Wellencamp Wars being phased out by the Garn-St Germain Act, the 203k loan program, the Nehemiah Program, why having skin-in-the-game is required by lenders, FHA loan limits and if they will be permanent, inventory levels in California, what makes a balanced market, sales activity up, if declining in inventory is healthy or if it means retail consumers are pulling their homes off the market, what happened to the median price and why it got hit so hard, the risk of people walking away, the different ways of rescuing people and their homes, the unintended consequences of government fixes, the market not being in full recovery mode just yet. Please see isurvived2008.com.

C.A.R. Executive Vice President Joel Singer has held the Association’s top staff position since November 1989 after serving as C.A.R.’s chief economist and heading the Association’s public affairs department. Singer was instrumental in developing Real Estate Business Services Inc. (REBS), C.A.R.’s for-profit subsidiary, and serves as its president. He also is president and chief executive officer of RE FormsNet LLC. Singer joined C.A.R. in 1978.

42-TNG Radio – Jack Kyser 11-17-07

Friday, November 16th, 2007

Jack_Kyser

Jack Kyser

Chief Economist for the Los Angeles County Economic Development Corp.

stream

itunes

download

rss

Bruce Norris is joined once again by Chief Economist for the Los Angeles County Economic Development Corporation (LAEDC), Jack Kyser. Bruce and Jack discuss how California will deal with budget shortfalls because of real estate, California’s 10% budget shortfall, borrowing into the future, how the election year could affect us, possible changes in the bankruptcy laws, new Fannie Mae and Freddie Mac loan limits, California real estate transaction numbers, recent auctions, California rental markets, interest rate hikes, tax law changes, what it could mean if a democrat takes office, and where California is at in the current market correction.

Jack Kyser is the Chief Economist on the staff of the Los Angeles County Economic Development Corporation (LAEDC). Called the “guru of the Los Angeles economy” by the Los Angeles Business Journal, Mr. Kyser is responsible for interpreting and forecasting economic trends in the Los Angeles five-county area (Los Angeles, Orange, Riverside, San Bernardino and Ventura counties), and for analyzing the major industries of the area. Utilizing this information, he helps develop job retention and creation strategies for Los Angeles County. Mr. Kyser’s advice is frequently sought by business, government and the media.

The Los Angeles County Economic Development Corporation (LAEDC) is a private, not-for-profit membership organization whose mission is leadership in the retention and creation of jobs and economic base in the Los Angeles area. Mr. Kyser’s analytical research work and insightful knowledge of the regional economy has helped to elevate the LAEDC to recognition as the pre-eminent source of economic information and forecasts on Southern California.

Prior to joining the LAEDC, Mr. Kyser was chief economist for the Los Angeles Area Chamber of Commerce. Mr. Kyser has also worked for Security Pacific National Bank, First Interstate Bank (then United California Bank). Mr. Kyser later joined Union Pacific Railroad in Omaha, Nebraska, where he was transportation economist. He has also taught economics at the University of Nebraska–Omaha, and served as a business reporter and commentator for radio station KVNO-FM, also in Omaha.

A native of California, Mr. Kyser was born in Huntington Park and currently resides in Downey. He holds a Bachelor of Science degree in industrial design and an MBA from the University of Southern California. He has also pursued additional course work at UCLA.

Mr. Kyser serves on the Economic Policy Council of the California Institute, the research and policy arm of the California Congressional Delegation. He also serves on the economic advisors panel for the California Chamber of Commerce. He is also a past president of the Los Angeles Chapter of the National Association of Business Economists; a member of Lambda Alpha–a land economics fraternity; and on the board of directors of the South Park Economic Development Corporation, and the Building Owners & Managers Association of Greater Los Angeles.

41-TNG Radio – Jack Kyser 11-10-07

Friday, November 9th, 2007

Jack_Kyser

Jack Kyser

Chief Economist for the Los Angeles County Economic Development Corp.

stream

itunes

download

rss

Bruce Norris is joined by Chief Economist for the Los Angeles County Economic Development Corporation (LAEDC), Jack Kyser. Bruce and Jack discuss how global markets are important to the LA forecast, how forecasting has changed in the last 25 years, the huge role the entertainment industry plays in the Los Angeles economy, how different economists can come up with drastically different forecasts, the speculator vs. the investor, how less taxes will effect LA, if we’ll see a recession in California, interest rates, if the FED getting involved is helping, what other industries will see a decline in California because of real estate, and Jack’s outlook on LA commercial real estate.

Jack Kyser is the Chief Economist on the staff of the Los Angeles County Economic Development Corporation (LAEDC). Called the “guru of the Los Angeles economy” by the Los Angeles Business Journal, Mr. Kyser is responsible for interpreting and forecasting economic trends in the Los Angeles five-county area (Los Angeles, Orange, Riverside, San Bernardino and Ventura counties), and for analyzing the major industries of the area. Utilizing this information, he helps develop job retention and creation strategies for Los Angeles County. Mr. Kyser’s advice is frequently sought by business, government and the media.

The Los Angeles County Economic Development Corporation (LAEDC) is a private, not-for-profit membership organization whose mission is leadership in the retention and creation of jobs and economic base in the Los Angeles area. Mr. Kyser’s analytical research work and insightful knowledge of the regional economy has helped to elevate the LAEDC to recognition as the pre-eminent source of economic information and forecasts on Southern California.

Prior to joining the LAEDC, Mr. Kyser was chief economist for the Los Angeles Area Chamber of Commerce. Mr. Kyser has also worked for Security Pacific National Bank, First Interstate Bank (then United California Bank). Mr. Kyser later joined Union Pacific Railroad in Omaha, Nebraska, where he was transportation economist. He has also taught economics at the University of Nebraska–Omaha, and served as a business reporter and commentator for radio station KVNO-FM, also in Omaha.

A native of California, Mr. Kyser was born in Huntington Park and currently resides in Downey. He holds a Bachelor of Science degree in industrial design and an MBA from the University of Southern California. He has also pursued additional course work at UCLA.

Mr. Kyser serves on the Economic Policy Council of the California Institute, the research and policy arm of the California Congressional Delegation. He also serves on the economic advisors panel for the California Chamber of Commerce. He is also a past president of the Los Angeles Chapter of the National Association of Business Economists; a member of Lambda Alpha–a land economics fraternity; and on the board of directors of the South Park Economic Development Corporation, and the Building Owners & Managers Association of Greater Los Angeles.