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By Bruce Norris .

I Survived Real Estate 2012 Part 3 #303

Friday, November 9th, 2012

I Survived 2012

 

I Survived Real Estate 2012

Part 3

(Full Bio)

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On October 19, 2012, The Norris Group proudly presented I Survived Real Estate 2012. An expert line-up of industry experts joined Bruce Norris to discuss perplexing industry trends, head-scratching legislation, and the outlook for real estate in the coming year. Over $77,000 was raised to benefit Make a Wish and St. Jude Children’s Research Hospital. This event would not have been possible without the generous help of the following platinum partners: ForeclosureRadar, the San Diego Creative Real Estate Investors Associatio, the Investors Workshops, Invest Club for Women, San Jose Real Estate Investors Association, Frye Wyles, MVT Productions, and White House Catering. Lean more about the panel and how to attend at isurvivedrealestate.com.

Bruce continued his discussion with Mark Palim and Eric Janszen. He asked Mark if he feels we have passed the bottom of the housing market and are now on an upswing that is sustainable. Mark said they have not called the bottom, but what they are seeing in the data and seeing pretty broadly across the country is the return of a seasonal pattern where we had a really good spring in terms of not only house prices but also days on the market. Many markets are returning back to a very healthy situation in terms of supply and demand. Mark said the reason he is a little hesitant to say we are definitely past the bottom goes with the fact that prices are currently being supported by incredibly low interest rates and the Federal government having a huge involvement in supporting credit. He can’t promise he can keep them there a while; in fact, he can’t really promise anything.

Bruce wondered what his expectations would be and if he thinks interest rates are likely to remain reasonably where they are for a while. Mark said this is his current view in forecasts for the next few years. He believes mortgage rates will stay where they are with a little bit of an uptick over time as the economy improves. The Federal Reserve has been very clear that they will keep interest rates low for as long as they think they need to. This will be backed up with immense purchases of MBS.

Bruce asked what the positives were that got us off the bottom to this point. Mark said it is a combination of things. One thing is that markets actually work after a while. Prices came down 30%, and people looked at it and said at the current prices they were going to stop renting and buy instead. Employment is also improving. It is not back to where one would want it to be, but there has been some improvement. These two things have helped immensely along with low interest rates.

Bruce asked if he felt that the improvement in the market was driven by real forces or mostly by policy decisions. We are in a period of unprecedented policy intervention, but he thinks that when individuals look at the price of a house and interest rates to take on the commitment to own a home or buy an investment property, these are real decisions.

Bruce asked about Mark’s research and if he came up with a scenario where he sees it as significant and tells it to Fannie Mae, would they sometimes implement new policies based on expectations. Is it definitely moving forward, or do we need to tell them it’s dangerous and to be careful. Who do the people listen to, and how quickly do they receive the policy? Mark said they are fortunate in the economics and strategy group, and they have a terrific management team that listens to a lot of the research they do. It is a battleship-sized organization, and their balance sheet is a $3 trillion balance sheet. The conservator is ultimately responsible for guarding taxpayer money. Things move slowly and judiciously with care; and Mark said that at least with everyone he has met in the three years he has been at Fannie Mae, they are all conscious of making data-driven decisions and trying to make the best decisions they can. Bruce jokingly asked if Mark could put a good word in for investors who bump the number of loans that are available. Mark said if you spoke to their REO operation in Dallas and the people who run it, they love individual investors. At the height, they had about 180,000 homes in inventory, and they were taking in about 14-15,000 a month. They get terrific execution from new homeowners and individual investors. Mark said in the company they very much appreciate investors.

Bruce continued the discussion with Eric Janszen from iTulip. Something he really respects about Eric is the appreciation he has for the process where he believes you must remove emotion away from the decision. In a stock market that went crazy in the 90s when he told his investors that followed him that he would exit by the end of 1999/early 2000, it was a nice thing to know. It’s like buying gold at $270 and never selling it. Bruce has a friend who owns a lot of silver, and after signing up for his friend’s website he received an email where he told everybody out of the blue that he was selling all of his silver. Bruce immediately forwarded it to another friend and told him to take this guy seriously since he has a good track record of picking tops and bottoms. His friend told him no thanks and that it was going to 100. About three days later it was around 30. However, Bruce said he appreciated the process, but what scares him about Eric’s process is he disagrees with his real estate conclusions.

This was the reason they were at I Survived Real Estate. It was not to pat Bruce on the back or predict anything. He wants to understand why really well-meaning and educated people come to different conclusions sometimes. Eric quoted, “I lay out the model for the rate and duration of decline, which I have determined to be 10-15 years from 2005 depending on the form and extent of government intervention in the market.” Eric made this statement in 2004, so Bruce wondered if the extent of government intervention has surprised Eric. He said it has, and to say that it was unprecedented government intervention is an understatement. He was surprised by very little, but QE3 was one thing that surprised him. QE3 was interesting because it was specifically focused in buying mortgage-backed securities. All the other quantitative easing before that was both treasury bonds and mortgage-backed securities. This was directed specifically at the housing industry.

Bruce asked what the effect will be for the housing industry on this particular policy. Eric said it will be positive. What Bernanke has been trying to do is re-inflate asset prices and financial assets, which you see if you look at household balance sheets. There is a document the Fed puts out every quarter called the Fed flow of funds, which measures household worth. The two things it measures are financial assets and tangible assets. Tangible assets are a small portion of it, especially with housing value that makes up about 90% of it. The other 10% are things such as your refrigerator. The financial assets are stocks, bonds, and portfolio assets. These are back to where they were before the crisis. QE in Bernanke’s view has been successful in reflating those because standard theory states that if you can increase household net worth and it has a positive wealth effect, which moves aggregate demand curve up and improves the economy. That has been successful so far in that it did what it was intended to do.

Bruce asked if he mostly agrees or disagrees with his opening remarks regarding Shiller. Eric said he does agree with everything he is saying about his market here, although he is not an expert on his original market. Eric said he is more of a macro kind of guy, so his concerns are more macroeconomic. In terms of the housing market nationally, a housing bubble or any kind of bubble is a process, not an event. A housing bubble could take a long time to unfold. In his view it started in the mid-1990s and really took off around 2002 with some extraordinary intervention. The Federal Reserve really caused it to take off until it crashed in 2006. There has been a very long period of time from 1998 until now when there has not been what he would generally consider to be a market price for real estate in the United States. It has been distorted one way or the other by government intervention. For an average person trying to figure out what the price of real estate should be, whether it’s here, in Boston or Ohio, it’s like being in a casino for two weeks and trying to figure out what time it is.

Bruce asked how important housing is to an economic recovery for the United States. Eric said since the mid-1960s we have never had a sustained recovery from a recession without a housing recovery first. This has always been the pattern. Bruce next asked how subservient real estate is in the United States to things outside of our country. If Europe ends up having a pretty nasty recession again, what would the ramifications be not only for the United States but real estate in the United States? Eric went back to saying a recession is technically a period of time when the economy is shrinking, so there is negative GDP growth. What this creates is an upward gap, which is a gap between potential GDP and the actual GDP. In all recessions in most of our lifetimes, it is always closed in a relatively short period of time, even during the very large recessions we had back in the early 1980s. It closed in one year from about 7 ½% of GDP to zero. This was a very rapid recovery.

The so-called Great Recession produced an upward gap of almost the same amount of about 7.7% of GDP, but it has not really closed at all. It is still at 7.5%, so it stayed parallel. This goes back to the question of why traditionally real estate has always been regional and how we knew we were getting a housing bubble. Eric said when he started writing about the bubble in 2002; the signature event was diversions of housing prices from regional incomes. It is logical that regional home prices should be correlated to regional incomes because you are going to buy a house within about 30 miles of your commute. You are going to pay the mortgage you can afford based on your income. This is why housing prices tend to be regional. When they diverge, then something is inflating prices beyond what normal incomes would support. Eric said when you tell him you are seeing prices going up but employment is not going up, there is some other factor besides normal market factors driving it. This raises the question of whether or not this will continue. Bruce said he has been trying to get this out of Fannie Mae, but he would not come up with it.

Mark Palim added that the other interesting phenomenon you get is large differences across the country based on the elasticity of supply. What this refers to is the ability of builders to build the moment demand picks up. If you look at the boom and the bust on the coasts and in areas where there are geographic and politically imposed limitations through zoning, the moment income starts to go up and credit loosens you see prices start to move up. If you go to Plano Texas where there is a lot of land and it is developer friendly, you just don’t get the same boom/bust cycle that you get, for example, in Manhattan or San Francisco. Mark said he does not know how the counties here would compare on how difficult it is to add supply. That is definitely going to be a factor that is affecting the differences in regional performance.

The next person on the panel was Sara Stephens. Sara is the 2012 President of the Appraisal Institute. She serves on the organization’s board of directors on its executive committee. She has been active in the Appraisal Institute and all its regions for about 24 years. Returning again this year is Gary Thomas, the President Elect for the National Association of Realtors. He has been in the business for more than 35 years and has served the industry in countless ways. Bruce also welcomed E.J. Burke, the Vice Chairman of the Mortgage Bankers Association. E.J. Burke is Executive Vice President and Group Head of Key Bank Real Estate Capital and Key Bank’s corporate bank with responsibilities for real estate capital.

Bruce told Sara he has an independent appraiser who wrote him a referral letter in the sense that he has always been impressed that the Norris Group did not do what was typical when they requested an appraisal. Part of the letter said that he had been an appraiser since 1988. In those 24 years he has done 14,000 appraisals. As an appraiser, his job is to protect the lenders’ investment. If a loan officer is involved, their job is to get a loan funded. If there is a real estate agent involved, it is their job to get that house sold. If it is a refinance, the borrower’s concern is to get the new loan. If it is a divorce situation, the owner that is buying out the other partner wants the appraisal low while the other wants it high. If it is a short sale, the realtor wants the appraisal below market. If it is a private sale, the owner wants the appraisal above market while the buyer wants it below market.

In over 99% of the 14,000 appraisals, there has been pressure from most realtors, buyers, sellers, loan officers, and attorneys to get the appraisal value at a number that is best to meet their needs. Bruce asked Sara if she finds this true and if it reflects the reality of the appraisal world. Sara said she thinks this is true. She jokingly said to somebody at her table that if she sent an appraisal to somebody and they don’t call and complain, the first thought is that it’s too high. The pressure on appraisers is enormous since they are reporting the market. It is very difficult for people to understand that they are an unbiased third party, and this is why they are here. They are here to protect the public trust, provide their expertise, and to investigate the market and report it. This is really their job and their function.

Concerning the lender side, Bruce asked E.J. if he agrees with the pressure that not only exists from the mortgage broker to the appraiser, but also from the client to the mortgage broker. E.J. said he absolutely agrees, to which Bruce asked if there was anything in place where it is common for realtors to put pressure on appraisals. It’s something where we have landed in quite a mess because some of our greed was not reined in by ourselves. The question is if there is anything in either the mortgage industry or the realtor industry that says to leave the appraiser alone. Bruce asked if this is coming from the leadership down or from somewhere else. Gary responded that the thing everyone wants in any market is fair appraisals. Bruce had alluded to the market moving up, but this is problematic for getting the appraisals right as we move out of the trough. This has been the case every time we have gone through a recession. We live with this, and we blame the appraiser because they are conservative in what they are doing. They have to be at this point in time. We understand it even if we don’t like it.

Regarding the mortgage industry, Bruce asked if there are any rules telling people what not to do. E.J. responded that for regulated institutions, the last time we had a big real estate crisis; it gave us the little brother to Dodd-Frank. Under this, we have to separate ordering the appraisal and reviewing it from the lending process. In his institution, for instance, it is ordered by the risk people and reviewed by the risk people. They are not allowed to talk to the appraiser. Bruce said it sounds like we had a mechanism in place, but it did not work. E.J. said this is not the case of a regulated institution, so the mortgage market has not always been regulated. But even the banks have made plenty of mistakes, so it just goes to show that you cannot rely simply on an appraisal to make your lending decision. There are a number of other factors that determine if someone gets paid back or not.

Bruce went on to discuss the appraisal management company’s design to provide a barrier between the appraiser and the rest of the participants, the goal being appraiser independence. Bruce asked if this had occurred already, to which Sara said it has to some degree. One of the big problems we are seeing from the amcs and their emergence into the world of the appraisals is that obviously they were set up and put together to provide that firewall between the lender and the purchaser. The idea is a good one, but unfortunately what has happened in a lot of instances the mantra of the amcs seems to be cheap and quick. What we are seeing is we are sacrificing the ability of an appraiser who is local, has local expertise, an understanding of the market, an ability to put together an appraisal that is accurate for a specific part of the market that person works in. This is all being negated by the insistence that the fee be very low and the timing be very quick. We are seeing a lot of people traveling into markets 200-400 miles and come in, make an inspection, and gather what they can quickly, go home, do the appraisal, and turn it in in 24-36 hours. For all of us, that single-family dwelling is probably the most important financial decision we will make. Having some kind of support for that financial decision is extremely important. Having a qualified, educated appraiser work on that appraisal who is local and has expertise in the market and understands what is going on is key to helping consumers make that decision and shoring up a process that is ongoing.

To find out more, tune in next week for I Survived Real Estate 2012, part 3. The Norris Group would like to thank their gold sponsors for supporting the event: Adrenaline Athletics, California Property Solvers, Coldwell Banker Pioneer Real Estate, Elite Auctions, For Investors By Investors, In a Day Development, Inland Empire Investors Forum, Inland Valley Association of Realtors, Investor Experts, Inc., Keller Williams of Corona, Keystone CPA, Las Brisas Escrow, Leivas Associates, Mike Cantu, Northern California Real Estate Investors Association, Northern San Diego Real Estate Investors Association, Personal Real Estate Magazine, Pilot Limo, Realty 411 Magazine, Real Wealth Network, Rick and LeaAnne Rossiter, Southwest Riverside County Association of Realtors, Jon Risinger Photography, Sonoca Corporation, Spinnaker Loans, uDirect IRA, Wilson Investment Properties, Tony Alvarez, Westin South Coast Plaza, and Winning in Tough Times, LLC. See isurvivedrealestate.com for the video from the live 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.

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Using the Auction Method as an Alternative to Selling Houses

Tuesday, October 30th, 2012

Randy Grigg


Randy Grigg

Elite Auctions

(Full Bio)

 

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Selling by auction has several advantages over other methods if the process is done right.

Elite Auctions recently celebrated its 10-year anniversary of selling our own fixed-up houses, and assisting other flippers to sell their inventory.  As President, I can tell you we made a lot of mistakes in the early days.  Today, we think we have a well-oiled system for selling property efficiently.  We continue, however, to try and improve, as the “cheese” is moving all the time.

For basic background info, I’ve been involved in the real estate game for 35 years now. For the first 23 years, I was accumulating single-family houses for cash flow.  Twelve years ago, I stopped buying houses for investment because my wife and I had enough income to support our lifestyle.  Now, for the past 12 years, our company’s focus has been buying and selling houses as well as conducting onsite auctions.

When I started, all houses were turned over to the best Realtor® in town to sell. The average time, however, to find a qualified buyer who actually closed seemed excessive.  Many of the escrows fell apart because of contingencies.  The buyer always got their deposit back regardless of the reason because I couldn’t move on without canceling the current escrow, and the escrow company held the deposit.  So instead of having a two-month holding period after fix-up, many times it took four months or so to actually close — often with two to three different “pre-qualified” buyers.

When I saw the benefits of using an onsite auction for selling, the process helped take the guesswork away from the critical holding period where costs accumulate on a daily basis. Our auction contract, which the buyers sign, is much different than the standard “pro-buyer” California (CAR) contract.  The buyer purchases “as is” with no contingencies, and he or she relinquishes a large, nonrefundable deposit which is deposited into our trust account — not in a “negotiable” escrow account. It seems fair to me that when we own the property, we should be able to dictate the terms — whether it’s renting to a tenant or selling a rehab.

When we started selling by auction, all our rehabs were sold using an absolute auction (no minimum bid / no seller reserve).  After using my houses as guinea pigs and selling substantially below value, we were forced to learn how to market more effectively, how to talk to potential bidders, and how to create a “feeding frenzy” with buyers.

In the early days, we sold seven houses and a fourplex for a very savvy investor — all absolute with no reserve because he preferred this type of auction and trusted our system to get the highest price possible.  In Kentucky and other midwestern and eastern states, an auction isn’t an auction unless it’s absolute without reserve.  Basically our auctioneer friend in Kentucky tells us that about half of the sellers call him to sell their property absolute and the other half sell traditionally with a Realtor® through the MLS.  He tells us no one would show up if there was a minimum bid or reserve!

California hasn’t caught on to using auctions to sell its own houses, but many Californians love to buy at auction…oftentimes paying way too much.  You see, a well-orchestrated/advertised auction will benefit the seller, not the buyer. Even Trustee Sales, that in times past were held on the courthouse steps using a monotone bid caller, are now switching to a live auction format in a hotel with ringmen and a low starting bid to build momentum and competition.

About three months ago, we attended a Trustee Sale held at the Marriot to see if we could get a deal, and because we were curious about the auction company’s format.  We had our numbers calculated for all 15 houses and enough cashier’s checks to buy the two most expensive properties. Needless to say, we didn’t buy one – not even the trashed ones.  Overall, the price at auction was an average of 28% higher than we were willing to pay…RETAIL!  Just to make sure this wasn’t a fluke, we attended two more Trustee Auctions… but yes, the results were the same.

Hopefully, you see that auctions can be better for sellers than buyers.

A side note, however: right after the market crashed and there were a ton of bank-owned properties (2008-2010), we bought several houses at ballroom auctions just because the ratio of bidders to houses was much less.  We turned and sold them all onsite by auction using our company, and did quite well. TIMING is everything and the cheese is always in motion.

Next blog, I’ll discuss the best timing and the best properties to sell by auction, along with comparisons of selling by listing through the MLS vs selling by an onsite live auction.

Until next post…

 

 

Bruce Norris of The Norris Group will be at the OCRE Forum at the Chinese Cultural Center in Riverside on Wednesday, November 7, 2012.

 

The Norris Group will be holding their Distressed Property Boot Camp from January 29-31, 2012.


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Vice President and Chief Economist of CAR Leslie Appleton-Young Joins Bruce Norris on the Real Estate Radio Show #281

Friday, June 8th, 2012


Vice President of C.A.R.


(Full Bio)


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This week Bruce Norris joined once again by Leslie Appleton-Young. Leslie is vice-president and chief economist for the California Association of Realtors, a statewide trade organization with over 150,000 members dedicated to advancement of professionalism in real estate. Leslie directs the activities of the association’s member information group. She oversees the analysis of the housing market and brokerage industry trends, member communication, and membership development activities. She also is closely involved in the association’s strategic planning efforts and is a well-known speaker in California.

One of the things Bruce has noticed that has been on the increase is the percentage of equity sellers. This is probably a very significant development because in a way that is an acknowledgement that they are not going to see 2006 prices any way soon. It is an embracing reality and also recognizing that whatever they are going to do next in real estate is a good time to do it. If you are selling today and trading up, you are going to be fine. If you are trading down and possibly dealing with some other investment property, there are a lot of things you can do to get the advantage of the positives in this market, even though you are selling at a price that a few years ago you would have been somewhat disappointed in. When you are buying in the same market, you might ask yourself what the big deal is. People have a lot of emotional attachment as was noted in last week’s radio segment. You have almost 30% of the mortgages in California underwater, so people are in distress and many stuck right now.

Bruce wondered how different the reasons are for people buying in 2012 than in 2006. Leslie said you have more first-time buyers, and you have a little bit more of the trade-up situation going on because those equity sellers have finally realized this is not such a bad time and are going to jump on it. If you look back in 2006 and 2007, it was really a market dominated by REO purchasers and larger and smaller investors. It was more of a situation where certain prices were so low they were going to buy as many as they could and do their business model that way. When you look at the market today, it is much more balanced. It depends on the area. If you look at the sales that closed escrow in April, 58% were equity sales, about 22+% were REO, and about 19.4% were short sales. Therefore, you have a little bit of a balance between short and REO; it is a little bit more on the REO side while the rest are equity sales. When we first started to come out of the bottom, the REO market was well over 50% in many areas and likely close to that statewide as well. We certainly have over the past several years whittled down on at least the available inventory of REOs to the extent that now you have a two month supply, even less in some areas, of REO inventory.

One of the things mentioned in the first segment was shadow inventory. FHA has approximately 41,000 REOs right now, but they have over 700,000 people that are 90 days late. Fannie and Freddie have similar stories, and the loan mods have similar percentages. Bruce wondered what will happen with this inventory, if they are just going to really dole it out over time or take it to the sidelines as rentals. Leslie said they will most likely keep doing what they have been doing, which is to dole it out over time since this is the only thing that really makes sense for them in terms of managing their balance sheet and recognizing the losses on those assets. What is interesting is that it seems like almost every year, not including the last year or two; people would have a date set. They would ask questions like if they heard that on September 15 all of the banks are going to dump all of the foreclosed properties in one day. This never happened, and it will not happen. However, we still cannot say that this problem will not be with us for quite some time, possible 4-5 years in some areas. There is no magic bullet here; it is really one property or loan at a time. The impact of various programs will ebb and flow, but it takes time for the lenders to work through each and every one of these, and it is going to define our market for a while. Every year the market seems to be a little bit different, and certainly this market with fairly robust sales for six months in a row is showing that people are able to be more responsive today to the advantages of the market.

Bruce wondered what percentage of these sales investors are buying. Leslie said the investor sales in California are probably over 20%. In some areas they are significantly higher. All cash purchases have been about 25%. NAR had a number that was in excess of 30% a couple months ago. There are non-investors who are paying all cash for homes, but it is a very significant part of the market. About 80% of them are investing to rent, and possibly the other 20 are reselling, flipping, fixing them up, and selling them. However, this will vary by market.

What is interesting is we have had a big recession, and if you look at household formation, it really didn’t happen. We are way behind on household formation, and at some point the echo boom generation is going to play catch-up. You will see an article from time to time talking about the coming housing boom. When you look at the lifestyle choices that the generation has had to make given how lackluster the job opportunities have been and the doubling and tripling of families, at some point they are going to have the income and the job market is going to be conducive for them to break through or break free and enter the housing market. New construction was just hit very hard and has started to come up the last couple years, but it is still well below the 200,000+ units we need a year to house everybody. Things will be changing, but as long as the economy is as challenged as it is with the euro zone and Japan and India slowing, there are a lot of global trends that will impact our economy and our financial environment.

Things are either a lot more confusing than Bruce ever acknowledged, or it is more confusing than it ever has been. Leslie said she believes it is the latter and recognition of the impact of all these forces outside of our control is more heightened than ever. Mark Zhandi came out with an article that said the GDP is really dependent on the end result of Greece. Some people when hearing this might think that Greece is the size of Rhode Island, so how would it have that big of an impact. It is a little frustrating for Bruce as a local investor in Riverside that he has to pay attention to a lot of things outside of real estate and outside of our country. The financial community is a global community, and everyone is a player. Everyone is exposed to Greek debt and the Euro Zone. With all of that the financial crisis was a real wakeup call that it is not just about me in my little area, but you are directly impacted by what goes on overseas. It really is overwhelming.

Mark Zhandi also said we sometimes have the tendency to create today’s policy to solve yesterday’s crisis. Leslie said she heard him speak in D.C. a couple weeks ago, and he was right on target with comments like this. We are dealing with Dodd-Frank and qualified residential mortgage as if that is going to really be a game changer, and it is not. A lot of requirements for that loan is not necessary. Leslie said it will be a game changer in a very negative direction. One of the things Leslie said she has been concerned about is in order for a mortgage to qualify, the loan needs to have 20% down. You look at the last ten years of what the GSEs have purchased, and less than 15% would have qualified as a QRM under this definition. It is very restrictive, and the data shows that the difference the delinquencies and foreclosures for 10%, 15%, and 20% down are not that different. To focus on 20% is really going to be a burden for a lot of first-time home buyers.

There are a lot of policy implications tied up into what was most likely a real attempt to not let that happen again. However, the pendulum always swings too far in either direction. The timing of this is really not the best, and we don’t need to have the most restrictive lending policy when we have the affordability that is at all-time highs. When you can actually buy something and reduce your cost as opposed to rent, you would think that would be good idea to be more aggressive as a lender than less. There are so many people who, if they could, would just a straight refi that would take them down from 7% to 4%. They would then be able to stay in their home, so Leslie does not understand why this would not be a doable thing. There is really no difference since you are already in the position of 140% LTV, so you might as well be at a 140% LTV with a loan that somebody is going to make a payment on that you can afford. We saw in the San Fernando Valley in the ‘90s that people stayed in their communities even when they were underwater. It is not a completely rational profit utility maximizing decision when people look at their home in their community.

Bruce asked Leslie if she thinks Fannie and Freddie will not exist in ten years. This was the impression the GSEs gave Bruce and Sean O’Toole when they spoke in front of them in D.C. Leslie thinks this message has been sent loud and clear. If you looked at the white paper that the FHFA came out with earlier, you would see that this year they essentially said as much. However, the question is if it is a new entity or a combined entity, and what does it do if it is backstops. There are a lot of unanswered questions that have just not been fleshed out yet, and it is going to take a couple of years for them to do that. However, there is enough possibility of major change in which we all need to be involved. If you look at the mortgage market today, you see that last year well over 90% of the loans originated in United States for home were Fannie Mae, Freddie Mac, or FHA. That is just the way the market is, so the first-pass argument is that whatever you are going to do, don’t do it now. We have an industry and economy that is trying to get back on its feet. Looking longer term, Leslie did not think there was any doubt that there are changes that should, could, and will be made. The point is to do it in a reasoned fashion so that you avoid as much as you can, both pitfalls and distress, that is going to take the economy back where we don’t want it to go.

Bruce thinks one of the things that is going to happen in 2013 is we are going to have to get serious about generating some revenue and increasing taxes. Bruce wondered if Leslie fears that real estate would be one of the obvious targets for some of the policy changes. Leslie said she had the opportunity to go back with her leadership team a couple months ago, walk the halls, and go in and talk to the California Congressional Delegation. Without a doubt there is support for the mortgage interest deduction and a general feeling that this is not a time to mess with housing since it needs to get back on its feet. If and when a major effort at tax reform begins, likely after the election, everything is going to need to be on the table. Leslie said they were told this a couple of times by people who were very sympathetic. The thought was if we take the mortgage interest off, then somebody else is going to their thing off while another is going to take their thing off until pretty soon nothing is going to be on the table. Being realistic about it, everything is going to be on the table, and we will just have to see how things go.

The majority of the California Congressional Delegation has signed on to a resolution that has been passed around for the last two years supporting the mortgage interest deduction as it currently exists. However, if you recall what happened in 1986, you had a midnight deadline for a 3,000 page bill, and there is a timeline where people sign on and you see the mortgage interest deduction get capped at $1 million. It is hard to updo an affordable housing argument against that kind of cap, but it does also leave open the door for further reductions down the line. Leslie said they will be watching this and participating in these discussions with great interest.

When it comes to topics such as Proposition 13, Leslie said she cannot imagine a time that this will be looked at in a realistic fashion to change. It is too much a part of the landscape, and the lore. The public support for Prop 13 is quite strong, and we have a budget in Sacramento that does not hold together for this year or for the foreseeable future. There are commitments made in terms of pensions and medical support that are going to require an increase in taxes, higher revenue, or a reduction in those benefits. It is not going to be for the faint of heart to watch that process going forward because everybody has something to protect. The bottom line is we are going to have to keep cutting back until we can afford what we are doing. Fiscal responsibility is extremely important.

One thing the real estate boom did was provide a lot of revenue that did not exist prior. It looks like we figured out that more revenue does not necessarily solve the problems. We now have a dearth of revenue, but if we are trying to get new revenue sources then this is not really the solution. We really have to go to where the cuts are, which is happening. You are seeing cuts, and you will continue to see more and more cuts. There is a structural issue with respect to the commitments the state has made and what it is legally required to do since it cannot file for bankruptcy. The local municipalities can though, which is what makes Chapter 9 bankruptcy an interesting study. We have seen this in Vallejo and a few other cities. Michael Lewis released a book titled Boomerang in which the last chapter is actually about San Jose and what they are facing with expenditures that were related to an economy that disappeared and that promises that were made to public sector employees are now the bulk of their budget. Hopefully some lessons have been learned, but we are going to have to find our way out of it. This will most likely come with a mixture of cuts and revenue, but it is going to have to be primarily cuts. This is why Bruce believes real estate will not leave the table unscathed. Hopefully they will leave some things that are important. We had quite a price decline, so possibly a reduction in the amount of interest as far as up to a certain dollar amount would not be the end of the world at this point.

Another interesting topic is mortgage settlement for the California market. Bruce wondered which would be likely to occur: $12 billion for write-downs or short sales. Are people looking at reductions with this $12 billion? Leslie said she does not really know since she has not been following this that closely over the last month or two. She has not really seen much in the press about what they are doing. The initial reaction was it was great, but in California it really is a drop in the bucket. She has not read anything that has been an update on where it is all going. Bruce said he thinks he knows where it is earmarked to go, but Leslie said it is probably too early in the game and the process to have really seen an outcome yet. On the city of Riverside’s foreclosure task force, it is anticipating knowing what kinds of funds are going to be available and for what purpose. As of now, they really don’t know. Leslie said it is hard to get even a little cynical after the last five years when you hear about a new program that is going to do one thing, but only ends up doing a tiny part of it. This is not very successful.

Bruce wondered what percentage of the market now is first-time home buyers. He knew it got down to about 37%, although Leslie said it is at about 40%. She said they were going to have their annual market survey in the field next month, and this is really the data that she looks at the most and has the longest time trend on. They recently just completed a homebuyer survey, and about 47% of the people in that example were first-time buyers. Therefore, this is probably the general ballpark. If we had more inventory, it would probably be higher.

Bruce also wondered how the membership is holding up and what the mood is like. Leslie said membership peaked in 2006 at 211,000 realtors this year. She said they are going to come in at about 158,000, which is awfully good considering what has gone on in the market and the percentage of the business done by a smaller subset of agents. All that being said, they really are very busy, very engaged, and they are encouraged by the market fundamentals. This is to say after 4-5 years, there is definitely a new mood of positivity.

To find out more about Leslie’s business and any updates, go to www.car.org.

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.

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Vice President and Chief Economist of CAR Leslie Appleton-Young Joins Bruce Norris on the Real Estate Radio Show #280

Friday, June 1st, 2012


Vice President of C.A.R.


(Full Bio)


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This week Bruce Norris is joined by Leslie Appleton-Young. Leslie is vice-president and chief economist for the California Association of Realtors, a statewide trade organization with over 150,000 members dedicated to advancement of professionalism in real estate. Leslie directs the activities of the association’s members investment group or information group. She oversees the analysis of the housing market and broker industry trends, member communication, and membership development activities. She also is closely involved in the association’s strategic planning efforts and is a well-known speaker in California.

Bruce wondered how 2012 feels compared to some of the past years we have had to cope with. Leslie said 2012 is easily the best year they have seen in five years, and they are seeing that in their sales and in their price state. They have been above the $500,000 annual pace for six consecutive months, which is a very healthy level of sales. The issue has been prices; and what they saw in April was that the statewide median was $308,050, which is the first time they have been over $300,000 in over two years. There are definitely stresses and strains in the market, but compared to where we have been it is a sign of the times that the biggest challenge for the housing market is lack of inventory. We are not just seeing it in the REO moderate to lower end of the market, but we are seeing it throughout all of the prices in the housing spectrum. That is the good news and sign of the continued healing in the market.

Bruce wondered what Leslie points to as the reason for the median price increases. He wondered if that is an actual increase or a shift in inventory sold. Leslie said it is a little bit of both. What CAR has been doing the last couple of years is analyzing the segments of the market that are really markets unto themselves. They have the REO market, the short sale market, and the equity sale market. Prices in California bottomed way back in the beginning of 2009, so we are about 25% above the floor or the trough. When you look at the Inland Empire, the strong pace of sales they had just coming out of the bottom was really testament to people snapping properties up that were often less than replacement cost. This changed a little bit since people figured it out and you had multiple offer situations. You still have a very low inventory for REO. In their April data, CAR has a two-month supply of REO on the market, so that is the ratio of listings to sales. They have a 4 ½ month supply of equity sales or traditional sales where there is equity in the home.

For the short sale category they have a 6.3 month supply in the market, which take a lot longer to close. You have these three separate markets, and Leslie would argue that in the REO market those prices firmed a while ago and have been showing some upward trend, though not double-digits like we were used to when the lending was sealing the rise in prices. That market went down so low it certainly turned the corner, and the data shows we are starting to see some leveling off in the other parts of the market as well. We are turning the corner, and it is not a 90 degree turn, but it is definitely a turn.

Bruce said he noticed in some of Leslie’s presentations she had a price band page where for the REOs priced for either square foot or the median price, there is a huge spread. One might look at this and think there were big discounts being given on the REO, and Bruce can say this is not really true. Leslie said she typically does not include that unless she spends a lot of time explaining it since it is not corrected for the type of property and geography. The moderate and lower-price communities have tended to have a much greater market share of distressed homes, so that has defined what graphs like this look like.

From the peak of the market to the bottom in early 2009, Bruce wondered what the percentage drop was. Leslie said it was about 59%. We went from May 2007 when the California median home price was $594,530 to February 2009 when it was $245,230. That was a 59% peak to trough inside of two years, which is scary. That was very significant. There was no precedent. We had the ‘90s, which we thought were ugly until we had this. This is a totally different animal.

The residual damage is that you have a lot of people who are upside down. The CoreLogic data is now slightly below 30% of the mortgages in California, which are now underwater. This makes these people really immobile; they are no longer buyers. They may be a short sale candidate, but they are no longer a buyer. They won’t be until they go through some kind of a short sale. This is why it has really been difficult to get a good number for the shadow inventory that everyone talks about. It seems to range from $4 million to $11 million nationally. A lot of it really depends on what the people will do. Some of them have not paid on a mortgage in a while, and others are going to be able to pay until their ARM adjusts. We still have a few people in this category. If their ARM adjusts, the price per month might actually go down since you can’t get interest rates any cheaper.

Bruce said the inventory has really changed since January and is significantly down. He wondered if this is because sales are way up or because the inventory has been diminished. Leslie said it is a little bit of both. We have seen acceleration in sales and also a reduction. If you look at ForeclosureRadar data, for example, we have a slight two-year downward trend in the number of properties that are getting a notice of default, getting into, and coming out of the foreclosure process. There are a lot of reasons for that. As you look at an economy that is improving, we are seeing a few more loan mods coming through. Even though it is not a lot, this still gets people out of the pipeline. In general, you have lenders actively managing their treatment of these properties, pushing them all through, and recognizing all of the losses at once, which is not a viable financial alternative. You are getting things managed and spaced out.

In practical terms, it is really starting to work because if you have inventory this low, you are going to have to have higher comps emerge from this situation. This brings up the issue of appraisals, which is a big problem. Appraisals are always viewed as a problem in a turn in the market. There is always a little bit of a lag; but certainly this time around it is a quandary, both on the appraisal side and more generally on the lending side. Leslie said things seem backwards to her. In retrospect, in 2005 and 2006 things should have been really tight since we were at the top. Now that we are climbing out of the bottom, it is very difficult to qualify. The reality is this is rock bottom. The payment that is emerging, which is reflective in your affordability chart, shows numbers we have never seen before in history. This means that the payment in relation to earnings is at a historical all-time low.

With respect to rates, people are savvy and understand that this is a once-in-a-generation opportunity to buy in these kinds of circumstances with affordable prices and affordable rates. The economy has started to show some life, although we need a lot more. If you look at the macroeconomic data over the last six months, it is getting better. The employment data, although not consistently great, is a lot better than it used to be. It is going to be up and down. The consumer confidence data that came out this morning showed some of a retreat. In general, we are still way up from where we were two or three years ago.

Bruce said it would seem to him that if somebody at the top was in charge of seeing if we are better off having people get their housing costs fixed for 30 years at this ridiculous rate so they could pay more taxes, the answer would be a resounding yes. This would be better as opposed to being a renter with a variable housing cost for the rest of their life. Leslie said she really felt like three years ago as we were just coming off the shock and worst of all this, there seemed to be a general consensus that if we fix housing, help these homeowners, HAMP and TARP, then the rest of the economy will follow. It seems that more recently there is not a consensus that it is about housing anymore. Leslie said this is a little bit of a mistake because as Bruce noted, you have a significant number of households, both in California and nationally that are underwater. People need to take responsibility for their financial decisions. On the other hand, there were certainly bad actors and all kinds of other things going on. It seems like maybe more of an effort made to assist housing will help everybody down the pipe.

Bruce has spoken in front of Fannie and FHA with Sean O’Toole, and one of the programs they discussed was a nothing-down loan program. This would be perfectly timely. He does not know what to do with people who live, for example, in Hesperia who owe twice as much on their home. He does not really think we should reduce all the mortgage debt, but we should say that we need to have a certain percentage of occupant owners, which makes sense to Bruce. There is a generation that can get into homes right now; the down payment is really immaterial. It is the payment that results from the purchase that will make that loan safe. You can move a lot of homes to the occupants if they did not have to have a down payment. One little change to the loan program would be if they don’t make their payment, let it walk to another buyer. This would be a simple FHA assumption like we used to have in the ‘70s. With just one loan program change, you could solve this.

Raphael Bostic, who is with FHA, was sitting right across the table from Bruce when he was talking about his ideas aforementioned, and Raphael said he had no problem with this. He had no problem having the loan walk to another buyer. Bruce asked if he could put this in writing for him, which Raphael found funny. He understood that this would be a valuable thing for the market. A lot of these things are not that complicated, we just need to get support and institute it. The problem is that if HUD made a decision, it doesn’t really sit with them but rather in Congress. The feeling is that a lot of the people do not necessarily understand the things they need to understand. Bruce does a fair amount of looking at charts himself, and there has been a really big change in the criteria both Fannie and FHA are willing to loan to.

In 2007 at the peak of the market, 45% of their loans were made to people with 6/18 FICO scores or less. Now, 3% are 6/18 or less. This is a radical shift. Leslie said when she was back in D.C. for the NAR meetings, there were several people from FHA talking about the situation that they found themselves in. They were under a microscope with respect to Congress in order to justify the program, keep the program stable, and prepare for delinquencies that had been on the rise. This clearly is not an accident, but they are trying to reduce their risk exposure. However, things really need to be looked at more holistically in terms of what is going to be good for the overall economy in the long term. Some of those people are probably going to be great credit risks. As far as a safe pile of loans, they have created the safest pile of loans ever in 2011. The problem was when you are loaning in California in 2008 and 2009 as prices descended 3% a month, the equivalent of the down payment, that is not going to work out too well.

The other thing that keeps getting drilled in over and over again is California does not look like the rest of the country. There is a bulk sale pilot coming out of Fannie Mae. CAR has been opposed to this since they have not had problems selling REOs. If they market them for 120 days and still can’t sell them, then maybe it will be okay. Let our industry have a shot at moving things through quickly, in a less costly manner, and give the Californians who are really anxious to own real estate an opportunity to do so. In other parts of the country, this amount of inventory is not a characteristic of their market. California is always out there on its own, and this is another case of that. It has to be really frustrating to be an REO agent with a 1/10 capacity. Some of the people Bruce new personally who had 600 listings in 2008 have 60 listings today. They could easily absorb any percentage of increase of REOs into their business model and benefit the local economy by creating commission, escrows, and repaired houses. We do not need Wall Street to come in and do that for us. Leslie said they have been very vocal on this issue and seem to at least have made the position crystal clear.

Bruce said he hopes everything makes sense to people since one of their mandates is supposed to be to save the taxpayer money. He does not see how selling in bulk accomplishes this. We should let investors or local owner occupants figure out what they will pay. It has to be more than a bulk sale to do a hedge fund.

Bruce wondered what the mood of the buyer is like in the marketplace. Leslie said she would describe it as a mix of elation and frustration. You have to understand that things cancel out, and it is cheaper to buy than to rent. People’s thinking is that this is amazing; they can get FHA 3% down. However, on the other hand it is one disappointment after another. Leslie has heard horror stories from agents in the association about 5 or 10 offers, even up to 30 offers being made, and it blows your mind. It is a very competitive market out there, so it is very important to set the expectations of what they are getting into. Especially for people doing this for the first time, they read the headlines, think it will be a slam dunk and that they can go into a ritzy neighborhood, pay $.50 on the dollar, get a loan, and everything will be easy. It is not like this at all; although Bruce said the nice part is that is priced at $.50 on the dollar, and you don’t have to get a discount.

Bruce said it drives him nuts sometimes when people search for a home. He will be speaking, and someone will come to him telling him they are looking for their residence. They are very specific about what they want, and then they want a deal. Bruce looks at them and says they have a deal.  They have the best price and historically best interest rate, and you are going to miss the opportunity of a lifetime by trying to be cheap.  You really need to figure out that they get to have the house of their dreams at a number per month they could never have imagined. A lot of times the inventory they are chasing is really not being chased by investors. Some of them want what was the $1.5 million dollar house that is now the $750,000 house. You don’t mess with this house. There is a little less demand in this type of product. There may not be a lot of listings, even in this price range, but Bruce thinks people sometimes think a discount is a big deal, when in fact getting the right inventory to live in is much more important.

Leslie said she follows a lot of local areas because the aggregate data is always going to be the aggregate data. You want to look into it much more deeply, and there are not a lot of listings. There is not a lot to choose from, so that creates this environment that it is a great time to buy, so why can’t I buy. The short sale process has to be crazy making if you are an owner-occupant where you make an offer and you really don’t know what the answer is for quite some time. Those rules are going to be changing, so you are going to get a response, thumbs up or thumbs down, within 30 days. One of the problems could be if they are literally so overwhelmed by files from customers. There is one person Bruce knows in the B of A short sale department who alone has 1,000 files. The easy answer would be no because there are no other answers that will emerge inside of 30 days. It seems if you really don’t have time to make an intelligent decision because you personally have 1,000 files, then if the answer has to emerge in 30 days the answer would probably be more negative than it needs to be. You would probably have to start it again.

Bruce wondered if the short sale process has been improving and if agents have said it is at least reasonable now. Leslie said it is mixed. She is hearing that things are much better than they were a year ago. Occasionally you hear of people closing in 45 or 60 days, relatively quickly. Leslie said she talked to a manager out in the Conejo Valley who got his report this morning and said it is getting a little more difficult again. It ebbs and flows, but in general there has been such a spotlight on the whole process for the last couple of years that it is getting better and people seem to be slightly more satisfied with what is going on, some lenders more than others. Bruce has said this is true and varies greatly. There tends to be some significant discrepancies between the experience that the homebuyers, sellers, and agents have depending on the lender.

You can go to www.car.org to keep up on all the statistics. Tune in next week as Bruce continues his discussion with Leslie Appleton-Young.

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.

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272-TNG Radio – Sean O’Toole 4-7-12

Friday, April 6th, 2012

Sean O'Toole


Sean O’Toole

Founder, ForeclosureRadar

(Full Bio)

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This week Bruce Norris is joined by Sean O’Toole, founder and CEO of ForeclosureRadar.com. Prior to launching ForeclosureRadar, Sean successfully purchased and flipped more than 150 residential and commercial foreclosures. He leveraged 15 years in the software industry. Sean used technology as a key competitive advantage to build his successful real estate investment track record. Now he has brought all these skills to ForeclosureRadar.

Bruce talked about how Aaron has a favorite word for websites, robust. If you say this about a person, it is not a compliment. However, if you say it about a website it is a good thing. This is how you can describe Sean O’Toole’s website. There is a lot to real estate and the real estate business, and Sean tried to make a tool that would work for all kinds of different things. They try to find new ways to use the site, go after new types of business, or have customers tell them something they had never thought of. The goal was to create something that would allow people to find a way to use it that works for them. Sean has a short sale section on his site now where the people that are actually trying to get them accomplished are able to communicate with each other and lenders who are easier to use. There was even a recording recently done that was shared with others, and this is a useful forum to which someone can have access. In their learning center they call it the short sale report; and it is free and right off their own website. They try to post information about each bank and links where you get the packages and letters as well as have a comment section where users can share information about each of those lenders, how they are to work with, and tips and tricks.

One of the general things about the internet is the nature of it is so inexpensive to access such a ridiculous amount of information. A lot of what is at the website is free of charge. When people pay for websites, they probably do not have an understanding of how much easier Sean has made the business. Bruce wondered if Sean even gets comments from people in the business or who have been in the business for a long time. Sean said he usually gets a double-edged compliment, especially from the ones who had been in the business before Sean’s existed. Half the time people are thinking they were saved a lot of time and allowed them to expand. Last year they may have brought 50 properties a month and made millions of dollars, and it is an awesome compliment that they used Sean’s primary system. However, it is also followed by people telling him he reels in the market and brings in a lot of other people. He gets both ends of it.

Bruce was never really a full-time trustee sale buyers until Greg figured a lot of it out along with a lot of the tools that were provided him. You go to a sale, and you see the same three or four people there every day. Now you go, and there are probably 50-75 people, and they change a lot. People can get up to speed a lot quicker than they used to, but they do not really have any appreciation of how much work has gone into getting them there. Sean said a lot of it was an issue of the times. People shift to where the market and the opportunities are. We went from a market where foreclosures did not matter to one at the peak where they make up the majority of the market in quite a few areas. Sean said he was looking at some stats he ran where in San Bernardino you went from 90% of the market being traditional market sales with 6% being flips and investor-run deals with 2% short sales to 46% REOs and 31% regular market sales in 2009. A lot of it was most likely out of necessity since we had a lot of builders who were pushed out of the building business and went into the foreclosure business. A lot of commercial brokers whose business was dried up also went into the foreclosure business. A lot of it was just natural, and Sean said they were fortunate to be in the right place at the right time.

Being an investor, Bruce looks at Sean’s website for these reasons, but he wondered what the government would use ForeclosureRadar for if Sean had them in his customer base. The first thing Sean said he saw them use ForeclosureRadar for was mosquito abatement. By finding properties that were not necessarily being maintained in the pools, the government was using their website to search for swimming pools in foreclosure properties so they would know to go treat them for mosquitos. Later on, a lot of cities get active to try to keep light down with code enforcements and the extension of the foreclosure process that we have seen over the last couple of years. Once somebody stopped making their payment, a lot of times they stopped making repairs too. In some ways it is great that they slowed down the foreclosure process as it has kept inventory off the market and kept people in their homes longer. However, at the same time their homes are not getting repaired, so code enforcement officers are using ForeclosureRadar to go look for these issues and try to be proactive about it.

Whether the code enforcement comes into play after the trustee sale or in the middle of the process usually depends on the county and the budget. He has seen some start off at the NOD stage. They will maybe take photos of the property at that point and continue to monitor it. If it goes downhill at any stage during the foreclosure process, they will start enforcement actions.

Bruce said something he had never seen on the website was a wholesale buyers list. One of the things Sean said he wanted to do from the beginning was they had a lot of incredible customers, the most knowledgeable foreclosure realtors and hottest investors, and they wanted to come up with a way to start connecting to those people. For all their customers, they allowed them to basically have a free advertisement out on their public website in something they called the marketplace. He wanted to connect folks and start allowing their customers to find each other and find services. They have investors who are willing to bid for others, so there is a bidding services section as well as people in property management, which some investors might be interested in. There are also a lot of realtors that are foreclosure experts and all get to advertise on this free foreclosure marketplace that is available to anyone. This section has not been updated as much since Sean said he tends to be more of a product-centric person than a market-centric person, which he said he is working on. He did say this feature has been around for a year.

Foreclosures have been a dominant player in the last five years, which is not typical California. Most typical California was the stretch from 2000 to 2006 where a trustee sale was rare. There were always a certain number of foreclosures, but Bruce wondered how radically this changes the business model that really concentrates on this. Sean said there is no question that foreclosures will play a less dominate role. It is already clear that REOs play a less dominant role now than they did even two years ago. There is no doubt that will even change and will continue to change. We went from 46% of the market being REOs in San Bernardino in 2009 to only 30% in 2011. That will most likely be lower this year. On the other hand, the motivators and players of who is in the foreclosure market changed in the timeframe from 2004-2006. You get some of the big consumer foreclosure sites, which he focuses on professionals rather than consumers. These sites had their best years in the years when there were the fewest foreclosures. They had less expense because they did not have to track as many foreclosures, and there were more people clamoring to invest in real estate and trying to find good deals. So there are really two sides to it.

Sean had mentioned how he thinks San Bernardino will have less of a percentage of REOs, and Bruce wondered if this is for natural causes or induced causes. Sean said he believes it is still largely from induced causes. You still have a lot of people underwater and lot of people in the foreclosure pipeline. However, it is becoming less and less politically correct to foreclose, so banks and looking for every other alternative possible. The latest thing is the REO to rental program. Banks all blame regulations for delaying these things and not pushing them through. At the end of the day it is all good for their bottom line to not foreclose and to delay the processes for as long as possible. We have seen this trend continue and grow. We are working through some of the problems as wells, so there are fewer people in foreclosure or underwater today than there were a few years ago. A lot of this is due to price increases.

One of the things Bruce has been studying about deleveraging debt is they are talking about the U.S. doing a really good job, but then in asterisks it said 86% of the debt reduction was just defaulting. It is improving, but it is not necessarily because we are having price increases. It is improving thanks to the strategic defaulters. Eliminating negative equity is a contrarian view.

Bruce wondered what the real estate debt was at the peak of the market. Sean said we have good numbers nationally, but not so well locally. According to the Fed funds, which the Federal Reserve publishes, we went from $4 ½ trillion in mortgage debt in 2000 to $10 ½ at the peak. We are now back down to about $9.8 trillion. This is a really good high-level gauge just to see where we are in the problem overall because if you think about debt as a percentage of income (in some cases the percentage of GDP), and you look at the number of new households and increase in household income from that time, the number should really be closer to $6 ½ trillion. This is where we should be back to if we want the same level of homeownership that we had in 2000. Unfortunately, we are a long way from being at that level, and Sean said he thinks this is the heart of the problem with the economy. Although, he realized that most economists would disagree and say it is jobs or something else. It is hard for him to see how you would have jobs when you have a consumer-driven economy where consumers are underwater in their homes. They have perhaps $3 ½ t o$4 trillion of too much debt.

What is interesting is that Bruce has talked to people who said banks have already written all this off. One of the interesting things about when banks write debt off is it does not write it off on the homeowner side. It is a one-sided write-off, so it does not improve the consumer position at all. Bruce has serious doubt that anybody has written off $1 trillion of anything, even if they put all their piles together. This is a lot of debt. The question is why you would want to model accounting that Congress put so much pressure on, specifically the Federal Accounting Standards Board. They say they have taken the write-downs, but it is the write-downs down to their fantasy values for these assets.

Bruce wondered when somebody wants to get into the business of trustee sales what are the typical rookie mistakes that he sees. Sean said the biggest mistake in terms of cost is to buy a second mortgage that you think is a first mortgage. The one thing Sean really encourages anybody entering this business to do is to really take the time to learn how to do title research. They regularly see their customers rely too heavily on their models. Sean said they guess what the positions are, and they give you that information. This helps with searching and the rest, but they do not intend for them to buy based on that information. They make things pretty clear with disclaimers and the rest, and nine times out of ten the models would probably work for the people. If your first deal is that 1 out of 10 where their guess is wrong or there is something strange about the title; that can be a very big loss. They will see other people who will call somebody, for example some junior customer service person, and they will ask them what they think is going on. They will usually tell them whether it looks like a first, but this is really not the way to do title research. If you cannot take the time to learn how to do it, you really should not be buying at auction. This is really not the place for somebody that is going to give it a shot and really not become good at it before they show up for the first day.

Bruce wondered what the likelihood is of somebody about to make a mistake having somebody there say not to bid on a second. With there being a lot more people down there, Sean said he sees helpful folks more often. Sean said early on in his foreclosure investing career he did this for a newbie and saved him about $150,000. He was still a relative newbie, having been down there 6 months, and the other regulars almost lynched him. They basically told him with more competition there is not really enough business to go around already, so by helping him out he saved him a lot of money. This means he was going to come back the next day. If he had lost the $150,000, they would never see him again.

Bruce said he prefers Sean’s route to the other people’s any day. Bruce actually did this intentionally one time to see if he had many friends and qualified intentionally for a second with his cashier’s check, and two other people qualified with him. However, when the opening bid came nothing was said. One of the regulars came over to Bruce and asked him what he had been doing, and Bruce said he just wanted to see if the person would tell him and see if he knew. In this way he made a really good point because you have to qualify to bid beforehand, and you will sometimes see the pros go qualify for things people might be confused about in order to try to suck them in. Sean has even seen pros knowingly bid to a point where they had a $50,000 loss against somebody trying to increase the other person’s loss because they realized the other person did not know what they were doing. Rather than letting them take the small loss, they actually took the risk of losing tens of thousands of dollars just to see that person’s loss be matured.
One of the things that has really changed is that before there was real equity, so when you are foreclosing in the ‘90s, people had older loans and there was equity. In this cycle, real equity is virtually non-existent, so you end up having something called a drop bid. If you asked somebody who attended trustee sales on a regular basis back in the 90s if they had checked out the drop bids, he would not have that vocabulary in his mind at all. Now, all of a sudden it is the entire business. Bruce wondered how somebody would find the drop bids before Sean’s site provided the service. Sean said it was largely by attending the sale or calling and checking ahead of time to find out. Pre-announcing opening bids is something that really started fairly recently. You would occasionally see it beforehand, but nobody even thought to enquire as what the opening bid was because up until 2008, the opening bid was the amount due. The years 2007 and 2008 were a terrible time to be in the auction business because everything had an opening bid that was above the market value. This was why the REOs were so overwhelming because they were taking back 95-99% of the inventory they could have sold to somebody with a cashier’s check. In the peak month, 97% went back to the bank.

One time in San Bernardino, Bruce happened to look in the MLS, and it was so ridiculous. There were 25 properties per $1,000 increment all owned by lenders. 101 had 25, 102 had 25. You had your way if you were buying through the MLS at that point. It was right at this time that we claimed the term shadow inventory and were talking about bank-owned properties. For all of those listed in the MLS, there were at least that many if not more that were not listed in the MLS. That bank-owned inventory was pretty short-lived because once the banks realized they needed the correct prices for what people could afford without the crazy financing, that shadow inventory disappeared. In a lot of places we went from 20 months of inventory to 4 months of inventory in a few month period.

Shadow inventory is still a very misunderstood term as the definition has shifted to talking about the REOs that were not being marketed to something else. Bruce was just in front of the mayor and city council in Riverside, somebody brought up shadow inventory, and his emphasis was the banks were holding onto a lot of properties. He was emphatic about it that they had not done what they were supposed to do as far as putting up for sale. It is a little hard to deal with somebody who is that emphatic with a chart, but he does make a point that there is something called shadow inventory that has changed definition.

If you want to check out Sean O’Toole’s website, visit www.foreclosureradar.com. He helps realtors, investors, and government agencies track foreclosures in California, Arizona, Nevada, Oregon, and Washington. The cost is $49.95, and there is a discount for members of the California Association of Realtors.

Tune in next week as Bruce continues his interview with Sean O’Toole.

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.

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The Norris Group Real Estate News Roundup 2/17/12

Friday, February 17th, 2012

Sources:
U.S. foreclosure filings decline in January
Delinquencies and Foreclosures Decline in Latest MBA Mortgage Delinquency Survey
Foreclosure Sales Up for West Coast States Except Washington
Initial and Continuing Claims for Unemployment Fall Again
Builder Confidence Increases for Fifth Consecutive Month in February
Purchase Applications Decrease in Latest MBA Weekly Survey
Southern California home sales inch higher, prices dip lower
Deadline for foreclosure review submission extended
Military members may get six-figure payday for wrongful foreclosures
Citigroup pays $158M to settle mortgage fraud
Obama Proposes Extending Tax Waiver on Mortgage Debt Forgiveness
AGs weeks from filing foreclosure settlement documents

Today’s News Synopsis:

In this week’s video, Aaron Norris gives the news of the week in the world of real estate and other big news of the week. In spite of a decrease in home prices, the market actually saw an increase in housing inventory.  The rate for 30 year mortgages continues to remain steady at an all-time low.  The unemployed will soon only have 73 days to collect benefits for unemployment.

In The News:

Housing Wire – “Home prices fall, but inventory levels improve” (2-17-12)

“The national inventory of single-family homes, condos and town homes declined 23.2% in January from a year earlier, as more markets benefited from an influx of investors and buyers looking for deals, Realtor.com said.”

DS News – “Property Fraud Valuation Rises Following Decline” (2-17-12)

“The risk for property valuation fraud rose nearly 8 percent for this fourth quarter following a period of decline, according to the Mortgage Fraud Risk Report released by Interthinkx.”

Realty Times – “Average 30-Year Fixed-rate Mortgage Unchanged From All-time Record Low for 3rd Consecutive Week” (2-17-12)

“In Freddie Mac’s results of its Primary Mortgage Market Survey®, the average fixed mortgage rates remained unchanged amid mixed consumer sentiment data.”

Inman - “Prudential Douglas Elliman pledges $100k for real estate scholarship fund” (2-17-12)

“The New York University Schack Institute of Real Estate, founded in 1967, announced its first-ever scholarship from a residential real estate firm earlier this month.”

CNN Money – “Congress restructures unemployment benefits” (2-17-12)

“Beginning later this year, the maximum number of weeks the jobless can collect unemployment benefits will be reduced to 73 weeks.  The legislation, which Congress approved Friday, calls for unemployment insurance to be reduced in two stages. States with lower jobless rates will see federal benefits trimmed starting in June. The full cut will go into effect in September.”

Housing Wire – “Colorado foreclosure activity drops to five-year low” (2-17-12)

“Foreclosure activity in Colorado for January fell to lowest level in about five years, but the mortgage servicing settlement deal could spark additional activity, the Colorado Division of Housing said.”

Bloomberg – “Gillard Urged to Copy Bernanke as Australia’s Lenders Squeezed: Mortgages” (2-17-12)

“Australia’s Prime Minister Julia Gillard may be forced to follow U.S. Federal Reserve Chairman Ben S. Bernanke by increasing mortgage purchases as house prices slump and the nation’s biggest banks extend their grip on the home-loan market.”

San Francisco Chronicle – “New housing construction exceeds January forecast” (2-17-12)

“Builders broke ground on more homes than forecast in January, helped by warmer weather and adding to signs the residential real estate market is stabilizing.”

Housing Wire – “TARP banks pushed Treasury over executive pay and won” (2-17-12)

“Executives at the largest financial institutions pressured the Treasury Department in 2009 to allow higher executive pay and threatened to hold off paying back bail outs if the demands weren’t met.”

Hard Money Loan Closed

Rancho Cucamonga, California hard money loan closed by The Norris Group private lending. Real estate investor received loan for $190,000 on a 3 bedroom, 2 bathroom home appraised for $315,000.

California Real Estate Investor Events:

Bruce Norris of The Norris Group will be at the 2012 Kick Off Brunch on February 18, 2012.

The Norris Group posted a news event.  Bruce Norris of The Norris Group will be at the Riverside Escrow Association on February 21, 2012.

Looking Back:

4,966 new and resale houses and condos sold in the Bay Area, according to MDA DataQuick. Statistics from the MBA showed the delinquency rate for mortgages decreased to 8.22% in the 4th quarter of 2010. The Labor Department said jobless claims increased 6.5% the previous week.

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.

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260-TNGRadio – Craig Hill 1-14-12

Friday, January 13th, 2012

Craig-Hill

Hard Money Lender for The Norris Group


(Full Bio)

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This week Bruce is joined once again by Craig Hill of The Norris Group. Craig has worked with The Norris Group since the company opened in 1995. Craig has worked with the real estate investors, helping them access money for their deals and trust deed investors who want to get a very safe yield on their money. Prior to working with The Norris Group, Craig was in the hard money loan business for years prior to that; and the expertise he brought with him has proved him valuable to the success of the company.

Today’s radio show focuses on the borrower side of loans. Craig deals with calls all the time and goes through the terms of the loan, and there will be some callers who are connected to the advertisements of 4% and are completely shocked when Craig tells them it will be 12.5%. They do not understand this side of the world at all. However, Craig said these calls usually come from people who have never done it before, so usually whenever Craig gets into a situation like this he tries to ask them how they funded the last deal they did. You really have to establish that this is a different world, and if somebody has been a property buyer for a long period of time, they have a better understanding. Sometimes if you get that person who feels they can do it, it might be best for them to pursue a loan at their bank under a non-owner occupied program. Craig tells them they might be able to get it if they have perfect credit and other things. There are a lot of different ways to handle it, but Craig said The Norris Group usually deals with investors who do this for a living and have an understanding of what the costs are going to be.

The real education is to go ahead and try whatever you think is easier or less expensive because the lending world is really not working very well right now. Bruce worked with a major bank where the manager told him the frustration they have right now where they cannot fund owner-occupied loans inside of 75 days. In the investor world, if you do not have speed, you don’t find deals. They have to be able to close their loans quickly, and they have to rely on the fact that the deal will close. People are always asking how they can save money, so they either try to list the house themselves or find their own money source. People even hold seminars about how people can find their own money, but it is really not that easy. It is not that easy to get trusted with money. You always have to ask yourself whether it is really cheaper or not because there is always something attached to it, including a no answer when you thought you already had a yes. The Norris Group gets a lot of these kinds of calls where someone calls at the last minute and only has three or four days or less and they need to close it. Someone had told them something didn’t perform. It is so competitive out there now, so you have one loan that does not perform then you can forget about doing business with your agent again or anybody that agent knows. You have to see that this was really the cost of not getting a loan as it exceeded far the cost of getting one. It is not easy to watch over the years people going through a process of trust. As a person, to start from scratch is just not a reliable source.

Bruce came through the hard money business first as a borrower of considerable amount of money on a regular basis. He really did not consider the cost as onerous at all; he just needed access to it. With reliability comes the ability to grow. It’s the same way with The Norris Group business as a whole and just like how it is with an investor. If an investor has either his own money, such as a limited amount like $200, they really are working under constraints. Once they have access to somebody who might have, for example $1 million, they can start and tailor their business knowing they have access to $1 million. There is a cost to this, but you also have to look at the benefits of this. The benefits are you can up your marketing and do many more types of projects. It’s like being a construction lender without having a lender. A construction worker has to have some leverage, or he is only going to build ten homes. This has been the same way with The Norris Group; the borrower side has always grown along with the money side because the money side is there and the borrowers need the funds. This is what a hard money lender is.

When Bruce and Craig met, their meeting came about because Bruce was seeing more opportunities than he could personally handle. He had a fair amount of cash and a credit line, and all these were active on free and clear things. He had a chance to go to HUD auctions that were tossing out $.50 deals a half a dozen times per auction. He also had the chance to buy a track of homes at the same number. He looked around and saw how he could not take advantage of it, and this was the start of their meeting. When Bruce and Craig met, this was not the typical loan for a hard money loan business. It almost did not exist, and this was in about 1992 or 1993 when for hard money lenders the rule of thumb was a house was worth what you paid for it. If one next door sold for $100 that was fixed up, then you bought one that was exactly a model-match right next door for $50 or less, then you could borrow $30 or $40 on that one. At the same time, The Norris Group could lend somebody who had never made a payment $60 grand on the other one. When Bruce first came to Craig, he had to fight very hard to get the first few deals through because it was not done that way. Now, in a lot of ways hard money is synonymous with that exact function for investors. Back then, however, it did not even exist.

Bruce said he remembered for one of the properties he bought at a HUD auction that was appraised, they had not discussed what he had paid for it. He asked for it to go ahead and be appraised and would be able to borrow X-amount of percentage on the value. When Craig told Bruce the value, he asked Craig if it bothered him that he would be giving him money back more than he paid. The first thing Bruce thought of was they had a really unique opportunity there and Craig was probably dealing with his type of the world for the first time, and Bruce had access to a lot of dough for the first time. Bruce told Craig he could rest assured and made six payments on the first loans, and all of a sudden it dawned on the owner of the company that they had never had anybody do that prior, so they either understood that Bruce understood it or he was capable more than their other clients had been. This was an important transition for the hard money loan industry because it followed with Craig hoping there were more people like Bruce. Craig spent three or more years until he had all the other loan officers ask him when he thought it was going to be done. Some of them never transitioned into doing that and Craig strictly transitioned into doing only that because he got used to the facts from Bruce and others thinking the process was very efficient. They knew how to make the most happen with the least effort.

Bruce has always been surprised because he remembered thinking when 1995-97 passed and it was the end of the REO world, they were really thinking from where all the deals were going to come from, and they did. The private party purchasing and construction started, and all of a sudden The Norris Group was even busier. Craig said this has been the one important thing that there has always been a niche for good borrowers and private money. If good people are out there doing something and making a profit at it, whether it be buying off private parties or lots when the time is right, there is always an opportunity and a surprise that no matter what the real estate market is like, there is always a space for hard money loans. Bruce is so convinced about this now that he has had the chance to go back and rub shoulders with the people who make decisions in the normal world and see how they view investors. He came back with a self-assurance knowing there will always exist a need for a private loan business because we just make decisions that are common sense, yet the infrastructure prevents this. For example, The Norris Group is not afraid of a home that does not have a kitchen because they have dealt with 1,000 of them and have not been damaged by any of them because they know a kitchen can reemerge for a certain amount of money. In the loan process, they retain the money that would cause a kitchen to show up if the borrower stopped paying. You start putting the pieces of the safety together and think you can make the loan, but it does take private money to fund it quickly and accurately. Bruce does not think we are ever going to have a lot of competition from the other side.

Craig is amazed how much conventional lending will not do. There are so many hoops to go through, and the borrowers The Norris Group is loaning to have wealth and credit. They have everything where you think you can walk in and get any amount of loans you want, and they can’t even get loan #1. Craig received a call from a borrower not too long ago who owned about 4 houses free and clear for about $120-$140,000 each. This is his money he put into them, but the bank will not work with this because they consider it cash out. Craig wondered if he would be a stronger borrower if he leveraged at 100%. Here is somebody with perfect credit with four free and clear houses and the bank will not work with him because they see this as cash out. It does not make sense to him. Somehow this puts him in less of a safe position that he owes, for example, $200 grand at 50% and has $200 grand of liquidity to make sure it gets paid. This is a decision-maker you’re competing with and you think you will be okay. With The Norris Group on the other hand, their response is how quickly they can get their appraiser out there.

Some people are disappointed that there are more hoops than they thought. They attend a seminar and get told that hard money only looks at one thing, and then they go elsewhere like The Norris Group and see that this is not the case. They were not really told what was really going on. Because of the nature of loans and more recent history, Craig said one thing that is very difficult for people to understand is if you are brand new, it is very hard to delicate the whole process and think you are going to have a good result. You don’t even know how to protect yourself. This is the most frustrating thing Craig sees from some of the national seminars because it is almost like they are a part of a group and are dealing with a mentor, while The Norris Group takes a look at the deals and sees they are not deals. The number one thing The Norris Group wants is to make sure people have a deal, or they are going to talk them out of it. Bruce said this is an important thing for people to know that there are companies that are built that way and companies that are not. It has to go through some filters. If The Norris Group is going to make a loan on it, then there is probably a very high success rate for the investor.

There are several filters. For one, you might look at the sheer numbers and say it is not a deal, and then you have an appraiser who goes out with a lot of experience in investing and says that the numbers make sense but it is really a dangerous property for specific reasons. The filter The Norris Group has for people who borrow money from them is second to none. Bruce trusted himself and said he would actually have cause himself if he had found a deal. If someone like Rick Solis had gone out there and told him he really needed to take a second look, then he would. You really cannot put a value on this type of filter, and sometimes The Norris Group will get calls from people who are thinking of buying all cash, and Craig tells them to call him when they have their numbers. If they have something in escrow that they are thinking of doing, then they need to take a quick look at it because it is very easy to see where somebody can make a mistake.

For people who don’t have experience, they really don’t realize how expensive the journey will be, so there are surprises and repairs. All these things start taking away, whether it is a percentage here or there, and all of a sudden a deal at, for example, $.82 on the dollar that seems like it is going to make you a lot of money actually costs you a lot of money. If you get over 75% of what the house is worth in repairs and the purchase price, you are really starting to deal with a very thin margin. Craig will back out everything and start at 100%. He will ask them if they are going to sell it themselves or if they are going to have a commission, because now more people are paying incentives such as 2 or 3% of the closing cost. If you have something and then you have the cost of the loan, pretty soon they can see that what something is costing and being sold for is not leaving anything in the middle. You are going on a 6 month journey, and this is where the experience comes in. You are going to hire a construction crew you have never dealt with, and the odds of this not working out are higher than dealing with one you have dealt with twenty times. Everything that potentially goes wrong in the business is especially likely to occur to the first-time person. For that individual, having a deal is critical. The first step is the person needs to have a deal.

The second most frustrating thing for people is they really are told that they don’t need to have any money or need only a very little money. We are looking at things in terms of the borrower needs to have survivability and a successful outcome. Years ago Craig had a client who had a house and made payments like clockwork, then all of a sudden he stopped making payments. He called in and said he had a specific amount allocated for that, and Craig said it was quite a surprise. This was years ago; so more and more The Norris Group has had the philosophy that the really liquid cash is very important because it gives them survivability to only to protect The Norris Group and their investor, but it really protects their down payment and what they put into the property. It gives them the ability to get out of a situation instead of lose a situation. It is also really a benefit for them to make a monthly payment.

Craig has always been asked if the payments can be included in the loan, and he learned years ago from making an unwise transaction with his baseball cards that once the money was long gone he made payments on it every month. Every time he wrote the check it was a lesson to not do it again. In the same way, if you are making a payment on a property you realize that it is costing you money. Just because you might have payments for six months, you cannot just sit around and wait. You have to take action since the problem is not going to solve itself. The payments are either not a high priority or the borrower has a tendency to not think about making payments. The Norris Group used to do seconds for people so they would not have as much in, although this is something they do not do anymore. They realized that not everyone is disciplined. The Norris Group not only looks at the deals, but they also try to help people be disciplined so they have successful outcomes. You cannot try to do three if your limit really should be one. Stick with the one because you are really going to have a successful result on that one. One of Bruce’s favorite statements Craig has made is, “Lost another loan; made another client for life.” In this case, the client was told the truth they actually needed to hear to see that they now have confidence that they have a backup system they can trust and will not get hurt by their loan officer.

There is almost as many people out there who would thank The Norris Group for not doing deals, talking them out of a deal, or explaining how it works. It is very satisfying because what Craig tells people when he is talking to them is he can tell by their voice when they are a little disappointed, but he tells them he can deal with that. Being a little disappointed right now with Craig telling you no or what is the real deal is much better than the client having a deal three weeks from now where they are going to lose the deposit or having a deal nine months from now where you lost $20 grand. This is going to be a lot more disappointing. The philosophy at The Norris Group is to deal with it as it comes, and people are usually very appreciative of the fact that TNG tries to give them good advice.

Bruce mentioned the home shows and how one of the things he noticed was how frustrating they were because some of the reality was missing. On the show, you are shown a property in the beginning that needs a lot of repair. It’s a perfect opportunity for two investors, but then you come back four months later and they look like they want to get a divorce. Then, the realtor comes back in and tells them what they left out. Going from A to B is an expensive process, and it just shows there are deals that do not fit the level of experience of certain buyers. Craig always tells them when they get their first deal; he tells them they did not find the deal, it found them. There were several people who passed on that deal who were experienced investors, and the newer people need to stick with what they know and what is the simplest process. You have to leave the other things for the other people, and conversely in their group of clients they have a lot of clients who are experienced. They have one right now out in Orange County who is buying a property for $220,000 and are putting about $125 grand into it. This is a very experienced investor, but it is also a niche because not a lot of people are going to be able to accomplish what he is going to accomplish. You have two sides of the scale; one that can tackle these kinds of things, and the newer group that needs to stay away from this. Most often these are the deals that the new people find that other people had passed on originally.

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.

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The Norris Group Real Estate News Roundup 5/16/11

Monday, May 16th, 2011

Today’s News Synopsis:

MDA DataQuick reports 6,789 houses and condos sold in the Bay Area during April. TransUnion claims the national mortgage delinquency rate fell to 6.19% in the first quarter. The United States is expected to reach the $14.29 trillion debt limit Monday. National mortgage debt decreased by nearly $400 billion from 2007 to 2010, according to Frank Nothaft of Freddie Mac.

In The News:

MDA DataQuick – “Bay Area Home Sales Lose Momentum; Median Price Dips Below 2010 Level – Again” (5-16-11)

“6,789 new and resale houses and condos sold in the nine-county Bay Area last month. That was down 3.7 percent from 7,051 in March and down 3.1 percent from 7,003 in April 2010, according to San Diego-based DataQuick.”

NAHB - “Builder Confidence Unchanged in May” (5-16-11)

“Builder confidence in the market for newly built, single-family homes held unchanged at the low level of 16 in May, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The index has now remained at this level for six out of the past seven months.”

Housing Wire – “In these troubled times, more Americans come current on mortgages” (5-16-11)

“The first-quarter national mortgage delinquency rate decreased to 6.19%, according to credit-reporting agency TransUnion. The numbers are down 3.4% from 6.41% in the fourth quarter and down 8.6% compared to 6.77% a year earlier.”

Housing Wire – “US to reach debt ceiling Monday” (5-16-11)

“The United States is expected to reach its $14.29 trillion debt limit Monday, a turning point that has kept members of Congress debating for months.”

CAR - “April 2011 sales and price report” (5-16-11)

“Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 499,830 units in April, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. April home sales were down 2.9 percent from March but up 5 percent from the previous year. The statewide sales figure represents what would be the total number of homes sold during 2011 if sales maintained the April pace throughout the year.”

Bloomberg - “Treasury Yields at Almost 2011 Lows on Concern Economic Recovery Is Weak” (5-16-11)

“Ten-year yields were little changed at 3.18 percent at 9:05 a.m. in New York, according to Bloomberg Bond Trader prices. The 3.125 percent note maturing in May 2021 dropped 2/32, or 63 cents per $1,000 face amount, to 99 17/32. The yield fell to 3.13 percent on May 13, the lowest since December.”

Housing Wire – “Outstanding mortgage debt plummets in three years” (5-16-11)

“Mortgage debt fell nearly $400 billion between the end of 2007 and 2010 as more Americans continued to pound away at their debt and turned to refinancing to reduce monthly mortgage payments, according to new analysis from Freddie Mac’s Chief Economist Frank Nothaft.”

Housing Wire – “Freddie offers closing cost help, agent bonuses on REO” (5-16-11)

“The government-sponsored enterprise held 65,000 REO properties at the end of the first quarter, but it sold a record 31,000 during the period, according to its financial supplement.”

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.

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The Norris Group Real Estate News Roundup 4/14/11

Thursday, April 14th, 2011

Today’s News Synopsis:

Statistics from MDA DataQuick show 7,051 houses and condos sold in the Bay Area last month. CAR says home sales increased 3.1% in March. According to RealtyTrac, foreclosure filings dropped 27% year over year. A newly proposed bill may require mortgage servicers to respond within 45 days of receiving a short sale request.

In The News:

MDA DataQuick – “Sales up, Prices Down for Bay Area Housing Market” (4-14-11)

“A total of 7,051 new and resale houses and condos sold in the nine-county Bay Area last month. That was up 41.3 percent from 4,991 in February and up 0.2 percent from 7,040 in March 2010, according to San Diego-based DataQuick.”

CAR - “March sales and price report” (4-14-11)

“Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 514,090 units in March, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. Sales in March increased 3.1 percent month-over-month and 1.5 percent year-to-year, aligning with C.A.R. sales expectations for 2011.”

Inman - “Feds announce partial settlement with ‘robo signing’ servicers” (4-14-11)

“In a partial settlement addressing so-called ‘robo-signing’ foreclosure practices, the nation’s largest loan servicers have agreed to hire outside consultants to review foreclosures initiated in 2009 and 2010, and to compensate homeowners who should not have been foreclosed on.”

Los Angeles Times – “Mortgage rates continue to edge higher” (4-14-11)

“The average rate for the benchmark mortgage rose for the fourth straight week, according to Freddie Mac, which said in a report Thursday that the lenders it surveyed were offering 30-year loans at 4.91% this week.”

CNN - “Foreclosures off 30% this year” (4-14-11)

“The number of foreclosure notices filed during the first three months of 2011 fell 27% compared with the first quarter of 2010, according to a report from RealtyTrac released Thursday.”

NAHB - “Proposed QRM Harms Creditworthy Borrowers and Housing Recovery” (4-14-11)

“In the midst of a very fragile housing recovery, the government is throwing a devastating, unnecessary and very expensive wrench into the American dream. First time homebuyers will have to choose between higher rates today or a 9-14 year delay while they save up the necessary down payment. And 25 million current homeowners would be locked out of lower refinancing rates because they lack the required 25 percent equity in their homes.”

Housing Wire – “Jobless claims unexpectedly rise to 412,000 last week” (4-14-11)

“For the week ending April 9, Americans filed 412,000 initial jobless claims, which is 27,000 more claims when compared to the previous week’s revised figure of 385,000.”

Housing Wire – “Bill introduced to speed up short sales” (4-14-11)

“A bill was introduced in the House of Representatives this week, requiring mortgage servicers to respond within 45 days of receiving a short sale request.”

Bloomberg - “U.S. Foreclosure Settlement Muddies Outlook for Mortgage Relief From Banks” (4-14-11)

“The 14 largest U.S. mortgage servicers, including JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC), agreed to review all foreclosed loans from 2009 and 2010, and pay back losses in cases that were mishandled. They also will improve procedures by hiring staff, upgrading document-tracking systems and assigning a single point of contact for each borrower. ”

Orange County Register – “Are these home prices too good to be true?” (4-14-11)

“There have been 79 short sales that have closed escrow in Huntington Beach thus far this year. They have sold for an average of 99.9% of their list price. That’s a pretty incredible number. I fully understand the reasoning for aggressively pricing a short sale listing. Agents want to get an offer in front of the bank as soon as possible to get the ball rolling on the short sale. But I think this has to be done within reason.”

Orange County Register – “O.C. hotel room rates jump 6.6%” (4-14-11)

“The lodging experts at Colliers PKF report that Orange County hotels in February saw average room rates at $138.19 per night — that is up 6.6% in a year (or $8.52 a night.) Meanwhile, 67.3% of Orange County hotel rooms were filled vs. 63.9% the year earlier.”

Housing Wire – “Lawmakers to consider reducing QRM down payment to 10%” (4-14-11)

“Lawmakers in the House of Representatives are considering a push to lower the 20% down payment required for exemption of the recently proposed risk-retention rules on securitized mortgages.”

Looking Back:

One year ago, the U.S. Treasury reported more than 1.4 million borrowers had been offered trial modifications under HAMP. The MBA’s weekly survey showed that mortgage application volume decreased by 9.6 percent from the previous week. Banks required over 25 percent more time to foreclose a property in in California from the previous year. According to statistics from the Federal Reserve’s Beige Book, overall economic activity increased in nearly all parts of the country.

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.

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The Norris Group Real Estate News Roundup 4/8/11

Friday, April 8th, 2011

Sources:
Southern California rents are likely to remain flat, study says
32 million people struggling to pay mortgage
Home prices double-dip in West but flatten nationally: Clear Capital
Home prices fall for seventh month in February
U.S.: World’s 7th worst housing market
Possible Federal Government Shutdown
Federal shutdown would hit California hard
Analysts say FHA shutdown possible without budget consensus
Tax rule that would’ve hurt small business is repealed
Home Builders Applaud Congressional Passage of 1099 Repeal
The 2011 Community Preference Survey
Mortgage aid offered to those who cashed out equity

Today’s News Synopsis:

The government has yet to agree on a budget. If they cannot agree on a budget before Monday, many jobs will be put on hold, and many government sponsored programs will temporarily stop functioning. CMBS delinquencies fell to 8.74% in March, according to Fitch. The due date on taxes for property owners has been extended for 1 day.

In The News:

NAR - “What a Government Shutdown Means for REALTORS®” (4-5-11)

“If legislation providing for funding is not signed into law to extend funding after April 8, the federal government could shut down. This means many, but not all, government programs, including some that impact federal housing and mortgage programs, could grind to a halt as early as April 9, 2011.”

Los Angeles Times – “Home lenders shed workers as mortgage rates climb” (4-5-11)

“the nation’s No. 1 mortgage lender, has handed pink slips to about 1,900 workers who had processed loans generated both by Wells’ mortgage unit and by independent brokers, a spokesman said Thursday. About 230 of the positions were in California, said Jason D. Menke, a spokesman for Wells Fargo Home Mortgage in Des Moines, Iowa. Nearly 100 cuts were made in the San Diego area, 59 in Irvine and fewer numbers in San Bernardino, Rancho Cordova and Walnut Creek.”

Housing Wire – “The claim: Short sales closed in 30 days” (4-5-11)

“But if a mortgage servicer says his or her company can complete a short sale in 30 days, are they being overly ambitious? Eric Friedman, president of PREO, doesn’t think so. His 10-month-old company boasts the ability to accomplish this task. Through PREO.com, Friedman says he lines up banks, investors, servicers, real estate agents and buyers in a seamless process to transact a short sale in as little time as 30 days.”

Housing Wire – “Fisher: The time for banks to support the economy is now” (4-5-11)

“Fisher called for the immediate end for the Federal Reserve’s quantitative easing program and a pullout of all federal support for America’s financial institutions. He made his comments while speaking at the 2011 Society of American Business Editors and Writers conference at Southern Methodist University in Dallas Friday.”

Orange County Register – “SEC: O.C. activist lied to investors” (4-5-11)

“The Securities and Exchange Commission filed civil fraud charges Thursday against high-profile Orange County money manager and political activist Charles ‘Chip’ Hanlon, alleging that Hanlon ‘vastly overstated’ the size of his Delta Global Advisors financial advisory and the financial health of the business.”

Orange County Register – “Property owners get extra day to pay tax” (4-5-11)

“April 10 is the traditional due date for the money, but because this year that day falls on a Sunday, the deadline has moved to Monday!”

Housing Wire – “Fitch finds CMBS delinquencies dip for first time in four months” (4-5-11)

“The overall delinquency rate stood at 8.74% in March, a decrease of 2 basis points from the previous month and the first drop since October. Fitch analysts said despite the deceleration of delinquencies, which fell across four of the five main property types last month, the upswing projecting for the rest of the year will likely take the rate to a peak around 10%.”

Housing Wire – “FHA settles with mortgage lender for improperly refinancing loans” (4-5-11)

“The Federal Housing Administration’s Mortgagee Review Board settled with a Massachusetts mortgage lender that allegedly failed to fully verify whether borrowers could sustain mortgage payments prior to refinancing their loans. As part of the settlement, First American Mortgage Trust of Brookline, Mass., agreed to pay $72,500 to reimburse FHA for past insurance claims and to indemnify FHA’s insurance fund for any claims to be paid on five mortgages should they default within the next 60 months.”

Orange County Register – “How fed shutdown could affect homebuyers” (4-5-11)

“Virtually every mortgage taken now requires an IRS Form 4506 to be processed on the borrower. Lenders use this form to ensure there are no expense deductions, self-employment, rental income, etc that was not claimed on the mortgage application. If the government shuts down these forms cannot be processed and final loan approvals will be delayed.”

Looking Back:

One year ago, John Husing estimated that 10,500 new jobs would be created in Riverside during 2010. First American CoreLogic reported distressed sales accounted for 29 percent of the U.S. market. According to the Clear Capital Home Price Index, US home prices dipped 3.9% in the first quarter of 2010. The rate for 30-year FRM loans was at 5.21%.

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.

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