On October 18, 2013, The Norris Group proudly presented I Survived Real Estate 2013. 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 $90,000 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: This event would not be possible without the generous help of the following platinum partners: PropertyRadar and Sean O’Toole, HousingWire, the Apartment Owners Association, the San Diego Creative Real Estate Investors Association and President Bill Tan, Investors Workshops, InvestClub for Women and Iris Veneracion and Bobi Alexander, San Jose Real Estate Investors Association and Geraldine Barry, MVT Productions, Wilson Investment Properties, RODA Construction, and White House Catering. For event video and information, visit isurvivedrealestate.com.
Aaron Norris opened up the event by once again thanking the platinum partners. Zane Forshee, the classical guitarist, flew all the way from Maryland as a favor to provide the entertainment for the night. Aaron joked it would not be appetizing if he was the one playing guitar that night. He also gave a special thanks to the TNG team: Craig Hill, Robyn, Rhonda, Vickie, Greg, Rich, Amy, Ken, Donna, Joe, Kirsten, and Alisha for being a part of the incredible team. He also gave a very special thanks to Diana Barlet, who had the very distinct privilege of seating 450 people and setting the tables for the event.
I Survived Real Estate has always been about a cause and a conversation. On this night, they blew away all past records for raising money. Together they raised $90,000 this year alone. They sold out of seats three weeks before the event, which is the first time they have ever sold out that early. I Survived Real Estate is underwritten by the Norris Group, so 100% of the money they raised went to charity. Some of the audience members actually did not have a dime out of their own pocket. There was a giving page on the Norris Group website run by Make a Wish. They asked their friends, colleagues, and anyone who would donate. They were at the event because they decided to raise over $200. However, some of them raised a lot of money. Twenty people participated over that amount, raising over $12,000. Aaron recognized those who participated in the individual fundraising. Tim Gordon, who raised $1100, was the fundraising winner.
The efforts at I Survived Real Estate benefited two very important charities that benefit children struggling with life-threatening illnesses. Lainie Strouse of St. Jude’s Children’s Research Hospital was one of the beneficiaries for I Survived Real Estate 2013. Her drive to the event in traffic was worth it since she got to be in a room with people who helped make it possible to do what they do. None of the patients ever see a bill, and this is one of the most important things she can say. With many of the treatments, some of them cost up to $1 million and the patients never have to worry about paying for it. All they have to worry about is caring for their child, which is enough to worry. She spoke with a family not too long ago, and their son had gone to another children’s hospital and gotten very good treatment. However, he needed more and was not able to get it because insurance said they exceeded their amount and could not give them anymore.
This is something that never happens at St. Jude. They can treat children based on their needs and never have to say no. The reason why they never have to say no is because of generous people like the ones at the event. Lainie thanked everyone for this because whether it is $5, $10, $100, of $5,000, whatever they give goes directly to the children. This is how they are able to do what they do for those children.
Sarah Pizzaruso with Make a Wish spoke next. At Make a Wish, they grant wishes for children with life-threatening medical conditions. Their mission is to enrich the human experience with hope, strength, and joy. It seems pretty obvious that granting a wish would give their wish kids hope, strength, and joy. The surprising part is how that mission extends well beyond just the children themselves. A few months ago, they met 7-year old Alex who was battling leukemia. Being a huge comic book fan, his simple wish was to fight crime and help people. He loved Batman and could think of nothing more exciting than spending the day with his hero battling bad guys and maybe being in a movie. Make a Wish helped make this wish come true only two weeks prior to the event. From being called to the police chief’s office to be sworn in, chasing the Riddler around the city, to finally putting away his nemesis for good, it was an adventure unlike any other.
Sarah knew as the wish was being planned how it might change this little superhero’s life, but she was not prepared for the ripple effect. She spent the day with Alex’s mom. As a mother of three small children, she rarely had the chance to indulge her oldest son’s elaborate fantasies. Instead, as the parent of a child battling a life-threatening illness, she often plays the role of the bad guy. This includes the shuttler to the hospital for treatment, the enforcer of playtime rules when things get a little too rough for Alex and his compromised immune system, and a constant worrier. But that day, she watched in awe as everything Alex dreamed of unfolded right before him. She watched him giggle as his costume was presented to him. She laughed as he radioed his fellow officers to tell them if the Riddler was in his sights, and she heard him yell from a helicopter just before it took off. This was a dream come true.
She realized then that the wish did not just give Alex hope, strength and joy, but it gave the same thing to his mom and dad. Now, as they continue to tell the stories of the day she has noticed something even more amazing. It was not just the family that received a wish that day. It was the police officers and stuntmen who put on the performance of a lifetime and the volunteers who helped put it together. It was the film crew, the helicopter pilot, the damsel in distress, the crowd and the hero’s welcome ceremony who were affected. Hundreds in just that one afternoon were affected. Alex’s wish left everyone filled with hope, strength, and joy. This is the power of Make a Wish. This year, their chapter will grant 315 wishes like Alex’s for kids all over Orange County and the Inland Empire. This is a wish every 27 hours. They will also assist with over 600 wishes from children all over the world who visit them to see local sites, like Disneyland, or to meet their favorite celebrity.
Unfortunately, according to the centers for disease control, they are still only reaching half of the eligible children in the area. But thanks to their support, the people at the event will help them reach their goal for every kid facing a life-threatening medical condition. They will have the opportunity to live out their truest wish, just like Alex. Sarah thanked everyone for their incredible support on behalf of everyone at Make a Wish, including the staff, volunteers, board of directors, and wish kids. With their support, she knows they can help turn life-threatening illnesses into life-affirming triumphs.
The Norris Group brought in six people to speak at the event, thought leaders from the country to join them at I Survived Real Estate. The conversation with them on stage gave everyone a better understanding of what remains of 2013 and what we can look forward to in 2014. The host for the evening was none other than Bruce Norris himself. He has been in real estate for thirty years, been part of thousands of transactions, builder, investor, and hard money, and hosts the weekly award-winning radio show. He spends much of his time researching “nerdy” things like Congressional bills, bailouts, and economic trends. He is also the only black belt as of two weeks ago.
Bruce began by saying that many years ago he attended a seminar where he was inspired to write goals. Goals are kind of like lies that you tell, pretend they are true, then work until they are. He wrote two the first night that were complete fabrications. One of them was that he gets up to speak and gets a standing ovation. This was a ridiculous lie. If he had the guts to write a third goal, it would have been that his good friend of his and black belt trainer could stand with his wife at the event. Bruce said this would be the briefest presentation he has ever done since he was more interested in asking questions on the panel than saying what he thinks.
There are a lot of special people on the panel who have insights that he would like to understand a little better. Bruce felt more optimistic about where we land price-wise than anybody on the panel. However, if he was wrong he sure wanted to know and knew that everyone else would also.
Bruce said he is not going to avoid questions that challenge things he has said. The point is that we have the best and brightest people in the country, and he would like to ask them questions to see if he can clarify where his opinion differs from theirs. Bruce knew this meant they were going to disagree, and that was the fun part.
The event is called I Survived Real Estate, but the past year was not about surviving. For those who owned real estate, it went up, which was something they liked. It has been the first time in a while they can say they had aggressive price increases. This caught a lot of people by surprise, and they did not see this one coming. This is the supply of people who are underwater, so you have a big price increase. This number dropped. Not only does it drop down to 15%, but that number should be encouraged to say it might as well hang in there since it has hung in this long. You then start having other side effects like not defaulting.
What is interesting is that we have accomplished this price increase without a big boom in sales. The sales over the last two years have been kind of consistent but not extraordinary.
Bruce displayed a chart showing that California sales are at a pretty mild level. The mix is different, which Bruce said they would discuss on the panel as well as ask some questions about it. The sales are not extraordinary, yet there goes our inventory. Bruce said the reason he lands on a different space from most people is he studied the inventory chart; and at three months of inventory if you have more than three months demand it would not make sense that you should have some pricing pressure. We went down from six months to below three months on demand that has been very consistent. Bruce believes that demand still exists and is landing on inventory half the level that it could be. Therefore, we are going to have price aggression, which would make sense to Bruce.
One of the things they have to figure out is if someone will loan to them. This is up for grabs, and a lot of things changed January 10. Another factor that John Burns was there to bring up is the subject of new home builders. Are they going to give us a lot of inventory, and is that going to be a piece of the puzzle that changes the scenario. Bruce spent an hour listening to an interview where three people spoke. Two were public builders, and one was a private builder. They are very optimistic about the future, yet Bruce showed the chart of sub-divisions in Riverside and San Bernardino County. We have a group of builders who are happy about the future, but they are not creating any sub-divisions. Bruce said he would really like to get to the bottom of it since he wonders if there is something else he does not know.
He does not know what a lot of people on the panel know that is specific to their industry. At the event, he got to ask the panelists questions to which he did not know the answers. When you have a radio show, you do not do this unless you are dealing with an expert. You cannot just have 30 seconds of dry time and say, “Boy, I thought he would know that, I don’t know it either.” That night, Bruce was taking that risk.
The share of equity sales have grown and grown. Bruce said the chart did not look like it was going the other direction, so the question is what an equity seller does the day their house closes. Bruce does not know how you go from three months of inventory to six months of inventory if that is the prominent seller and they are going to buy another property.
There is also a group of people who were foreclosed on, but the question is about the people who hung in there and now have equity. There is a thought that says those people will be so happy to get out of homeownership that they will sell and become a renter. If any group has proven they want to own something, more important than the numbers is that group. Bruce is not buying this, and he does not know how we lack demand.
Bruce showed another chart that displayed the mix of sales is going toward equity sellers. All of the things Bruce feels could damage price is now becoming a non-issue. All of the factors that add inventory to the mix are improving as far as motivated sellers. We have improved in delinquency rates and foreclosure rates. On the panel that night was Sean O’Toole from PropertyRadar, and he also looked at some charts and had some statistics Bruce did not even know existed. These have to do with price aggression, what happened to the median price, and where it landed.
You see in the paper all the time about mortgage rates. Bruce showed a chart that showed mortgages were declining heavily and joked that mortgage rates have soared. When you get into a business in 1980 and 1981 and refinance your house to become an investor at 17 ½%, four and a half is not soaring but rather the mildest thing you have ever seen in your life expect for the last twelve months. The point is that we did have an interest rate hike, but it did not price enough people out. One of the favorite things people, especially panelist Leslie Appleton-Young, like to talk about are affordability. Bruce said they would talk about the chart on the panel and see if there was still room for people to get into the market. Bruce showed an affordability chart that showed we are all the way down to 36.
Bruce said he would talk with Christopher Thornberg on the panel about GDP growth since this has to do with the future of interest rates. Are we going to see enough GDP growth that the Fed says we are going to stop helping everything out? All of a sudden interest rates do a major shift.
Another topic is unemployment. It is coming down, still has a ways to go, and California still has a bigger number than the nation. However, we are getting closer and closer. International buyers have certainly picked up since that number has changed from 2012 and is now at 8%, a fair amount of them all cash. So it is interesting to ask what the history of foreign buyers is. When prices accelerate, do they go away or do they become stronger in volume?
Another chart that is very different from normal is first-time buyers. When you come off of a bottom, the percentage of sales back in ’95 and ’96 was about 50%. Now we are at 28%, so it would be really interesting to see why they are not participating. Are they being beat out by all-cash buyers to where they cannot qualify? To Bruce, that number is the missing link to demand and where a lot of demand is possible if they can get a loan.
Bruce said they would also discuss that night the credit score differences. One chart showed the aggressiveness of 2008 where we were loaning to people with FICO scores very different than we are now. There is a 300 FICO score to 579. Bruce did not even know you could have a 300 FICO score. However, we were loaning 23% of all the FHA loans to that group, then 36% to under 639. 60% of FHA’s credit was going to that group. In case you wonder why we have some losses, that could be part of the reason. Now we are loaning 9% to those people. Bruce planned on talking with Debra Still on the panel about if we have gone too far and what will happen on January 10 to the mortgage industry. We can have an aggressive year, but we have to have somebody say yes to a loan. This is why all of these things are important.
FHA is declining, and what is odd about this is you just had a group of buyers who used to own who showed up after three years of a foreclosure and cannot get a Fannie Mae loan. The numbers are staggering. In Riverside and San Bernardino County, a year and a half supply of demand was foreclosed on in 2008 and 2009. Three years later they could re-enter the market and get an FHA loan. However, they probably had a hard time competing with all the cash buyers. Bruce is not buying that demand has been met, he thinks it has yet to be fulfilled.
Bruce thanked Leslie Appleton-Young and Sean O’Toole for always letting him use their charts. We interpret them different, but it is really good to have all their research. One chart showed the days when we had something other than Fannie and Freddie and FHA funding loans. Now, we don’t have this and this is a real concern going forward. If the goal was to downsize Fannie and Freddie, then how are we going to fund loans? Bruce also planned on discussing the lowering of the loan amounts.
Bruce showed a picture of Time Magazine of a man hugging a house titled “Home Sweet Home.” This was one of his favorite pictures, although the timing was not good. We felt really happy about it, but it did not turn out it was going to continue. In 2014, Bruce does not know if it will be this kind of year or another Time covered in 2010 that said “Rethinking Homeownership.” Is homeownership really a bad idea, and they were going to see how this played out. Bruce said he thinks the reasoning of a strong up movement in price still exists in 2014 as it did in 2013. He was going to see how this plays out and will really enjoy having conversations with everyone on the panel.
To find out more, tune in next week for I Survived Real Estate 2013, part 2. The Norris Group would like to thank their gold sponsors for supporting the event: Adrenaline Athletics, REIExpo.com, Coldwell Banker Town and Country, Claudia Buys Houses, Elite Auctions, FIBI (For Investors By Investors), In a Day Development, Inland Empire Investors Forum, Inland Valley Association of Realtors, Investor Experts Inc, Keystone CPA, Las Brisas Escrow, Leivas Associates, Homevestors, Bottomfeeders, Northern California Real Estate Investors Association, Northern San Diego Real Estate Investors Association, Orange County Real Estate Investors Association, Orange County Investment Club FIBI, Personal Real Estate Magazine, Pilot Limo, Primary Residential Mortgage, Realty 411 Magazine, Rick and LeaAnne Rossiter, Southwest Riverside County Association of Realtors, Sonoca Corporation, Spinnaker Loans, uDirect IRA, Tony Alvarez, and Westin South Coast Plaza. See isurvivedrealestate.com for the video from the live event.
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