I Survived Real Estate 2020 Residential Panel Pt 3

 

The Norris Group proudly presents it’s 13th annual, award-winning black-tie event, “I Survived Real Estate”. Industry experts join Bruce and Aaron Norris to discuss perplexing industry trends, head-scratching legislation, and opportunities emerging for real estate professionals headed into 2021. All proceeds from the event benefit Make-A-Wish and St. Jude Children’s Research Hospital.

Platinum Partners:

 

  • Norada Real Estate Investments
  • San Diego Creative Investors Association
  • The Outspoken Investor, Tony Alvarez
  • Think Realty Magazine
  • Wilson Investment Properties
  • Realty 411

Gold Sponsors:

 

  • 7 Figure Flipping
  • Inland Valley Association of Realtors
  • Keller Williams Corona Keystone CPA, Inc.
  • Las Brisas Escrow
  • Leivas Tax Wealth Management
  • NorCal REIA NSDREI
  • Pasadena FIBI
  • Real Wealth Network
  • In A Day Development
  • Spinnaker Loans
  • uDirect IRA

See below for full video and resources.

Episode Notes:

 

Narrator  Welcome to The Norris Group’s 13th annual I Survived Real Estate Gala. The Norris Group would like to thank the following Platinum partners: Norada Real Estate Investments, San Diego Creative Investors Association, The Outspoken Investor Tony Alvarez, Wilson Investment Properties, ThinkRealty Magazine, and Realty411. We’d also like to thank our Gold sponsors: 7 Figure Flipping, Inland Valley Association of Realtors, Keller Williams Corona, Keystone CPA, Inc., Las Brisas Escrow, Leivas Tax Wealth Management, In A Day Development, NorCal REIA, NSDREI, Pasadena FIBI, Real Wealth Network, So Cal Cash Flow, Spinnaker Loans and uDirect IRA.

 

Aaron Norris  Kathleen Kramer, Orange County and in some in investing background in notes, welcome to the program and you are up next if you want to share your screen. I did want to say that Derek and thank you for covering the Compass. I’m Realogy announced this week, their version of the iBuying program that they’re going to be coming out with, I just had the opportunity with the Data Driven Real Estate podcast to interview David the CEO of HomeVestors brand. And, as you all know their the We Buy Ugly Houses. I’m calling iBuyers, the We Buy Easy Houses brand, please pay very close attention to what they’re doing in your backyard. I think they’re in almost every county that’s being represented here tonight. They are taking down the easy ones. They’re doing a terrible job on the rehabs and they’ve already admitted because of the open door. SEC forms that they’re, there’s, they’re losing money, a lot of the time, and they’re doing very little by way of the repairs and their buy box is shrinking. They’re going after newer, low hanging fruit. So, so just be aware. They’re going to go after the easy ones, investors going after the ugly stuff. You should be fine. All right, Kathleen, it’s all you.

 

Kathleen Kramer  Thank you so much, Aaron, I really appreciate being here. It’s a, it’s an honor to speak it I Survived Real Estate. And hey, Bruce, good to see you. And I’m just grateful I didn’t have to go on right after Lenska. Good job, Lenska. It was very enlightening. Very lively presentation. And I thoroughly enjoyed it. So, hopefully I don’t bore you to tears with my Data Driven Real Estate presentation here. But I am going to share my screen and go from here. And I too have a photo of us at I Survived which you’ll recognize some of these characters. And I’m here tonight to represent OCREIA, which I’m very proud to do. We are the Orange County Real Estate Investors Association, founded and by Kaaren Hall that you see there on the left, and you’ll recognize the bloke there in the middle. And yes, we’re going on our seventh year. And I Survived Real Estate, I have to ask Kaaren how many years we have been attending I Survived. I missed the first year, I think I was at home with my daughter who had just been born. And I kind of put my head in the sand when the market crashed in 2000, late 2008. And thank God for my little girl because that was just my focus. And it got me through the last crisis. So, hopefully we’re better prepared for this one. But Aaron asked me tonight to talk about the pulse in Orange County, which I will do, and my husband and I are note investors. So, I’m going to share a little bit of color with you about the note industry. What’s going on right now, for the ground level investor, if you will, not so much at the hedge fund level, but at the ground level, and some ideas for what to look for and where to look for opportunities. So, that’s, that’s my talk tonight. I wanted to invite you to come to OCREIA, now that we’re all doing zooms so eloquently in our pajama bottoms and our fancy tops. I wanted to let you know that we do meet every Thursday, every second Thursday of the month at five o’clock, Pacific. And it is on zoom. It is free. Isn’t that great? Don’t real estate investors love that price free? They do. Upcoming topics are a note panel ADU’s, which it’s interesting that we’re talking about ADU’s. And of course, our very own Bruce Norris will be joining us in a couple of months to give us his insights into what to look for the new year. So, at our meetings, we generally go a couple of hours. We do a market update, which I have been doing now for six years and Kaaren hasn’t kicked me out yet. So, I guess I’ll guess I’ll continue, deal profile and then we have the main speakers. So, OCREIA, we have seen a tremendous change since COVID. So, if you’ve been to our club, you know that we had about 50 or 60 people, maybe up to 200 when Bruce was in town. But now we regularly have two to 300 people on the line every month. And it’s fantastic. We have really seen a growth spurt in our club over this COVID episode. So, maybe we learned a little something from having to change gears. And so we’re happy for that, so grateful. A little bit about myself, I’ve been in the industry for 30 years. It says 25, but I don’t really want you to figure out how old I am. So, I’ll say 25. I’ve closed about a billion dollars in transactions. I started as a loan officer, I’m reformed from that category, now I no longer do loans, then I got into apartment, broker transactions. So did a lot of those. And then I retired for a couple years. So, now I’m an investor, a broker, a lender, my husband and I are partners in a company that invests in non-performing second notes. Oh, my gosh, how crazy are we? So, we’ll talk a little bit about that at the end. And of course, I love to speak in public and on zoom meetings now, apparently, and I have a bachelor’s degree in economics from UC Santa Barbara. And I can cat, a tap a keg, if you ever need me to come over, I can help you with that, too. So, anyways, if you need to reach me, you can try me at my email address. Or on LinkedIn, I like to live on LinkedIn, I’m not so much of a Facebook or an Instagram Gal. But LinkedIn seems to be my speed. There’s the legal disclosures. And so, tonight, I think Aaron asked us to really talk about taking the pulse of the club. So, I’m going to talk about what are the main concerns of our club members? And I think the number one burning question is, did the government drop enough money on, us to help us through recovery? Are tenants going to be able to pay the rent? Are landlords going to be able to pay the mortgages? And, and, and are we going to have a huge crash in single family thing or the wholesalers? So, a lot of the concern seems to be around the single family market and the apartment market. So, a lot, a lot of mom and pop investors in the apartment market locally. Of course, we know that a lot hinges on employment. So, I pulled this right off of the EDD website today as a matter of fact. And if you look at the very bottom down there, where the blue arrow goes in, I think I draw, draw your attention to the year over year change in the amount of the total amount of jobs lost in the leisure and hospitality industry in California. And so, we’re looking at a phenomenal sea change in that segment of the market and of employment market. And of course, those people are mostly renters, not all. And in fact, in California, we know that we have point 2 million people living all moved to Texas yet. Okay, so, or Florida, Bruce, our Orange County workforce is about 1.5 million little over that, out of that workforce, we have a 1.4 2 million employed and unemployed is 142,000 as of September, so, 9% unemployment However, on the 15th of October, Disneyland announced that they’re laying off 28,000, which is huge. So, I think if you’re an investor in wholesale deals or you’re looking for distress in Orange County, you probably ought to go on because its net of Disneyland is tremendous. So, they’re one of the major employers in Orange County. And this is going to have a significant effect on rents, ability to collect rents, and also some single family owners in Orange County marketplace. So, that puts the estimate if you add those 28,000 to our unemployment, that puts our unemployment rate at over 10% which is obviously going the wrong way. By the way, the EDD also is telling us that the median income, which Bruce will appreciate me, including this statistic, I think, is 69,000. So, median numbers can be misleading however, and if you look at the median home price in Orange County. So, there’s a lot of numbers on this chart. So, I’m going to try to clarify it for you here. So, in September of 2019, our median home price in Orange County was 830,000. It’s gone all the way up to 915,000, as of the September, so just a year later, you’re, you’re looking at a significant increase in the median home price. However, in May, it was just 834,000. So what happened? So, if you look at the green bars on this chart, these are the luxury clothes sales, luxury being divined, defined as 1.2 5 million and over. And what happened is a lot of people that were working in LA County, left LA County and moved to Orange County, because it’s safer here. And it’s a little bit less restrictive as far as the lockdown orders. So, when you talk about New York, for instance, and the flight out of the city, and you think about San Francisco on the flight out of the city, we also have a similar situation from LA to Orange County. And so our luxury home number of transactions increased significantly over the last few months. So, will this trend continue? That is a burning question. However, it would not surprise me to see that median home price go back down to about 850. Why do I say 850? Because if you look at January on this chart, 850 COVID lockdowns started to occur. And, and, and I do acknowledge that we have a lot of demand. In fact, I have some numbers on that, but significant changes in the makeup of our buyers. And so, we pulled a lot of the luxury homes out of the marketplace. But I don’t think that’s a trend that’s going to continue on the long term. I think the people that have decided to move are going to move and they’ve moved. How long does that continue? That is up for debate. So, that’s something to watch in Orange County. Here’s a little bit more about our actual figures in our numbers. Listing inventory is at the lowest that it’s been and several years since 2012, actually. And so, we did just under 4000 transactions as far as homes that are listed on the market. And so, that is significantly lower. And if you see the demand, those are pending sales, you can see that nice V shape there. It’s flattening off a little bit. But that’s to be expected. Here’s a little bit more data for your data walks out there, we have for just over 4000 currently active in the marketplace. That’s the lowest that has been since 2012 days on the market is 40 which again, is the lowest that has been since 2012. And if you take a look at our expected market time, you can see that from, even in the 1.25 to one and a half million marketplace, we’ve gone from 118 days 255 days, and significantly in a million and a quarter. We went from 109 days this time last year to 42 days. So, crazy what’s going on. So, here are the inventory changes. 6400 units last year. 4100 this year, 35% less pending sales. 2300 last year, 3100 this year 36% higher, closings 2500 to 3100 this year 23% more closing September over September. And price to list is 98.8. So this is no surprise to anyone who lives in California understands the market. People are very hot, interest rates being low, distress in the marketplace? Definitely not yet. So, we’re not seeing it. We may see it coming. We’ll see. So, certainly not in the MLS, right. The number of foreclosures is nominal, the or the amount of resales with equity is very, very high. It’s really not much to talk about on the distress side, how many sales are off market. So, if you’re seeing distress in the marketplace, most likely it’s not going to hit the MLS, right. So, thinking about that, how many off market transactions Do we have versus what we had in years past. So, the green line is 2020. And you’ll see that we have less off market transactions than we’ve had in years. So, we’ll see and this is a very important number I think to watch because if there is going to be opportunity in our marketplace, it’s [   ]. So, let’s look at affordability. And according to the add our median income is 69,000. But I think that most of us could agree that homeowner, homebuyers these days are counting on a two income family, a two income household. So, I’m doubling that number for my illustration, our median price. Again, I’m taking 850. Even though the numbers a little higher right now, 30 year fixed rate interest rate, I’m just rounding it off to 3%. Let’s just say you don’t have a perfect credit score, you know, and you’re not putting 30 or 40% down. So, let’s say your interest rates going to be 320 percent down, you better have a pretty nice truck flow to cash to buy a house in Orange County, 80% loan is 680, that’s well, under the conforming loan limit payment would be 2867. Taxes and insurance adds about another 1000. You’re about 3800 PITI, which qualifying income at a 42% debt ratio, if you’re debt free, would be about 90 to $100 a month or $110,000 a year. If you have two income households earning 69,000 a piece, you’re gonna have room to run. So, can our market continue to run higher if interest rates stay low? Yep, it can, as long as those higher income wage earners don’t lose their jobs. So, that would be my assessment on the Orange County marketplace right now. Now, there are some lower end homes in Anaheim. There are a lot of apartments, especially a lot of apartments that have been owned by mom and pop owners for a long period of time, in Anaheim Buena Park area. I think North Orange County could be an interesting marketplace for people to watch for NOD’s on apartments and try to buy the debt and get in on the deal on that download. We’ve already covered this quite a bit you like that, Aaron? And just in case you didn’t know what deal meant. So, when will Orange County correct? Well, let’s look at the political risk. Okay, this has been covered already tonight. So, I’m not going to go into a lot of detail. But I can tell you that a lot of this will become a little bit clearer after the election next week. Are we going to have a split tax roll? Can’t are we going to limit parent to child transfers attack spaces? Will we have legislated or voter approved rent control? And then also what is the National Tax Policy. So, I know we brushed on this in the earlier segments. But I want to mention that the Biden tax plan, an important part of the Biden tax plan each. So, with that we understand that could be a significant change for real estate investors. I spoke with Debbie at exchange resources, Debbie banister, [   ] she’s been there for 20 years, she’s the vice president exchange resources, she said , without almost without exception, the exchanges that she’s doing right now are people moving money out of California, they’re selling a California transaction, moving that money out of state. So there’s a little bit of anecdotal information for you. Here’s some apartment data, I think is interesting. It compares the this comes from yardie matrix. They’re a software company and a data conglomerate are in the apartment space. So that just shows rent growth and forecasted year over year, you’ll see the Inland Empire still has rent growth, according to yardi matrix. in Orange County, we’re seeing a little bit of deterioration in rents. With a forecast of that to improve increase. Job growth is decreasing, as we mentioned, and we have some completions coming on. So we do still have some new inventory coming to the market with occupancy at about 95%. And this is a chart of rent growth in LA Orange County and Inland Empire, you could see that according to this chart, we still have a little bit of growth and this is segmented by a Class B class and C class. One of the things that is very important, and this is going to be important in Orange County also is how many of the Fannie Mae Freddie Mac, FHA has plans actually convert back to full payments. So again, watching this in the Orange County marketplace, and it’s going to be very important to see if these investors or these buyers, I guess or borrowers, who have mortgages if they actually start paying again. I highly recommend you go to Black Knightinc.com and you check out their monthly report that they have on the forbearances. They break it down very nicely by category, and then also by dollar amount and volume. So, now I have a personal bet on this. I think Fannie and Freddie, FHA and VA, I can’t speak for the banks themselves in their portfolio loans. But I think that the government agencies are going to have a Refinance Program after they stopped taking new forbearances due to COVID. And I think they’re going to do something very similar to HARP [   ], where they allow a very low qualifying very low bar, refinance rate and term, no cash out, rate and term refinance, to add these deferred balances back into the main principal balance of the new loan and refinance all these loans out. It just clears the balance sheets, it clears up all the bond issues, it clears up so many issues for Fannie, Freddie and FHA, and it, and it gives everybody a reassurance that we can all go forward, I’d be very surprised if we didn’t see something like that. As soon as they declare the emergency over that is. As we know, more people this cycle have equity in their home. So, this chart is talking about how many people have equity and 80% of homeowners have more than 20% equity. Where is the distress? So, if we’re seeing distress, where is that? It’s primarily, this is from the Mortgage Bankers Association, is primarily in the retail and in the, the lodging segments of the commercial bank security. So, I know you’re going to cover a lot of this on your commercial segment in a week or so. But the banks are preparing for commercial defaults. And this goes into the note business. So, Wells Fargo set aside $6 billion last quarter for loan losses. And that’s important and the credit standards are tightening in the mortgage that Mortgage Bankers Association is prepares a chart every month, and the mortgage credit availability is tightest it’s been since 2012. So, this is important to watch, especially for note, private note lenders, this is good for private note lenders, because if people can’t go to the bank to get a loan, what do they have to do? Well, they have to come to us, right, Bruce? They need, they need us again. And so, originations on new first mortgages should be an interesting area to watch, especially as these credit quality gets tighter and tighter with the with the defaults increasing. Attom did a really interesting chart about predictions of how many foreclosures we’re actually going to see. So, I’d refer you back to them. Here’s a chart that they also prepared, which you could look up online about how many defaults and how many foreclosures did we actually have from 2005 to 2012. And so, you could compare that to the predictions, and then that might give you an idea or an understanding of where you think the market might go in the single family space. So, pulling it all together, I do think that there are opportunities in notes in 2021. So, where do I think those opportunities are, I think that there is going to be some single family distress, but you’re going to have to pick those deals up between the notice of default and the sale date, especially in California with all the new regulation. So, if you can subscribe to something like PropertyRadar, or County Records Research and you can get a hold of those and NOD transactions and when they occur, and then track down who owns those notes. I think that’d be a great opportunity for note investors to buy those notes at a discount from people that don’t want to have to bother to take those deals through foreclosure process. So, this is a good space. And that’s the first note deal that my husband and I did about four years ago. We, we did that we pulled up, pulled a deal from a private entity, off of County Records Research, and we took it through to foreclosure and it was a good deal for us. So, I think that’s going to be more and more prevalent. You’re going to see some apartment distress, especially mom and pop buyers who bought maybe at a three cap or a four cap at the peak of the market. And now they don’t have enough reserves or they just don’t have the will to take it through to the end because it’s so complicated. The eviction process is a disaster in California. And so, you know, there’s a lot of opportunity there. Now, if you’re Johnny warbucks, or daddy warbucks and you have a lot of money in your pocket, then I think it could go after hotel and retail repurposing, because I think there’s opportunity there too, but those are high dollar ticket investments. So, you know, you’ve got to have to team up or get into some kind of a structured investment. But there is opportunity repurposing these hotel properties and some retail properties. And the rest, I think you can probably read, we’re still buying non-performing notes, my husband’s business, they’re still looking at pools. They’re still trans, a lot of transactions being done. We modify the loans that are in our pools, and then we sell them to other hedge funds. And there’s still hedge funds, buying those notes from us. And we’re pretty much back to the pricing structure that we were before COVID hit, there was a little pause. And of course, we have some eviction, we have some foreclosure moratorium still going on in several states. So that slows things down a little bit. But at any rate, if you want to hear more about all that, then join us at OCREIA over the next few months. And we’re going to have a note panel, we’re going to talk about ADU’s, we’re going to have Bruce come and visit us. And of course, it’s the best price of all, it’s free. So, please come and join us. And again, I want to thank Aaron and Bruce, for having me. And thank you, Karen, for always putting your faith in me and OCREIA, and letting me give you the market updates. I really do appreciate that. And that’s all I’ve got. So, thank you, Aaron. Thank you, Bruce.

 

Aaron Norris  I love that prediction. I just so you know what PropertyRadar, I have to follow all the distressed in the NOD’s And they’re just, there’s nothing to talk about. They’re not happening. And I think the federal government with a nationwide issue like this, I completely agree they’re going to do something in the back end. And I am further going to predict that I do not see them bringing back the risk premium for, I would be surprised if they do that at the very end of the year. It sort of penalizes the people that really need it, and it’s more money in their pockets. So, why charge people more to get a lower interest rate? It just doesn’t politically sound like that’s gonna work for me. I don’t know.

 

Kathleen Kramer  Yeah, I think they really stepped in it right there when they tried to push that through. And, of course, it depends it you know, I don’t want to get into political weeds. It depends on what the next administration is. Because of course, the reason they were doing that is because they want to recapitalize those agencies and take them back private. But I think the timing really stunk. And, you shouldn’t go hit attacking on a half a point fee to every refi. In the middle of a pandemic, it would have been much smarter for them to start with an eighth, and then go with another eight, and then phase it in over time, and nobody would have even noticed. But, but pre-COVID times. And you know, nobody’s perfect. They’ll get it right the next time, I hope. But let Aaron thanks, Bruce. And I’ll be around for questions later. If you guys want.

 

Aaron Norris  I definitely we are a little bit behind. But we know we’re probably going to go closer to nine tonight, everybody so no stress about the questions. Up next is Christina Suter representing the Los Angeles area and while she gets ready, Dad, any thoughts so far, about what we’ve covered? Everybody was really given the task, you have about 20 minutes and thank you guys are doing great. It’s a lot of information packed in a lot of these presentations could very easily be an hour or more. So, I appreciate the data dump.

 

Bruce Norris  I completely agree on the, how the foreclosure is gonna be a non-issue they’ll get they’re gonna figure it out. Plus, these people have a lot of equity. So, even if it went, even if they were aggressive, went to trustee sale, they wouldn’t reach the bank. It wouldn’t become an REO very often, but I don’t think there’s any appetite for that. I really don’t.

 

Aaron Norris  Okay. All right, Miss Christina, you are up. Thank you for being here. The Pasadena FIBI, longtime supporter and really glad you’re here.

 

Christina Suter  Thanks Aaron it’s good to be here. Thank you, Bruce. Good to see you. Of course, from Florida. I can’t give you a hug. But that’s okay. you’ll survive as we all survived real estate. Right? Um, so, thank you. It’s, It’s, uh, it’s nice to be here. I I try to make it a 15-minute presentation. Try to keep it concise and, and to the point. So, I’m gonna actually see what we can do here and Aaron, you’ll keep me on task, I suspect. Yes. All right. Let me share my screen. Go here. Go here, to do, to do slideshow. So, um, I think that a lot of what we’re seeing i,s to me, I wanted to sort of touch on like, I love I Survived. I love the constant movement that you guys are tracking in real estate. I love investing in real estate, I love what the Norris Group stands for. And I feel really appreciative that you guys include me on this I Survived panel tonight. So, thank you for that. But it’s, it’s, it’s really to me, it’s what you guys give to the community as a whole, you guys give a clear voice of integrity, you give support for investors for all of us investors, as I’ve teased many times, I didn’t get the 2006 memo from boost, which I wish I had. So, that was my big learning curve of the not following The Norris Group. So, that was part of why I’m such an avid supporter, because there’s a whole community that you guys are supporting, whether it’s those of us who are here on this panel, or all the people who are listening to this, or all the people who were logging into this and listening to his podcast later. So, thank you for all that you do both for, you know, Make-a-Wish as well as for us as a community. So, thank you for putting this together, Aaron and not letting it slip in this year of COVID. All right, so let’s, let’s talk a little bit, I’m gonna start, I’m gonna start a little bit bigger, and work my way down. That’s how my brain works. So, you guys are stuck with. So, in June of 2020, there was a lot of concepts and a lot of questions going around sort of like predictions of, you know, where are we going to be? So, you know, in March, it was the COVID, lockdown was declared, and all of a sudden, everybody’s upset. And we have all these predictions of how life is going to get horrible or not, right? So, the gross domestic product at that at that point was five 5%, the Congressional Budget Office projected that COVID would create a potential loss of 3% of GDP. And if you just do some simple math, you’ll see that 3% of GDP is 7.9 trillion of our annual GDP. And I think that number is important, because I’m going to reference it back later, the protected highest areas of losses was was Leisure Services, services in general hospitality and retail. And really, the loss is directly related to the length of the what the shutdown was going to be. And there was a, you know, as as Lenska, Lesnka said, so Well, is it going to be a W? Is it going to be a V? Is it going to be an, it being a K? Like, what is this length of shutdown going to create for us? And what can we survive, at least in my thinking, as an investor, that’s where my head is going is the shape of the shutdown is going to define the actual losses in both unemployment, and therefore in real estate, because what is real estate house, real estate houses jobs? So, I’m focused on unemployment, and what does it mean, as far as losses as well as general loss inside of one’s pay, you know, savings account, and whether that’s a worker ever who’s a Starbucks? Or whether that’s somebody who works at Bank of America, or somebody who works at Apple? What is it going to be their losses? So, the S&P 500 at the time was 3000, with a high of 3300, up till that time, and unemployment was projected by UCLA possibly being 13%. And Shadow Statistics was a ‘No, no, I think we think kind of plan is gonna be 35%’. That was the projections, it, you know, Shadow Stats, what do you want Aaron? Right. So, Of course I can’t hear you, but I’m guessing what you’re talking about. Right? So, I’m just laying out a bunch of data on. Well, here’s, here’s what we thought was going to happen. But that isn’t really what happened. And I want to kind of walk it through a little bit to get a sense for what we thought was going to happen, what is happening, and maybe just for a moment, at the end go, what does it mean going forward? Right. So, here’s what happened to GDP. Here’s the reality of what happened inside of GDP. And let me see if I can get this box out of the way because I’m concerned you can’t see. So, here’s the reality of what happened in GDP. So, we were in 2019. Right, early 2020, 2%. We were hoping to see you know, inflation’s concerned above 2%, we want 2%, that’s considered healthy for the for the environment and the economy, is a 2% GDP growth, we want to see at least that much, and we were. But now here comes July of 2020. And we were negative 9% for that quarter, and it’s important, we understand that that’s a quarter, that’s not the year, my negative 2.9%. According to the Bureau of economics, I didn’t make this up. I’m just telling you where I pulled it from, right? That’s what they put forward. So, are we on track for a negative 3% GDP, which would be a loss of 7.9 trillion? Not, we might be. We don’t have enough data yet. But we might be. Then the Washington Post, right? We talk about what’s going to be most affected. What businesses are going to be most affected? Where we can lose that loss and GDP. And really, we see that there’s like event planning, automotive, beauty, retail and shopping, which we’re not surprised about and restaurants which we’re not surprised about. And so, we are seeing small business closures. In May, I haven’t seen more recent data than May, but if anybody’s got it, please send it to me. Right, then we have actual unemployment today, I want you to take a look at this unemployment because if you can see here, I’m trying to move my box either way, you can see that, wow, unemployment hit, right? 15%. But then it dropped again, this is nationally, to 7.9%. And what, what I’m not overly surprised by that data, it kind of mirrors the GDP we saw, right? There is this huge movement of loss of GDP, huge movement, a loss of jobs. And yet, these jobs showed up again, somehow. Yet, if you look at Los Angeles, right, LA County, we see 15% in September, and 16% in August. So, our unemployment isn’t 7.9%. In Los Angeles, we have a greater I didn’t put the social economics here, but we have a greater diversity in Los Angeles County. And we have as many waitresses, as we have people who work for, you know, Facebook, or Google over in Culver City, right? So, that’s what we’re seeing in Los Angeles. If we look at Fred, we’re looking at the S&P, S&P, even though we had a huge loss, here’s our 33. But notice the new high was fifth was 35,000. So, I’m seeing some inconsistencies in the data. I’m looking for an answer, I’m going to suggest an answer. But I’m looking for like what is really happening. So, how is this possible? My answer, federal aid, Right? Basically, if we take the number I put out, right, which is if we lose 3% of our GDP annually, not quarter by quarter, but annually, that’s 7.9%. Now 7.9 trillion, just math, I could be wrong in my math, but it’s around there. What made the difference? Well, we’ve handed out about 3.5 trillion in aid of different kinds. Take 7.9 take away 3.5. It makes the gap shorter, smaller. And it makes sense how the timing of the PPP loans and the idle. All of these programs that are being put out, are making a difference in supporting what we projected was going to be truly hard and difficult. And started to show up that way. But there’s a floor underneath it, called government support. So, what does that show? How is that showing up? While the real estate in reality is that it’s actually showing up and that people aren’t perceiving themselves as strapped, as they would have been? Or we would have projected if there wasn’t this government support. And, and unintended effect. To me, it’s an unintended effect. I first noticed this effect. When I got phone calls from my mom’s, from my daughter’s schools, mom saying ‘guess what we’re moving?’ Guess what we’re moving? I’m like you’re moving in the middle of COVID. Why are you moving in the middle of COVID? Explain to me, how you could be moving in the middle of COVID. Nobody’s supposed to be doing open houses. Well, if we’re going to be locked in the city, we want more square footage. If we’re gonna be locked in our home, we want a different place to be. And maybe second, it’s just like a pressure that built up in people that said, we’re relocating to a new city for a better lifestyle. And they moved to Temecula. They moved to Solvang. They didn’t leave California, but they moved to a different place. And so, here’s what we’re seeing in the actual California Housing, market sales and price. So, we’re seeing there’s an increase, right of existing homes who’s missing an increase in existing home sales, right? We’re seeing prices have gone up by 17%. In California, right. We’re seeing that unsold inventory is two months, which as we know, is definitely a seller’s market and not a buyers market. And we’re seeing medium days on market is 11. So, this is basic numbers are saying people are not as economically strapped as we thought. They’re not as afraid of buying homes because there’s a lot of homes that are being sold but they’re being it’s at the buying that’s afraid. I think it’s the sellers who are more afraid. They don’t want people walking through their home with COVID while they’re living there. So, I’ve seen more homes on the market that have been rehabbed and are empty than I generally see on the market. I’m seeing the demand is I want to move I’m uncomfortable as long as I’m in lockdown. So, the demand has increased but the supply has gone down and we’re seeing it in the numbers. Los Angeles housing chart, right. So, this is the long Hot chart from from Fred. I was like using the long term chart, but you can see it continued to go up here at the very tail in 2019,, 2020. I find this chart interesting because this is pending sales in Los Angeles. And here’s the big drop in May of 2020. And then the, we’re not happy we’re going to move, right and the push up here showing that people were stalled, but then chose not to be, days on market in Los Angeles is 43 days in market, there’s an increase of 14% in Los Angeles County. And the price to list is 100.6, which means that when that’s listed is generally there, they’re more times than not where it’s going over the list price. Pasadena, so let’s get specific Pasadena, since that’s where I’m sitting as Pasadena. So, the population of Pasadena is 141,000 people. It’s the 41st largest city in California. So, we’re not that big truth be told, we’re not that small. But we’re not that significant. Right? 94th largest city in the United States, the median home price is 7.3 is 737,000. And yet, the median household income we say is about 80,000. In our industries are really medical, we have a lot of Kaiser here, educational because we have universities here, professional services, just kind of Pasadena, this is info. But I had to steal this from a website, because it won’t let me download it. So, here you’ve got to cut and paste, so forgive me for that. But hey, I want to give you the data. And I liked the way they put this data out. So, you’re stuck. Alright, so, really, what I want you to take a look at is the difference between the red line and the blue line. Right. And this is basically price to list. And to me, it shows the pressure on the market, right? So, if we’re seeing the median list prices, the red line moving right along here, just under 1 million, you can see the median sold price in May, just past May started bumping up above, that’s the price to list ratio went up, it pushed up again here. So, we’re seeing a lot of intensity and pressure. In the Pasadena market, I got, you know, clients telling me they’re putting in offers now we’re, they’re saying they’re going to multiples of four to five, not 20 to 30. I remember when multiples were 20 to 30. But right now we’re seeing 4 to 5, but it’s enough. It’s enough where we’re seeing that the market prices are moving up. So, right now, passenger inventory has been down by 28 has gone down 28% from last year. That’s the inventory that’s available 49 median days on market 15 weeks of increases in pending sales. So, you can see the pressure in the Pasadena market has been as intense as has been in the other markets. So, let’s get to moving forward. So, I should be on time. Right? Aaron, I should be okay. So, let’s go to moving forward for a minute. So, I have this theory, and I’m going to tell you m,y what how I’m tracking this. Small businesses employ 49 to 53% of US workers, depending upon where you get this statistic from 95% of small businesses, the official, definition of small businesses is 500 employees or less 95% of those small businesses that employ about I’m gonna say 50% of our workforce, hire 10 employees or less. So, who are those people? nail salons, barber shops? The dog kennel where I take my dog to get her washed and get her trimmed. Right? The restaurants? Right. These are the people that are small businesses. The coffee shop is not a Starbucks. What concerns me is that we saw 100,000 people and 1000 small businesses have close since May guess the name of this my timer. 100,000 100,000 people that close hundred thousand businesses have closed since May. We know that those small businesses which generally don’t have larger reserves, hiring maybe 40 to 45% of our workforce. We’re seeing larger employee starting to lay people off. What does this mean moving forward because real estate houses jobs, at least for me as, as somebody who’s on rental real estate and been in residential is of different kinds. My whole almost my whole investment career. What does this mean moving forward? I’m thinking, as many of us are that moving forward, it means that they’re even though we’re being held up by this support of the 3.5 trillion, and we’re worried there’s a potential gap in our GDP of 7.9 trillion. I’m worried that when the support stops we’re going see a deficit in employers, not in people who want jobs, but people who are capable of hiring, because we’ve seen the losses in small businesses. And because we’ve seen the decentralization of larger businesses. And because we’ve seen even midsize and larger businesses are laying employees off. When we take the band aid off, that’s what I’m concerned about. When it comes to employment, now, my concern is also an opportunity, right? Just as commercial notes as an opportunity and defaults on that as an opportunity. This is going to be an opportunity potentially in the rental market, whether it’s mom and pop rental units, which we’ve been talking about tonight, or whether it’s people who own single families. I can’t project when I tried to project back in June, you saw my statistics brought up, it didn’t work. We had a whole bunch of money they got flooded into the system, they completely hijacked my economic point of view. You know, if you want to, if you want to, have was it, you want several different points and points of view ask an economist their point of view. So, I don’t know where we’re going to go moving forward. But I do know that what I’m tracking to help me monitor what I want to do as an investor is the effect on employment, longer term. So, FIBI Pasadena is my club. We are also free. We’re also monthly except for December. And you’re welcome to come to our meetings, via zoom. We are continuing to do it via zoom. And it’s wonderful to be invited. Thank you, Aaron.

 

Aaron Norris  Thank you, Christina. Just for everybody, isurvivedrealestate.com and under speakers you’re going to see all the bio’s and Joey just a real quick shout out, I could not have pulled this off. He basically did everything. Joey thank you from the bottom my heart this would not have been possible this year without your help. Joey and I will make sure that all the clubs that we’re talking about tonight that they’re linked on I Survive Real Estate website. As you know, that has stayed up since 2008. We really appreciate it all the speakers that have participated over the year, so we’ll make sure to profile everybody.

 

Joey Romero  Thank you for tuning in to I Survived Real Estate 2020.  To watch the full video in its entirety. Or to learn more about speakers and sponsors. Please go to isurvivedrealestate.com and be sure to tune in next week for more I Survived Real Estate 2020 Thank you

 

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