I SURVIVED REAL ESTATE
Industry insiders focus on what’s ahead for 2022-2023
The Norris Group’s annual award-winning event, I Survived Real Estate is back, LIVE! Our 15th annual black-tie gala that benefits Make-A-Wish and St. Jude Children’s Research Hospital will continue at the Nixon Presidential Library. Since 2008, together we’ve raised over $1,000,000 for charity!
Record inflation, high housing demand, steep interest rate increases, national affordability challenges, global supply chain disruption, a pandemic reshuffle, and a dangerous war are just some of the headwinds we face as an industry and a nation. What has forever changed and what will remain constant? Are we headed for a crash, a slowdown, or another record-breaking year despite black swans looming in the background? We’ve assembled some of the brightest minds to help us tackle topics we never thought we’d have to consider and how they might impact real estate.
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Episode Notes:
Narrator This is The Norris Group’s real estate investor radio show the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever -changing real estate market hosted by author, investor, and hard money lender, Bruce Norris. The Norris Group proudly presents our 15th annual award winning event I Survived Real Estate. Industry experts join Bruce Norris to discuss the evolving industry trends, real estate bubbles, inflation and opportunities emerging for real estate professionals. All proceeds from the event benefit Make-a-wish and St. Jude Children’s Research Hospital. See Isurvivedrealestate.com for event details information on all our generous sponsors and to connect with our speakers. We want to thank our Platinum partners, San Diego Creative Investors Association, uDirect IRA Services, White Feather investments, The Collective Genius, MVT Productions, and Realty411.
Bruce Norris As all of you know, I love charts. I make a make decisions after looking at charts, and I was, this was going to be a longer presentation but I really decided not to do that because of the panelists that we have. I wanted to save most of the time for them. But I’m going to talk about some of this because this is an original creation of mine, it’s called the moodometer I don’t know if I need this or not. Can you hear me without it? Yeah. Okay, moodometer is an interesting invention. The, the affordability charge is something that I always paid attention to but what I what I couldn’t do is I couldn’t I couldn’t play with it. It was just there and I didn’t know what what I could do to improve what it told me. And so I started looking at this chart, and I realized that it played an important role. So, this is a, this basically says that any given year, this is the percentage of your median income that you have to pay to real estate with a 20% down, okay? So, this is the journey every once in a while the peak hits. And that’s typically euphoria. What’s interesting about this chart is it doesn’t, it doesn’t chart capacity. It charts willingness and willingness is the mood. So, if, if it was just capacity, and it was completely always 100%, all we’d have is gold lines. But we don’t. But we know it’s possible. But that’s the peak. So, how do you get to the peak? We just experienced it on 2021, maybe the beginning of 2022, you had anything for sale? Wasn’t it exciting? So, we had a we had a property that we had put up for sale. And we were going to ask when we started the construction 425. When we got done with the house, we thought it’s 525. So, that was a nice bonus right of 100 grand and a pretty good percentage. And then a bidding war, war ensued it within 45 minutes 11 cash offers and one VA offer. So, this is what happens at the peak. So, the peak, you get competitive bids, but maybe the finance one drives all the other cash buyers to another number. And that’s exactly what happened. So, the bidding continued, you’re going to fix, the bidding continued and got to 577. The winning bid was the VA that had the financing. But everyone that went along with that journey to 577 decided they wanted one too. So, we had three other houses under construction that was that house. And so they got it for 577 as well. That’s crazy. Well that’s, that’s euphoria. It doesn’t always happen but isn’t it interesting that we’re always the most interested when it’s at the peak? See ,what I really liked this as a cheat sheet. So, take a look at where it’s at the bottom. That, the charts your mood is, it’s your mood stinks. You hate real estate. Okay instead of in the 60s it’s 28. Then look at the year 2008, 09, what did we have to do to get somebody to buy a house in 2009, that was already 60% off of the peak, we had to bribe them with eight grand, please buy one of these. That’s why I liked this chart, it doesn’t take a genius, I think I’ll buy when it’s at its low when everyone else hates it. And I think you can have it one approaches 60. How’s that? Now, what it also does is tell you that if something changes in the formula, and for, by the way, it hasn’t, has the mood change now? Okay. So, that means you’re really not at 60. Now, we’re not sure where we are. So, what we’re, what we’re going to do here is we’re going to plug in some numbers, to see if the mood changes what happens to the median price, it’s possible. So, when you get into like, 850 grand, and you’re at 60% mood, and your interest rate changes, and your mood changes at the same time, you may, you may end up with a very different median, I’m gonna go backwards, if I’m allowed to do that. One of the things that you can also take a look at is, this is a span of 42 years, you visited over 60%, five times. That’s it. So, 12% of the time, you’re only over 50, maybe 20% of the time where you normally are, and it’s and it’s sort of like if you’re in a decent mood toward real estate, you’re at 45. An average you’re at 40. And you’re not happy you’re at 35. And if you hate real estate, you’re below 30. So, think about that, wherever you are in the moods he that’s going to dictate perhaps what somebody’s going to be willing to buy the next house for. So, let’s take a look at what interest rates do to this, and it’s one of the one of the things that you can chart to a 45% mood reading is a pretty decent reading. It’s, it’s not euphoric, it’s not completely giddy, but it’s okay. It’s matter of fact, it’s more likely the 40 and the 45 category really is the dominant specter of where you end up. So, if, if you have a 5% interest rate, but you’re in a mood of 45%, instead of 60, your median price goes down to 650 grand just because your mood changed. And if you have a 7% interest what happens to it? It goes to 520. So, we we got to almost 900 grand in California, complete euphoria all the double bids. Well, this is, this is a math formula that saying you’re at 7%. And if you go back to historically where you are most of the time, your median price is not going to survive it 800 or 700, it’s going to get the six, is going to get below 600. What if your mood is worse? What if it’s 40? Now, your median price is 7% is 465. And what if it’s 35? You really, really don’t like real estate. Now it’s 410. So, what this is basically saying if it’s just a math function, you’ve got a 35 to 50% price hit. That’s locked and loaded. Are you glad you came tonight? But it’s really interesting that it may not happen. And so that’s what we’re going to look at. Are there mitigating factors in place that may make that not happen? First of all, you’ve got in place, the most amazing set of interest rates on existing mortgages, right? And thank you for John John Burns provided this chart, as he did. When I did my seminar a few months ago, he was very generous and allowed us to use some of these charts. So, look at the interest rate below 3%, 13% of the group that had loans, three to 3.9 is 38. Four to 4.9 is 30. That’s a big percentage. It’s 80% of the mortgage is, not seven, not six under five. So, what’s going to induce them to put their house up for sale? Okay, yeah, there’s there could be motivation, but is that going to, is, are you going to see the majority of that inventory show up for sale? Or you could see them going, ‘You know what, I’m good.’ What is it actually got upside down and you had a two or 3% mortgage on it. Would it possibly cashflow as a rental? So, the reason we we put the title on that report that I just wrote Uncharted Territory, we’ve never had these set of charts, ever. We’ve never enjoyed an in place interest rate of 2 or 3%. And so what’s going to be interesting is to see if this prevents price damage, because the math is locked and loaded, your mood is going to come down and you should take a price hit. But what if your demand, I think sales are going to go down maybe by half? But what if that’s all the all the inventory that shows up? What if the demand is met with supply that’s pretty meager, also, you know, it’s going to go up as cash sales. Whatever percentage they are, they’re probably going to double. So, you’re really talking about maybe a small part of the market doesn’t mean you’re going to make a good living as a realtor, because you’re going to have maybe half the sales, but it could prevent price damage, okay? For for a long time now, we haven’t used adjustable mortgages, because we haven’t needed to so there’s no time bombs waiting in the wings that are going to adjust tomorrow. If you get a five, one arm or something like that, now that’s five years away from an adjustment. So, that’s, that’s a safe pile of loans we’ve got most of them are fixed. And we have huge equity positions. So, somebody loses their job, there’s a very good chance they’re selling that property for a profit. And they can move on. Okay. Something I thought of, because I’m because I happen to live in Florida is that let’s say you have a home in New York, we get a lot of migration from New York. So, if you owe 50% on a home in New York, and it’s a 3%, but you decide you want to move to Florida, can you buy, can you sell that home in New York and buy at cash, buy Florida House for cash? No problem. You’ve just solved your problem. I don’t need that loan back, I’m going to a place where real estate’s half. And I’ll buy there, which is why I like being in Florida because it attracts migration. And I think that’s probably going to continue. This is equity cashed out. So, we got a little aggressive in 2021, but nothing compared to where we were in the last cycle. Every once in a while I kind of talked to my tax preparer, because she’s got a bird’s eye view on people’s habits constantly. And during that cycle, in 2003, and four and five people were just refunding their house every year, maybe twice, pulling money out, having fun buying toys. That did not happen this time. New home construction, this is a national chart. So, after we went crazy with building all the homes, there was a big gap, and why was that? Well, they were below replacement costs, the prices crashed so much you couldn’t pencil a new house. So, you had a big hole, and then it gradually built back up. So, what typically happens at the end of a price cycle where prices go down, builders usually are building crazy amounts of houses. And and they can end up getting to an auction. And we’ll look in a minute at the California chart. So, this is the existing inventory for sale. If you go back to the like the worst time where big prices happened, we had almost 4 million houses for sale. And now we have less than about a million? About a million. So, there’s not a there’s not a lot of inventory for sale. And so it depends, I guess on the demand, if the demand is kind of equal to that supply, we may get through this fairly unscathed. This is job demand. And I know that’s down some maybe by a million or so but 12 million jobs. This is showing I think it’s down to 11 or below. And this is the amount of unemployed persons per job opening. So, you got two job openings for every person looking that’s unusual. Okay, that’s very supportive of price. So, unemployment really very healthy. So, it’ll be really interesting to see as they try to raise rates and see if we end up having a recession. If, if this if that changes. So, this is California construction, new homes, and this is really interesting to me. So typically what happens is builders, that’s why they need John Burns so much because they’re the worst timing experts ever. Because so late in the cycle, they have such unusual demand, right? So, that just had happened in Rosamond, when we build 93 houses. We gradually built momentum to the end of say 2005 where people were camping out in Rosamond to buy a new house. Do you know where Rosamond is? It’s in the middle of nowhere, after Rosamond there’s nothing. And so, people were lined up and we had fistfights to get to buy a house in Rosemont. And so, the one of them, five of them sold for about 280 In the last phase and two of them fell out. And then the market changed, the mood changed. Capacity didn’t, but they didn’t want it anymore. And you know, this home sold for? 205. So, what happened to the guy who just bought it for 280? It was 75 grand down. Maybe, I maybe I’ll walk away. Anybody know Tony Alvarez is? Yeah, Tony Alvarez bought those homes and that track for 40 grand or less, three years later. Guess the mood wasn’t so good. So, that’s why I like understanding. But so what’s what’s going to happen now? We didn’t build 150,000 houses, like we have every other peak cycle, we built 60. There’s not going to be a bunch of auctions in California that say, Okay, well, we’re gonna sell that for a discount. And if you just bought one, you’re gonna lose out, I don’t know what happened. So, that’s, it’s interesting that this did not be, this is not a big participant. So, think about the inventory, that’s not going to show up, you got literally 100,000 new homes that were never built, and you’ve got a bunch of people with two and 3% mortgages and say, I’m good. I’ll just stay. California trustee sales. So, we’ve got to have Sean on the panel and talk about trustee sales. And one of the things the news media can do is, you know, they gotta, they gotta create excitement. So, what would happen if you said, now, Trustee sales have doubled? Wouldn’t it be terrible? Like you can barely, this, we didn’t even get to 2022. But there’s so few trustee sales, that if it doubles, it’s, it’s nothing? So, you can you can just look at this chart and go okay, that, that’s not going to make a significant impact unless it gets unless it gets crazy. Well, that requires lenders thinking that’s a good idea to foreclose on stuff. And last time, they didn’t do too well. So, this is what happened when the lenders decided to foreclose on all the stuff they could. If you were if you were involved in that market at the time, I can tell you what happened in Moreno Valley. And let’s see if I have the chart that I want. No? Okay. So, in California, seven out of 10 sales was a trust was a REO. And what happened when you like we’re talking in the neighborhood that was 365,000, at the peak in 2005, and six, these REOs started get listed at 85 or 285. And then they never sold and never sold. Finally, these lenders, by the way, they were getting fined $1,000 a day because their home had broken window, or had a lawn that wasn’t good. And they just said, forget it. We’re out of here for 65 grand. Okay, 20 cents on the dollar. Trouble is most of the sales for that. So, I go, I buy one for 20 grand into fix it. I have 25 offers at 125 to take it off my hands. And the appraisal comes in at 95. Because seven of the 10 comps are 65 grand and it dominated the market. And it literally froze the market below replacement cost. You couldn’t be at a permit and a building lot for that. But that was the real estate value. So, that’s, that’s what the lenders experienced. Do you think they’re going to do that again? Intentionally? I don’t think so. I think, I think they may work out something, if they’re gonna foreclose on a bunch of people, but I’m not sure they’re gonna even have that opportunity because again, low interest rate loans in place. Manageable payment, probably just say, ‘You know what, I’m good.’ And another thing that’s really kind of helpful, how many of you guys have experienced rent increases for what you own? Okay, well, rent increases all of a sudden starts supporting a price and an interest rate that it never did before. So, I think we have that here. So, our affordability number is repetitive. When it gets to the bottom, it gets 17% or so. This is significant. And what happened here was different than before. So, we’re now in 2022. We’re at 16% affordability. How long did it take to get to 16% affordability in 2022 versus 2021? It took three months? How many people were buried in an affordability number that’s terrible? Almost nobody. Well, what happened in 2005, 06,and 07 was very different. You had those boom years, where oh my gosh, we’re doing 500,000 plus transactions. And we’re learning people that shouldn’t own a property because they’re gonna do it after they fill out an application really, or have a job. We buried a million in a half purchasers at the lowest affordability number. And this time we buried almost nobody. So, that’s, what I’m trying to say is that math formula, that moodometer is saying you’re going to have a big price hit if things were normal. But all of these things are mitigating factors that may in fact, prevent that. So, you know, what’s the outcome? That’s why I’m glad we have the panel of smart people to say, what do you think? Okay. So, that was what we just said, there. This is a kind of a Florida case study, and I did this at a 5.7% interest rate, now it’s probably seven. Can you get an A five, one arm and 5.7? Probably? Okay, so this still holds true. So, this is a Florida house with a pool on the left and excuse me? No, this is just this is one that Craig Evans builds for us basically, house price worth 400 grand, if you put 20% down, let’s say you wanted to live in it, you got to balance it 320, your PMI payment is 1840 57. And so forth goes to 2457 and the rental value is 2400 bucks. So, what I like about this is okay, my payments 2457. But I also get principal pay down to 337. And I’m renting and throwing away 2400 bucks. If that was my scenario, would I be a buyer or renter? You know, it might make all the sense in the world to be a buyer. Doesn’t matter that it’s worse than it was before. It means I’m going to write a $2,400 rent check, or I’m going to write a $2,400 payment check and get credit for it every month, you can see where people will still make that decision. The more expensive homes got a pool, downpayment 20%. And that rents for 3900, and the payments after the principal pay down 3965. So, even with the interest rate hikes, some of these things, some of these things can make sense to own. So, so how does this play out going forward? I mean, that’s what we’re here tonight is to ask some of the people their opinion, because I’m not absolutely sure. But I know the math is scary. But I know the, what might prevent the math from actually being enacted could actually win the day. So, it’d be very interesting. All right, what time do we 8:10, 8:11? And we’re supposed to go to a 30. All right, well, let’s do this. I’m going to have Craig Evans come up. Craig is the builder that’s building a rental homes for us in, in Florida. He’s done a great job. And it’s probably been the toughest two years, you could build anything, just because of all the things that have occurred in the meantime. Have a seat wherever you wish. Well, you look a lot better than I’ve seen you before. Craig Evans is a third generation contractor, and has been involved in many facets of construction. To his family background, he started at the bottom and worked up, sorry, his way up of learning all aspects of the job from labor to management. Craig has had major roles in residential commercial municipal. You miss, you miss it, you miss a. I can’t even say the word an agricultural construction. Through the years Craig has developed an ability to grow and scale businesses is now setting Douglas Brooke homes in building in Florida, Georgia, and expanding to Tennessee first quarter 2022. He believes in teamwork, as well as having valued and trusted trade partners. Craig has put together a quality team in house as well as some of the most trusted trade partners in the industry to build Douglas Brooke Homes. When when I met Craig, it was kind of crazy circumstances. We had a builder that had sort of disappeared with a couple million dollars. And I was writing checks to settle with the subcontractors and half the ones I was paying. I’m sorry, I don’t want to, can I move this? I don’t want to, I don’t want to miss it. I’m gonna stay on. Sorry about that. Okay, as I was paying the people that were taking a discount, so they could get paid something instead of what the built the general contractor had done. As I’m paying the subs, they’re going, “why don’t you just use Craig Evans.” He’s paid his great for 10 years and so okay, maybe I should do that. And he got a call too. And so we met and then we’ve hit it off. And so he’s probably been in the ground and above the ground with 100 houses right now. And we’re constantly dreaming up the next thing to do. So, thank you for helping bail us out and now we’re on some good things. So, one of the things that just happened is a hurricane in Florida. How many of you own anything in Florida? Okay, so there’s a lot of our clients that own stuff in Florida. And this is the text somewhere in the mid morning like 2 in the morning. Winds 140 miles an hour sustained 178 mile an hour gusts at your house.
Craig Evans So, we ended up at 162 mile an hour sustained.
Bruce Norris Oh.
Craig Evans Final, and the final gusts were 298 miles an hour. For over three hours.
Bruce Norris Is that, is that a category seven and a half or what? It, I thought 155 was like five or six? Five? Yeah, that’s it right? Holy cow. Okay. You’ve been in Florida a long time. Can you compare this hurricane with, with the others?
Craig Evans So, many of you that have followed Florida you know, there was a big hurricane in 2005 Hurricane Charlie did a lot of damage on the West Coast. As some of you may have seen the stat, the entire storm of Charlie fit inside the eye of hurricane Ian, you know, it was expected to make landfall as a category 1 that’s that’s an afternoon Thursday storm for us. We just we go play in the backyard, you know, just tell the kids don’t cross the street but but you know, it ended up staying and it greatly slowed down to what should have with, with Charlie was a matter of a few hours. This, this storm literally lasted for 11 hours, just torrential beatings.
Bruce Norris What areas were particularly hard hit?
Craig Evans So the coastal areas, it literally turned in came straight in over top of us on Sanibel Island, Fort Myers Beach, they had about 21 feet of storm surge that came through. So, most of those houses just, they’re not there anymore. You know, we are, one of our commercial, one of my companies, we do a lot of commercial building as well. And we’ve got a big remodel on a hotel there. And the bottom three floors just aren’t there. They’re, their walls are missing. There’s a lot of structural integrity going on. It’s an interesting time.
Bruce Norris What was the typical age of the properties that were there that area?
Craig Evans Most of the stuff on Fort Myers Beach, I mean, there’s the new stuff stood well.
Bruce Norris Right.
Craig Evans The new stuffs did well. But you’ve got a lot of houses on Fort Myers Beach that are built as far back as the 50s. So, there’s a lot of things that were built two feet above flood level. And so you know, at that point, their roof is 12 feet underwater. So, it that was two people talking about that 100 year storm. I was talking to a gentleman earlier that this was really the 500 year storm for our state.
Bruce Norris Wow. So, I’m just curious, it says structurally different. So, no one’s going to be able to build the same house there.
Craig Evans No, no, everything has to be brought up to code and floodplain and that whole process.
Bruce Norris Okay. What’s the timeframe to think, let’s say I still want to keep my lot but I want to build a new house?When’s the new house gonna be done.
Craig Evans So, pre storm we weren’t about to get through permitting entitlements, we were roughly seven months just to get through permitting is an average and then depending on the builder, and their efficiencies, it could be anywhere from five months to 20 months to physically build the house, so.
Bruce Norris Okay, so your opinion, the flood was more damaging than the wind, even though the wind was crazy?
Craig Evans Absolutely. Most of the especially like the homes that we built, you know, you go through that and you don’t know you don’t know what to expect. I mean, I, I was raised on structure. You know, my father and my grandfather built 50 storey buildings in Chicago. And so I’m raised to know how to build stuff that lasts till Jesus comes back, you know, but you come out and you’re like, man, this we don’t know what’s going to happen here. So, we go out and all of our homes, except one that we had just laid block on hadn’t poured the beam through so structurally, it wasn’t there yet. Everything else we lost a few shingles last piece of gutter, just very minor, minor stuff, the majority of the damage was primarily all storm surge unless it was an older home.
Bruce Norris What number of homes are we talking about in Lee County that got taken out?
Craig Evans So, as of this morning, then, the we’re still in the initial damage phase right now trying to assess what’s going on. As of this morning. There was about 56,000 homes in Lee County, that single family residences that have had anywhere from complete destruction to, they have complete destruction, major damage, minor damage. And then affected which they’re affected is basically classified as you know, you had some roof that you need to have shingles put on or tiles or things like that they’re minor damage, surprisingly, is actually still classified as two feet of water or less inside the home is considered minor damage, so.
Bruce Norris If you own an insurance company, that’s your description of as minor.
Craig Evans So, we’ve got a little over about 22% of SFRs have been tragically affected in Lee County.
Bruce Norris And okay, the number that you just gave me how many new homes are constructed in that county?
Craig Evans 2021, as you’ve seen the charts from Bruce, 2021, we had a fantastic year, and of all the residential permits pulled that were either new construction or major renovations not not going to put a new roof on or put it in replacing an AC, there was only 8000 permits built. So, at the rate of construction, we’re looking we’ve got somewhere between seven and eight years if we don’t do anything else other than repair homes.
Bruce Norris When people, when people go through Hurricane like that, what percentage of them say I’m out of Florida, I’m going somewhere else.
Craig Evans You really don’t get a ton of people that want to just pack up and leave, I wouldn’t want to put a number on it, I’d just be pulling it out of a backside there. But the reality is you don’t get a lot of people. It is a little interesting, this time, we’re starting to see some of the people that are in their 70s and 80s. Because of famous new rule of 50%, you anything that has 50% more damage according to an assessed value than then it has to be brought up to code well, so for the people that are in their 70s or 80s, we’re starting to find some of them are just saying that it’s not worth it. Now, the difference, which you and I spoke about a little bit this morning is, you know, we’re seeing some of the people that are on a more of a limited fixed income. They just physically can’t afford to rebuild. So, that’s a little bit of a different scenario, depending on insurance. What we’re seeing is a week before the storm, the Luxury RV market was tanking. Four days after the storm, they’d already sold 127 half million 2 million a half dollar RVs to sit in their driveway while they wait two and a half years to have their house rebuilt.
Bruce Norris Now, what’s the reason? I mean? So, Hurricane Andrew was in ’92. That was that was my experience with hurricanes. So, how long would it take for people like from the city to go look at this these damage homes and say it’s red tagged or whatever? Do they even have the capacity? Or they use an everybody that’s breathing to do that job?
Craig Evans That’s that’s part of the process. And again, because it’s changed since since Andrew, you know, FEMA has the 50% rule now. So, it’s not only is it is it going to be demolished or things like that, it has to pass the 50% rule to see if they’re gonna even allow you to pull a permit. So, you’ve got that problem along with insurance that only has 90 days to come up with an evaluation. I mean, they’re bringing they’re literally bringing adjusters in from all over the state they’re having people call to, to do a video assessment of your house, because they physically can’t get everywhere fast enough.
Bruce Norris Okay. So, the system gets completely overloaded. And that’s big mistakes are made at that at that point.
Craig Evans Oh, yes.
Bruce Norris Yeah.
Craig Evans The, a lot of the if and just this week, they’ve come up with some new topics for new guidelines for what they’re going to allow them to pass as emergency permitting. But even a couple of municipalities will give you emergency permitting over the counter. But some of them are still a week to a week and a half out the whole time that clock’s ticking for them to make decisions with insurance and everything else that has to happen.
Bruce Norris And is there a special permit process for damaged homes versus the months and months of the other?
Craig Evans Again, just, just finalize this week as far as basically, you know, what is that going to look like? What’s the determination of how much damage it received, if it’s classifying into a minor and they’ve done a pretty good job of outlining what that is now so it’s going to take a lot of the guesswork out of it. But you know, that will speed that up. But once you get, start getting near that number to at that point, you’d have to have people come out and physically assess the location which is going to create a massive logjam.
Bruce Norris So, let me just paint your picture as I see it as it playing out which is why I’m really glad I’m in Florida. Would you say you have a lot more demand and supplier at this point? Okay, for rent and for purchases.
Craig Evans For rent and purchase we physically, we still can’t build fast enough. And, you know, where I had the great privilege to sit with some gentlemen this evening that are, you know, said, I don’t know why you’ve got me here, they got more degrees than a thermometer. So, you know, I’m not sure why. But the bottom line is, you know, being able to talk through one of the things that I’m seeing about our specific market is, and this was even pre storm is the amount of interstate migration that was kind of our, I guess, out of state migration coming in, you know, up until just a few months ago, we were still having 975 people a day moving to the state of Florida, almost 60% of those people were coming to Southwest Florida, there’s tons of land already entitled that type of process, just getting it done, you know. And once the interest rates started to tick up, okay, we started pricing out some of our market share from an affordability factor. But there was still enough cash buyers coming in from out of state or that could afford to take a leverage point. But the reality is now that there’s no, nobody’s wanting to sell their, their their product from a resale. From a building perspective, it’s a good time to be a builder in Florida.
Bruce Norris Well, it’s also going to have migration of a lot of people to do work. So, you’re gonna have tons of people migrating there that are, that are probably going to figure out in a couple years, I think I’ll stay here.
Craig Evans Well, you know, that’s the interesting thing that you’re gonna talk a little bit this morning. Again, if we just take it last year, in 2021, there was already a short supply of labor to get houses built in a time, you know, aspect when, when Bruce and I first met, we were building houses in 63 days, because of supply chains. And because of labor shortages and that type process, we had hit a point where we were at about 10 months, and now we’re back down to about five. Whereas for the rest of the market, it’s still a pretty long build cycle. But in that process, there was still I could have hired 100 people and still not kept up with demand. Now, you add on 56,000 more houses. And they’re still estimate, there’s about 30 houses or 30,000 houses they haven’t been able to review. So, that number is only going to go up. When you take all of that in that has to be done. How’s it going to be? How are these things physically going to get done? Well, we got to bring in people from out of state. And so there’s interesting things, where are they going to live during this process? Because there’s already we just did 20% of the market share of houses out of the of the market. So, what’s that going to do to the price relevance of our market, the affordability to our market and the need for housing in our market?
Bruce Norris Yeah, it’s it’s going to be a very different experience, I think in that part of Florida than it would be maybe in California, even though the interest rates are going up. I think the demand, I’m going to I’m going to mention one other thing about Craig. So, we were, so we have a lot going on. I don’t know how many houses we have, but 80 or something like that. So, this is a day or two after the hurricane, he said, I basically need to just pull away from construction right now. And he’s got a boat. And so this is he’s texted me says, Coast Guard call me yesterday afternoon, I ran another 120 people off of Pine Island, six or seven at a time. So, this guy is making 20 trips until it’s completely dark, getting people off an island so that you can have something to eat after days. So, that’s why that’s why I like working this up. And I said do I need to bring anything and he sent me the longest list I’ve ever seen. So, my wife and I went to Costco and loaded up the back. It was great. He said one thing they need man, the kids, they have no kids clothes. Like they’re they have nothing so all the kids have no clothes. So, we went to Costco and just took big scoops off of the, it’s cool. Cool. All right.
Narrator We’d also like to thank our gold sponsors, Chase Leland Photography, Inland Valley Association of Realtors, Keystone CPA, Inc, LA South REIA, Leivas Tax Wealth Management, NorCal REIA, NSDREI, Pasadena FIBI, Tony Alvarez, White House Catering, Wilson Investments, Windermere Tower Realty. See Isurvivedrealestate.com for event details, information on all our generous supporters and to connect with our speakers.For more information on hard money, loans and upcoming events with The Norris Group, check out thenorrisgroup.com. For information on passive investing with trust deeds, visit tngtrustdeeds.com.
Aaron Norris The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669. For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.
