Covid-19 for Real Esate: Impacts, opportunties, and America with Bruce and Aaron Norris #688

Bruce Aaron blog

This week’s radio show and video guests today and for the next few weeks are The Norris Group’s very own Bruce and Aaron Norris.  Some of their VIP subscribers are with them today as they tape the radio show. They will be giving us an update on what is happening in the world with COVID-19 as well as answering their subscribers’ questions.  See below for full video and resources.   

Episode Highlights

  • What should we expect over the next two months, and what are businesses doing to help?
  • What was some good advice Bruce gave to different groups of people during this time to help each other out?
  • Are there still opportunities during this time?
  • Could the cost of packages result in more taxes?
  • Would the government stop Section 8 for any reason?
  • Where can you find resources for landlords as well as resources posted by The Norris Group?
  • Will the Norris Group still be lending, and has it changed?

Episode Notes

One of the reasons we’re doing this early – a few reasons. We actually do put this up on the radio show. For those of you listening to this later on, it’s a visual presentation. So if you go to our blog,, you’ll be able to find the video there or the YouTube channel. So there are some visuals today if you’re just listening. You might want to check that out. Also doing it a little earlier, hopefully you won’t experience as much Internet traffic. So that’s one of the things we have to consider. But know that we are recording this on our side. And thank you for being here today. For those of you VIP subscribers and borrowers on the line, you’ll be able to ask questions later on. We’ll get to you.

It’s obvious every day that we walk around in our life now that things are different. And sometimes that’s concerning, and that’s why Bruce wanted to talk about what we’re going through together and what our industry is going through and maybe the likely outcome. Yesterday he was in a drug store once again reminded that things were different. He had to go get something. And when he went in line, there was square X’s on the floor six feet apart. When he got to pay, there was like a plastic sheet, a little hole for the person’s face and hands to go through. Every time you do something, you get reminded that, yeah, these are different times. Maybe we’ve never had a time like this in our lifetimes. So what do we do? So first thing to do is remember who we are collectively. After 9/11 happened, Bruce had a really unique experience. He went to an Angels baseball game, and forty-five thousand people were there. National Anthem always starts the game, typically forty-five thousand people stand. The singer sings, and that’s the end of that. Well, needing no prompting, 45,000 people stood and sang the national anthem, many with their hand over their heart. And it dawned on him. Collectively, we get it, we don’t have any differences today. We’re just Americans. And that’s the cool thing about America and Americans, is that we can show up with our best game when we need it. And we need it, and he expects that that’s exactly what we’ll do this time.

There was an event in Boston, the Boston Marathon. In 2013, there were two bombs that went off 12 seconds apart, killed three people, injured hundreds. The natural reaction would be to think, “Well, next year there’s going to be a remembrance of that. And a lot less people will show up.” And guess what? That is not what happened. Over 30 percent more people showed up basically saying, you can kiss my butt. We’re going to run anyway. And that’s who we are. So that’s who we are as a group. When you get discouraged, you have to remember who you are capable of being on your best day. Bruce really respects Jim Rohn, and he changed his life. In 1981, he attended a seminar, went home that night, and wrote goals, and he wrote goals that were so far away from where he was in so many categories. But that’s what you do. You write things that you’re determined to be. He wanted to be a millionaire. He wanted to own a business. He wanted to speak in public without discomfort.

He wanted to be a black belt. Of all the things he wrote, that one seems the most remote, and he’s not sure exactly why, but that was too big. The next year he was after all of the other goals and he would attain all those, but he crossed out being a black belt. When his first wife died, Marsha. he was sort of casually training, and he got serious, and he trained twice a day for several years. And then one day he got asked to test for a black belt. And that same old fear came over him like, Wow, that’s incongruent with the picture I have in my head of myself.” His sensei who fought in the ring many times, very brave young man, knew hewas having trouble with it, and he gave Bruce a book called The Mind Gym. He didn’t have to read the whole book because he read an important line. It said, “When an athlete is afraid, they play small.” He really got irritated at himself and thought, “You know what? On that night, the only thing I want to do is leave the karate dojo with pride,” that he gave it everything I had. That’s all he wanted to do.

The way the test works is you have two hours of basically the hardest thing you’ll ever do and you’re fighting multiple people that have very, very high skill. And there’s your peers, people that have been there for years, some of them have eighth-degree black belts, there watching you, and they’re the ones that decide if they let you be one of them. On his best night, they said yes. That’s the best day he ever had as an athlete. You have that inside of you as well. So don’t play small right now. Find the best you. Bring it forth every day for the next several months. We can get through this.

He listened to a guy on YouTube. It’s called valuetainment. He’s got some great content, but one of the most important things that he said – he has a business where he has over a thousand employees, and he really hires a lot of immigrants. He said, “They have a chip. They have something to prove.” Bruce really related to that. In 2008, he was speaking in front of a group of about 400 people. There was somebody that came up and he was really well-meaning. He’s an employee of a very large company in a very high position. And he had entered the business of buying houses and all that. And at the end of their short conversation, he said, “I really feel sorry for you.” Bruce said, “Why is that?” He said, “Well, because of the size of your competitors, there’s no way your business is going to survive.” Bruce asked him for a pen. On his business card he had handed Bruce, he wrote 951-780-5856, the Norris Group phone number, and he said, “I’m going to give you back your card.” He said, “Call me in five years. I guarantee you I will pick up the phone.” That was 12 years ago. They’re still picking up the phone.

Last week, big buyers pulled out of the real estate market, not buying houses. Individual investors have not done that. In the last couple of days, some Wall Street lenders certainly changed their lending programs. The Norris Group has not. Every year for the last 12 years, they they’ll raise past the million-dollar mark. And many people maybe would think, “Well, you’re probably going to cancel that event this year.” And no, they are not. They are going to continue to do what they do. Wherever that guy is who told him his company wasn’t going to make it, thank you. You put a chip on his shoulder that day. Bruce said he can look at having employees in a setting where the business is uncertain and wonder, “Hey, what should I do?” And then he remembers, “Oh, yeah. On my best day, I’m a black belt who doesn’t give up and I get up every time I’m knocked down. So find your chip, and let’s kick some booty.

For those of you that are not familiar with anything The Norris Group has done in the past, they’ve earned the right to say perhaps what’s next in some settings. In 1997, Bruce wrote a report called The California Comeback. The little mark is where he wrote it. And then what happened? They said prices would double in the next eight years. Prices move steadily up. He wrote the California Crash saying prices could go down by half. That happened.

He wrote a report in around 2010/2011 – All In Or Fold, talking about it, really taking a look at real estate and saying would it ever come back since it had been flat on its back for about three or four years. He decided it was time to go all in. And the last one that’s on display is 2 Percent Mortgage Rates, $40 Trillion in Debt. And unfortunately, the Coronavirus has made probably both of them come true. The $40 trillion was a 10-Year figure, and unfortunately, we’re probably headed there. But all these reports have one thing in common. When he wrote the report, we were not where we were going. And it’s important that you have some ability to look forward and say what’s the likely outcome, because where we’re headed is maybe very different than where we’ve been before. So we’re about to go to a very dark place. When we get up in the morning, there will be bad news, and it will be increasingly bad news for the next eight weeks. So it’s wise and prudent to look at what’s likely to be next. And the answer is really going to be different depending on the length of this virus.

The damage path of the cycle is short and will be manageable, and we’ll talk about how this relates to other cycles that he has been in. The damage path will be much greater if the economic impact lasts a year or more, but Bruce doesn’t think it will.

Q: So what causes price damage to real estate? Most of the Norris Group history is in California. If you look at the chart, we have our cycles where we usually go gradually up and up and up. And then we have these times where we pause in the 80s and we sort of were semiflat from ’81-’84. And then we had a gradual decline ’90-’96, and then we had this big upswing, and we had a crash after 2008. And now we’re all the way back up again. But what caused these cycles is not what’s in place right now. This reminded Bruce a lot more of what happened in Grand Junction, Colorado. Grand Junction, Colorado was event-driven. Oil shale was a big boom for the area. When it came, tons of construction happened to house the people that worked in oil shale.

One day it closed. All of a sudden, there was a dominoes effect. It was almost the same dominoes, but it was event-driven, not affordability driven. So as soon as that event happened, there was massive unemployment, there were massive defaults, there was massive exiting of migration, and prices dropped 80 percent on fourplexes. So, this is the kind of situation that we’re looking at right now. We have an event-driven downturn possible, and so we have to take a look at and see where the short term impacts are that we’re about to face. We’re going to face a lot of bad news. We’re going to have terrible numbers of increasing virus contagion and deaths. That’s a given. As a priority, protect yourself and your family. Nothing economics is worth endangering your health.

What’s probably going to happen is you’ll have a low volume of sales driven by concern and restricted movement. So literally that’s a factor. You can’t have open houses. You don’t want to look at houses, so that’s really in place right now. You’ll probably have everybody’s income get affected and some people completely disappear. Bruce’s friend Glenn is a travel agent, and he literally had a thousand cancelations of cruises. He didn’t do anything wrong. He’s just sitting there. So there’s a lot of people that own restaurants; and all the things that you think about, “OK, well, we got nothing to do tonight. Let’s go out to eat.” Well, no, you can’t. “Let’s go watch a ballgame on TV.” Oh, no, you can’t. “Let’s go to Maui,” which I had just planned. Oh, I can’t. So this is what’s going on right now. So everybody’s income’s going to get affected somewhat. You’re gonna have people get laid off. You’re gonna have offices close. You’re gonna have unemployment soar. I mean, the evidence yesterday about the jobless claims were an unbelievable record number, and Bruce is sure we haven’t seen the worst of that.

For the time being in real estate, you’ll probably get lower comps because the only sellers will be the sellers that feel like “I’ve got to hit the exit before something worse happens.” Bruce thinks you have maybe a lot of listings, and it could be interesting. People that aren’t really that motivated could pull their listing and say, “You know what? We’re going to pass. We’ll wait.” That could occur. But you have maybe the likelihood of a lot more listings showing up and some of those sellers being motivated.

There are policies that are already beginning to be in place to mitigate the damage. What’s being done is really important. Some of this, we don’t know how it all finishes. The documents are still in play, but it’s obvious that the government is going to be sending people money for maybe as long as four months. It’s not a little bit of money. If you’re a married couple with two kids, it’s three grand a month. That’s $1250 adult, and this is not a one-time check. It’s four times. Of course, it’s maybe it’s up for review or whatever, but from Bruce’s understanding, it’s four times, not one time. It’s in the house today, and it’s going to get voted on, so it could change.

That’s what’s been discussed. You have Fannie and Freddie willing to waive payments. Bank of America said they would waive payments for a short period of time. Small businesses can get compensated for not laying off people and having their businesses affected. And Aaron’s got a Web site. If you go on under Free Resources, you’ll see Corona resource page, specifically for real estate investors. They are tracking the national and state response. So everything from the federal government also down to advice from places like the National Association of Realtors and then down to California, the California Apartment Association, the Association of Realtors here in California, trying to track what they’re doing legislatively. CAR has been pushing for realtors, independent contractors to get paid and make sure you’re up to date on what you can apply for as a realtor. If you have something that’s missing on there that you don’t see, just email and message to Aaron, and he will make sure it gets up.

Next week, Matt and Amanda Han are going to be here and talking about a little bit more in depth of what’s been being offered. They expect the bill to pass by Saturday, and that will give them a week to catch up and see what is being offered. They want to be able to talk about the different categories that they will go into later, what’s going to be offered to them. So they plan to do this for VIP subscribers and borrowers for the foreseeable future, Fridays at 8:00. Sometimes they will have guest speakers. Kaaren Hall might be next. She’s on the board of Retirement Industry Trust Association. Part of this package is that you can borrow from your retirement accounts and not face the penalties that you did before via alone or just actually taking it out, and several rules have been waivered. So as this weekend passes and they get more clarity on what it includes and then see how the state is responding as well, they will keep covering.

What’s great about this it’s very aggressive. Obviously, this is an unprecedented amount of money. We’re talking about not only the government doing this, but also the Fed is stepping in. They created a lot of liquidity in the mortgage industry, which was really important. Everybody was starting to refi, but there was a big clog. And so all of a sudden, interest rates went up from three and a half to about four and a half. And the deals weren’t being able to get done and funded. And the Fed stepped in. John Burns basically wrote a short email. He said the Fed is going to own every mortgage in the country. So if that’s what needs to be done in the short term, that is exactly what’s being done.

You also have a moratorium on foreclosures. So that’s the big thing that will not be allowed to happen. If that were allowed to happen, first of all, how long does it take to foreclose? It takes a long time, not just a simple four-month process in California anymore. The lenders know that’s not what they want to do. Tthey would mitigate the damage by waiving payments or tacking them on the end. In Florida, it’s about a four-year process. There’s no way foreclosures are going to enter the market in Florida for a long time.

That won’t be their problem. If you have a market that’s not filled with have to-sell sellers, you’ll probably have very low sales. Bruce imagines prices will basically be stable. After 120 days, he thinks the market will start to return to normal and is normal by the year’s end. That would be his guess. So each of us play a role in making this easier or harder, not only on the people that we deal with, but also on ourselves.

There’s times Bruce had lunch with one of his favorite investors, who he won’t name because of what he’s about to say, but this is somebody that has twenty-five times a month more income than you probably need to live. They spent the first 15 minutes one lunc