Leading up to the release of the report, we opened up our Q4-2018 TNG Economic Update Newsletter to our entire database (typically only available to our VIP Subscribers). In this newsletter, Bruce shared:
- Experiences investing out of state
- Important lessons (some embarrassing) he’s learned investing in other states
- Insights into major California counties and where we stand on price movement
- The table of contents for our upcoming report and why we are covering each topic (registration information below video)
- Questions from the audience
Download the newsletter HERE and watch the webinar below that was recorded at the live webinar.
FROM THE DESK OF BRUCE NORRIS:
For the last 20 years, it’s been my privilege to write timing reports. In January 2017, I stood in front of a very loyal audience thinking I was giving my last timing report. I calculated 10-year projections and figured I had given the subject of timing my best shot.
I WAS WRONG. THERE’S BEEN A SHIFT.
First, I was wrong about interest rates going lower before they went higher. In the report, I said, “For interest rates to go lower, we’ll need a recession by the end of 2018.” I thought we’d see a recession in late 2018. Obviously, that did not happen. Recessions happen on their own time and not because we’re “overdue” for one.
During recessions, the Fed typically responds by lowering interest rates 4%-5% to encourage growth. The economy did not need recovering; so it did not happen.
In fact, the Trump tax cuts have increased output for the country. Even with many economists now predicting a recession by the first quarter of 2020, the outlook for GDP remains positive.
The second area I was wrong?
I was wrong thinking that long-term projections are the most important. Let me give you an example. What if I said this in 2007?
“10 years from now, real estate prices will be about the same as today.”
Here’s a California real estate price chart. Was the prediction accurate? Yes! The destination is correct, but it does not calculate the trajectory! While I warned investors the trajectory would not be a straight line and while I believe in the long-term California predictions…
TRAJECTORY TRUMPS DESTINATION! AND, THERE’S BEEN A SHIFT.
About six months ago, several large-volume flippers called and asked for a consultation. It was my first inclination the market was changing. When I met with them, there were two main issues.
#1: FLAWED REAL ESTATE DEALS
The first issue was that the market was very tough to create a margin of profit. It’s been more difficult to find deals and the deals found are often flawed properties or in marginal locations (or both). In a hot market, as we’ve experienced over the past several years, these marginal properties sold quickly. This year, a shift has become apparent.
#2: STALLED REAL ESTATE SALES
The second issue is the most alarming…sales have stalled. Properties that went pending in just days are now sitting. Everything that was working stopped. Properties that used to go pending in days are not even being shown.
I’ve been building new homes in Riverside with a builder/partner. Early in the year, when we finished construction, the new homes went pending within days. It was a foregone conclusion that there would be multiple offers…and there was!
About three months ago, we got finished with two new homes. The homes looked great, but they had a less than positive location as they were on a main street. One was presold and went immediately into escrow with no issue until the appraisal. It came in $40,000 light (ouch)! We closed that sale and waited for the offers to come in on second new home. The best offer we had was a contingent sale where the buyers home needed to sell. Well, it did not. We were back to square one. It’s now pending but we are anxiously waiting for the second appraisal. It has been a long time since it has been this challenging to sell a new home, even on a main street.
IS CALIFORNIA REAL ESTATE ABOUT TO DROP?
The title to our new California market timing report is California Real Estate: On Borrowed Time. I’ve been in three California markets when the music stopped.
In the early 80s, the real estate investment firm I worked went bankrupt and the young owner went to jail. The company owned over 100 single-family homes that would not sell, all of which had hard money loans on them at 18% interest. Borrowing Peter to pay Paul, the owner created a Ponzi scheme which earned him an eight-year jail sentence. He was brilliant at what he did, but he got blindsided by a downturn he did not see coming.
In the early 90s, I had my own set of problems. I had built seven custom homes in a gated area of Palm Springs. I was fully confident the homes would sell for a great profit. They sold for about $200,000 less each than projected. I somehow survived that experience and my eyes were wide open on what it was like to experience a changing California real estate market.
When the California market crashed in 2008, because of my past experience, I was already sitting on the sidelines. Even though it was the great depression of California real estate, The Norris Group survived and I personally made a lot of money.
I learned to project AND PREPARE FOR what
was likely to occur.
This report, California Real Estate: On Borrowed Time, is important because the clock is ticking. The economy is strong enough that the Fed rates will likely increase three or four more times by the end of 2019. If 30-year mortgage rates increase as well, we’ll bump into an affordability number that triggers negative charts, one of which is sales.
California real estate affordability was 26% in the third quarter and we’ll likely hit 23% in the next few months. Historically, sales don’t decline as affordability drops from 26% to a lower number. Sales typically peak. But, this time is different! Because of the tight lending policies still in place, 17% affordability may not be reached. If that is true and this sales decline is the beginning of a downward trend instead of just a blip…
YOU’D BE WISE TO MAKE SOME SMART DECISIONS.
WE’VE HAD A NICE RUN.
WHERE DO YOU WANT TO BE WHEN THE MUSIC STOPS?
This real estate forecast will attempt to create a map so you can clearly see the dominos likely to unfold including new chapters dealing with inflation/deflation and which one we are likely to experience (and why you should care). We will tell you what charts and industries will indicate when the next recession will occur.
Like me, perhaps you have inventory for sale that is getting tougher to sell. Or, maybe you’re about to commit to a long-term project that you should rethink. Maybe you should take a good look at your rental inventory. My hope is that you will leave that day understanding how to protect what you’ve gained and how to position yourself to profit in the years to come.
P.S. Want to know what we’ll be covering? On the following page, I’m listing the table of contents so you can see what our all-day event will attempt to cover. You may be wondering what on earth some of these categories have to do with real estate.
You won’t want to miss our pre-event webinar where I’ll share some content from the report (because we never have enough time to cover everything). I’ll also chat about each chapter and share why it made the final cut. Believe me, there’s plenty of information that didn’t make the report for one reason or another!
CHAPTER OF THE REPORT
- Introduction: What changed? What’s next?
- History of 20 appraised properties
- Affordability: The tipping point changes
- Sales and inventory
- Interest rates/history of fed changes
- Trustee Sales
- Commercial real estate
- Family Budget and debt growth
- Demographics and migration shifts
- Retired readiness or senior financial stability
- National Debt and other broken promises
- Presidential outcomes past and present
- Past recessions and the likely cause of the next one
- How different investments respond to recessions
- How prices declined in the past
- Alternative ending for California real estate
- Why I went to Florida
- Top timing takeaways
Take-Home Course $597 – Includes access to the video and audio from the live event as well as extra downloads. We’ll ship the 260-page, full-color manual.
$747 VIP Year Subscription + Report (Save $300) – Includes 260-, full-color report manual, access to the video and audio recorded at the live event, and extra downloads for some chapters. Price also includes one full year of our TNG Academy featuring over 60+ hours of investor training online, discounts to live events, quarterly economic update newsletters, and discounts on things like Wayfair, Office Depot, and LampsPlus! Read more on our VIP Annual Subscription. AND…investors who have the timing report and are VIP, they will always have first access to investor trips out of state.
For questions, please call Joey Romero at 951-823-8266