I Survived Real Estate 2023 | Part 5 #854

I SURVIVED REAL ESTATE 2023

The Norris Group’s annual award-winning event, I Survived Real Estate, held last October 27th at the Nixon Library in Yorba Linda. Our 16th annual black-tie gala benefits Make-A-Wish and St. Jude Children’s Research Hospital. Since 2008, together we’ve raised well over $1,000,000 for charity!

The past two years have been like nothing we have seen in our real estate market history.  There are still so many unanswered questions about how the economy is going to change.  Pricing, The FED and Inflation is a lingering problem for working class America.

In this episode:
Cornelius Burke highlights top challenges in California housing market and regulations
Craig Evans explains the timeframe for developing new land in Florida
Bruce Norris receives recognition for his fact-based education and dedication

Hope you enjoy!

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.


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Radio Show

Transcript

Narrator: 0:00

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 16th 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 are merging for real estate professionals. All proceeds from the event benefit Make-a-Wish and St. Jude Children's Research Hospital. We want to thank our Platinum Partners. Inland Empire Real Estate Investment Club, San Diego Creative Investors Association, White Feather Investments, Wilson Investment Properties, uDirect Ira Services, MVT Productions, and Realty411 Magazine.

Joey Romero: 1:17

So please welcome to the stage Craig Evans. He's the CEO Douglas Brook homes DBL capital and Trini building homes and design and Cornelius Burke, he is the VP of Legislative Affairs for the California Building Industry Association. Thank you, Bruce, take it away.

Bruce Norris: 1:35

Thank you. You have a quote that I wanted to ask you about. It says we are in crisis. So now we have to remove barriers. That's a really appropriate quote in California. What were the barriers?

Cornelious Burke: 1:56

Thank you Bruce for opening his Pandora's Box. Good evening, everybody. Cornelius Burke, Vice President of Legislative Affairs for the California Building Industry Association. We represent California home builders, our members, we build masterplanned communities townhomes, ADUs, custom homes, we build by 85% of the new construction of homes in California and California's very tough state to do business. It's a beautiful state. We have Disneyland we have the beaches, we have the mountains, but as a tough state. What are top challenges here the state capitol was insurance crisis. As many of you know, probably experienced yourself a lot of insurance pyramid either went up exponentially or policyholders had saw their policies get cancelled. So the California Building Industry Association worked with the governor's office, the insurance commissioner to try to address that issue, it's still ongoing. But that's been the top issue at the state capitol for housing. Number two, it has been with us for a while now is the California Environmental Quality Act (CEQA). It is so hard to get the green light to build anything in California because of rules such as CEQA, where people use it to stop projects under the guise of environmental issues. And just lastly, a lot of regulations that get added every year, and a lot of new bills that emerged in Sacramento. One bill that we were able to defeat at the state capitol this year and hold for now is AB68. This bill would have eliminated our ability to build in suburban areas, it would have pretty much mandated statewide that the only new housing we can have is an infill areas and urban areas near transit. Thanks to the work of the California Building Industry Association. And others we were able to stop that bill from proceeding in the state legislature this year. We also stopped another bill AB1000 was seek sought to limit warehouse development, particularly in the Inland Empire. We also stopped another bill AB3035. That would have prevented homebuilders from selling two or more homes in one purchase. So a lot of bad bills were able to stop at the state capitol that would have hit it hurt our business and hurt our ability to increase production of new homes in California.

Bruce Norris: 4:15

Well, thank you for standing up for something that's reasonable. Craig, you live in Florida, it's a little easier to build there.

Craig Evans: 4:26

Yeah, I didn't have to fight any of these bills. Fantastic. You know, I can get my permits and 30 to, well, I should say that now we're at about 90 days for a permit. So it's not, you know, 19 years like some of the things here in California, so.

Bruce Norris: 4:42

Yeah, he's not joking about that. There was a friend of mine that had a he called me up all excited. He had a track of land approved and it was in Menifee. And when he started, he was 72 when when he called he was 91. I'm glad he was still around. He's probably waiting just for that. It's like, all right. Craig, take me take me through the timeframe, if you've got to, if you just need to, you're going to create a track of lots. So you literally have a big parcel of land and what would be the time process to say, Okay, I'm going to build these out to a track of houses, approximately, What's the timeframe in Florida to do that?

Craig Evans: 5:29

So, I guess there's two factors if we're developing new land, that process where we can start going with horizontals, within 11 months or so. From completely raw land, we could start to go horizontal within about 11 months, and then within 90 days after that start to go vertical. But the interesting thing about Florida right now, you know, is in especially in southwest Florida and some areas on the east coast of Florida, the scattered lot game in Florida is really what's a big deal. In the areas where we build on the southwest side from south of Tampa down to you know, Naples area. There's there's 1000s and 1000s and 1000s of vacant lands, Cape Coral alone at the beginning of this year, we had still had 70,000 vacant lots entitlements in an approved. You know, you've got a city just east of us that has 104,000 square miles of vacant lots entitlements in unapproved. All I've got to do is to go pull a permit and I can start building in 90 days. So the game changes in the state of Florida quite dramatically.

Bruce Norris: 6:46

Cornelius is California got a big shortage of houses because of their policies?

Cornelious Burke: 6:52

Absolutely. We're in a housing crisis because of these policies. The governor when he ran for governor in 2018, his goal was 3.5 million homes by 2025. We're not there at all. The Department of Finance, they have 2.5 by 2030. We need to build as much housing as possible. And that's one of the challenges that we face in our state. We need a band of folks, everyone in this room, everyone up and down the state to be cheerleaders for housing. The nimbyism in this state is out of control. The policies that we that our elected officials push in Sacramento are very problematic to housing production. And we need folks to raise their hand and say yes, in my backyard, we need more housing. I mean, just this week, the California Department of Housing and Community Development released a report on the city of San Francisco, their land use approval process take hundreds of days to approve a project hundreds of days to get a permit for a project. Then we look around and say, wow, why don't we have housing, it's because of our policies that make it so tough to deal with housing in our state.

Bruce Norris: 8:06

So instead of building new houses, so I'm familiar with the charts, California usually goes on a cycle ends up about 150,000 houses, you know, but just came off of 120 before that 100. So you never past 50 or 60,000 homes for this whole run of boom, that you never...

Cornelious Burke: 8:24

Yes, we we track building permits. Last year, we had about 130.

Bruce Norris: 8:29

Of what? 130 for what?

Cornelious Burke: 8:31

Multifamily and...

Bruce Norris: 8:33

Multifamily. So I'm talking about single family. Normally you have 150 single family. So there were absent like 100 it was because it just wasn't practical for a builder to go through the process is that basically you just go meh...

Cornelious Burke: 8:47

Some are just the land use approval process, some of just the market dynamics, but yeah, a lot of it is the local land use approval process.

Bruce Norris: 8:54

So ADUs become the thing. So is that apparently that's something California wants to occur?

Cornelious Burke: 9:04

Absolutely ADUs have taken off. And it's because of just reducing the barriers. Now there ministerial there by right over the counter. There was legislation pass this year and science a lot and may come ADU condos. A lot of questions on implementation of that. There's more financing available for ADUs , and they've taken off, ADUs has been just a huge growth throughout the state because of some of those barriers have been removed.

Bruce Norris: 9:34

It's been my experience, that density is not a good thing. That just, I'll just lay that out. I've been a buyer for a long time. The best deals that I've ever gotten is when you have fourplexes tied together in an area. I bought them in Moreno Valley, San Bernardino, Riverside for nothing because of the density creates dangerous environments. So that's why I'm in I'm just being I'm just trying to be concerned about something. When Aaron passed away, I actually drove around Riverside to visit each of the houses that he was at, you know, what was in common? There were parked cars parked on the, on the, on the street, on the lawns of every house. So somebody had a, we had a five bedroom house at one point, there were five cars on the lawn. So they had five people. So, you know, when you're adding ADUs is there some consideration about okay, we're adding maybe too many people in one place, as opposed to you know, your statement was really interesting. We're in a crisis. And now we have to move barriers, you know, that's a good thing to think out in advance, right. So as you're you're getting housing demand, but you're placing it inside of an existing house. And now you're saying, I think there's even rules now pass it that becomes possible to deed as an owner? Is that correct?

Cornelious Burke: 10:58

Yes. And also, interestingly enough, SB 1069, which was signed into law in 2016, doesn't require parking requirements. So that's some of the challenges that you're talking about. Yes, we do see a lot of challenges with more infill development, parking, and just noise, a lot of challenges. But as we talked about AB68, we have a state legislator who doesn't want any suburban housing.

Bruce Norris: 11:25

He doesn't what?

Cornelious Burke: 11:25

Any suburban housing at all. So,r we do see this this, this tug of war

Bruce Norris: 11:27

Right. with policymakers and urban planners who believe that all the growth should be in infill areas near transit. And quite frankly, we say no, we need housing and suburban areas, we housing infill areas, we need, obviously, high rise development, we need single family homes, we need duplex near the mall. That's what we preach at CBIA. So I think we'll see this tug of war continue between policymakers and urban planners and folks saying, hey, you know what, let's accommodate all the growth in urban areas near transit. Also, one of the things that we have to do in the homebuilding industry, particularly build masterplan communities is deal with this new regulation called VMTs, vehicle mile travel. Historically, when we build any project, we had to do level of service, how do you reduce congestion? And if you build a shopping center or a masterplanned community, how you reduce suggested in the streets now under VMTs, is how do you eliminate trips totally. This policy says people shouldn't be driving at all. Yes, at all. So these are the policies that we try to push back against and say we need balance. This isn't realistic to the market based economy that we have today. Interesting. I like I like that I'm in Florida right now, you know.

Cornelious Burke: 12:53

We need to be more like Florida. Absolutely.

Bruce Norris: 12:55

Well, you know, there's a chart that I paid attention to when I you know, you make decisions, and there's migration of money. So this is serious. So Florida has the most migration of billions of dollars, by far. When you look at the top 10 list, Florida's number is more than number two through nine. On the negative side, California has got the most wealth leaving. And you know, that's the part of the problem with the policies, you know, that you're just going okay. There's nothing available other than an ADU you know, there, you guys have land still available and like amenities and all that. It's just hard to understand why they say, well, we can't buy the building tracks here. You know, it's a sad.

Craig Evans: 13:38

You know, Bruce, you're talking in the last segment a little bit about from a permit perspective. You know, we look at the amount of permits that were pulled just in 2021. Everybody thinks that 2021 Was this fantastic year of construction. The reality was the amount of permits that were pulled nationwide, for 2021 matched what was pulled in the year 2000.

Bruce Norris: 14:03

Okay.

Craig Evans: 14:04

So,r we reached about 1.1 million permits in 2000. About the same thing and 2021.

Bruce Norris: 14:11

Nationally.

Craig Evans: 14:12

Nationally.

Bruce Norris: 14:12

Yeah.

Craig Evans: 14:13

You know, we swelled up to about 1.8, 1.9. In the 05 and 06.

Bruce Norris: 14:19

That was crazy.

Craig Evans: 14:20

We dropped down to about 25%.

Bruce Norris: 14:22

Right.

Craig Evans: 14:22

In 07.

Bruce Norris: 14:23

Right.

Craig Evans: 14:24

So, you know, we're coming back up in the aspect of there's a shortage on housing, which you started talking about. I guess my question out of that is, and you and I were talking about this beforehand, how you know, it's easy for me in Florida to say I don't have those problems. I mean, you know, we talked about that. I don't have that problem of how to build new housing, but yet we still have a shortage of housing because you and I've talked today, that's not coming in what you talk about in a segment that's not coming out of a resale. The people in Florida are not going to walk from a to three or 4%.

Bruce Norris: 14:57

No.

Craig Evans: 14:58

To buy anything. You know, 5,6,7 or 8? In that building of filling that space out of people that are renting or those types of things once we can get to an affordability, right, how do we do that in California? Because California is basically saying, we don't want to be a part of anything to fill that niche of permits that's needed for the country that we're already behind. Yeah, that's something that Cornelius, we spent 30 minutes talking about before that happened.

Bruce Norris: 15:22

Well, that's, that's why there's so many people leaving, right. It's just they can't find the home that they want. So it's just discouraging, because, you know, I've been living I'd lived in California for a long time. But it's hard for somebody to start here. Right, because of the price and everything but then you you're saying okay, can you imagine I can't imagine the conversation with my wife. Okay, the only thing has failed was an ADU, but somebody else's garage, where we get to own it, you know, that wouldn't go off to good. Craig, I wanted to ask you something on the building side. Do habits change the builders? So let's say you're building in 2020, you're probably as comfortable as can be specking without a buyer in hand, do does that have a change to where our builders now waiting until they have maybe a contract more often, before they build?

Craig Evans: 16:18

Well, over the last two years, that has definitely, you know, changed a lot and builders depending on their pace of being able to deliver a product which all things being equal, that the last two years of that is builder has been extremely difficult to deliver a product on time, in a decent timeframe. But, you know, a lot of that over the last few years has taken place because if you gave a fixed contract starting in 2000, that you wrote in February of 2000. And you delivered that product in you know, let's say August or September, you'd had a 35% price increase on your cost of goods. If you're in affordability housing, you don't have that margin. So you were selling that house and paying $20,000 to get to the closing table.

Bruce Norris: 17:13

So you're talking about 2020?

Craig Evans: 17:14

In 2020. Correct. So by midway through 2020, you know, a lot of builders were having to say, hey, we're not going to continue to eat this because, you know, for six, well started about 15 as building started to move back up, a lot of builders, not all but a lot of builders were going to a fixed price if they didn't have cost escalators. And so in that process, you know, builders was like, Hey, wait a minute, we're about to be toasted here. So a lot of them had to get out of those, you know, get those off the the balance sheet and then start going to cost escalators or just waiting till the very end, you know, cost escalators wasn't good, because the lenders didn't like them. And so they'd want to lend on because they didn't know where the person was going to build a you know, how much work was a lender going to do to not to close that loan when I got to because if the cost of the house has gone up, 30% person couldn't do it, then they just don't work for nothing.

Bruce Norris: 18:08

How have you implemented loan by downs in in the new housing sales.

Craig Evans: 18:13

So it's interesting in what Doug was talking about earlier, you know, a lot of the big nationals, you know, they've got a balance sheet a lot different than I do. So they can afford to go in and do a two 3% buy down, you know, buy that down from eight, a quarter down to five, five and a half.

Bruce Norris: 18:29

Up front.

Craig Evans: 18:30

Up front.

Bruce Norris: 18:30

Which is not cheap.

Craig Evans: 18:31

It is not cheap, you know, for me in the in a 350 to 40,000 our house and buy down a point in a quarter for about 6800 bucks. I go to two points, it takes me to $25,000. So for you know, I'm gonna do 250 houses this year. That's a big swing that says okay, this, this house may not be profitable anymore as profitable and still cover fixed costs on all the employees that we've got. So it's definitely a challenge in competing with some of the nationals, because they've got the ability and they've got a balance sheet that they can back into and do things that a lot of regionals and smaller builders physically can't do. But a permanent, you know, point point and a quarter buy down. That's a great tool that we've used and are using it and it's making a difference because again, for you know, for most of what we do our bread and butter is affordable workforce housing. appointing a quarter on our housing is $350 change in their payment.

Bruce Norris: 19:31

Right.

Craig Evans: 19:32

That now says that, that mom and dad can still go buy milk and can take their kids out to see a movie on the weekends.

Bruce Norris: 19:39

Okay. Joey, where are you? You gave me one finger. I don't know which one it was but...

Joey Romero: 19:52

All right. At this time, we're gonna bring the rest of the panelists up. But we have some special Tom Wilson, could you please come up to the stage?

Doug Duncan: 20:15

So we're, we can't, I think, say that we're happy that Bruce is going to retire from this, or this would be the last event. But we also didn't want to let it go by without acknowledging the humanity of this.

Bruce Norris: 20:37

Thank you guys. Thank you. Thank you.

Doug Duncan: 20:53

So we have a couple of things. And it's for all of us. So this is from all of us. And to know, the man, is to love the man. And we were trying to think of things that would be specific to the to our, what attracted us to this. For me, I suggested it's the education and the celebration. This event represents both of those things. And that's a big part of your life. So thank you.

Bruce Norris: 21:24

Thank you very much.

Tom Wilson: 21:25

Did you read... So, so we all know, this is a certificate of a acknowledgement of a donation made to the Nixon library, and the knight Nixon National Cancer conference, in honor of Bruce Norris, and in memory of Aaron Norris, so from all the sponsors.

Bruce Norris: 21:50

Thank you very much. Thanks.

Tom Wilson: 21:57

I had the pleasure of meeting Bruce in about 2005. And he put the data behind my hunch and feelings that we were in a bubble. And Bruce I really love you but I especially like that you saved me so much money. When early on and getting to know Bruce, we were engaged in the conversation one time where the real estate professional who is arguing something really silly, like price has always come down when mortgage rates go up. Which we all know, Bruce has taught us otherwise. And when the conversation was over, I turned to Bruce, and said, Bruce, you were so quiet. You didn't really argue your case, your perspective, which I know is quite different. And he said, Tom, I'm never interested in being right. I just want to get it right. Does that So Bruce Norris?

Bruce Norris: 22:59

Yeah.

Tom Wilson: 23:06

So, on behalf of the sponsors, and all of us who have gotten great pleasure out of this world class event that Aaron started and that, you know, you've embraced in all these years. Thanks for all this wonderful, fact based education that you've given us.

Bruce Norris: 23:24

Thank you.

Tom Wilson: 23:25

I have a plaque here for you, which shows a picture of the panel of I survived in the years. This started in 2008. This is the 16th year wow of I Survived. And it says presented to Bruce Norris and The Norris group and memory of Aaron Norris, and gratitude for years of inspiration and your real estate investment community and the survivors.

Bruce Norris: 23:50

Very cool. Thank you. Thank you.

Narrator: 24:00

See ISurvivedRealEstate.com for event details, information on all our generous sponsors and to connect with our speakers. We'd also like to thank our Gold Sponsors, Chase Leland Photography, Fair Trade Real Estate, Inland Valley Association of Realtors, Keystone CPA, Leivas Tax Wealth Management, NorCal REIA, NSDREI, Pasadena FIBI, PropertyRadar, The Outspoken Investor Tony Alvarez, White House Catering, Windermere Tower Realty, Rick and Leanne Rossiter. ISurvivedRealEstate.com for event details, in For more information on hard money, loans and upcoming events with the Norris group, check out the Norris group.com. 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: 25:09

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.