I Survived Real Estate 2023 | Part 7 #856

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:
Supply chain disruptions and labor shortages in the construction industry
The importance of contextualizing foreclosure data & the need to consider policy factors and equity levels in understanding market trends.
Our guest speakers share what they look forward to in 2024



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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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.

Bruce Norris: 1:13

In 2006, the new builds went sorry, right? It was crazy, I and a lot of... say 2006, after 2000 to 2006.

Craig Evans: 1:25

That were about 9 million in the United States.

Bruce Norris: 1:28

Right. And a lot of them were being bought by investors who said they were going to live in the house. Okay. So...pardon me?

Doug Duncan: 1:38

They just checked the wrong box.

Bruce Norris: 1:39

Yeah. At that point, we're where we overbuilt? Like we're talking about being under built by a lot. We're it, nationally. Where we overbuilt at that time? Really? That? Okay, we were okay.

Doug Duncan: 1:54

The millennials weren't in the picture until 2015.

Bruce Norris: 1:58

Say that one more time.

Doug Duncan: 1:59

Trhe millennials were not in the picture until 2015.

Bruce Norris: 2:03

Okay.

Doug Duncan: 2:03

And they moved into the demand curve.

Bruce Norris: 2:06

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Sean O'Toole: 2:06

I mean, the other thing we saw that I think sometimes we were talking about this earlier on the demographics and stuff is you can have, households are fairly flexible, right. So parents move in with children and children move with parents, and we saw a lot of that, you know, saw five bedroom homes and stocked in with one family and each bedroom in a crisis during the downturn, right, that reduces a lot of demand. And, you know, if one bedroom houses a family, you suddenly have a lot of supply.

Bruce Norris: 2:33

Right.

Sean O'Toole: 2:33

There is some flexibility there. You know, same thing in the pandemic, where you had families that needed to separate for medical reasons and stuff, just for the safety of the family, because somebody who's maybe in a medical profession coming home, didn't want to, you know, get an elderly parent sick. So that number of households saying it doesn't just follow demographics, it's not that simple.

Craig Evans: 2:55

You know, Bruce, you and I've talked about this before, the thing that interests me in the aspect of selling the millennials didn't come back until 15. You know, when when the market dropped in '08 and it went from 1.9 million, you know, single family permits being pulled in '06. There was like, 420,000. Right. You know, by 15, when they started entering the market, when you look from a retail or resale perspective, you know, those people coming in from an affordability, they're looking for that 10 year old product, there was no product to buy them. Because nothing had been built since '04.

Bruce Norris: 3:33

Right.

Craig Evans: 3:33

So there was nothing to buy, because that wasn't there, you know, so it has created a lag over the last, you know, since that 13, 14 time period to where people are moving in interior. And so why don't want to buy new, let me buy something that's five years. Well, there was no five year old house. So it's created a lag over since that time period, that's just really now starting to catch up on those permits.

Bruce Norris: 3:57

Well, how hard is it to catch up? I mean, you got...

Sean O'Toole: 4:00

In California?

Bruce Norris: 4:01

Well, this national will... catch up. Cornelius, you're now taking on your buddy, but you should get paid a lot of money for your job. You run into brick walls all day long. But I'm serious. How hard is it to catch up? I mean, so your builder, legacy your national builders, oh my gosh, we could build twice as many homes. Why wouldn't they do that? Is it the land? Or the process or what?

Craig Evans: 4:29

Well, me personally, I think there's an affordability aspect right now that is, you know, I know for a fact in the market space that we build, we've priced out about 52% of our market space that just can't afford the house right now. Hence the right, you know, the conversation we had about rate buy downs, things like that. But the basis of where you start is a big deal. And that volatility of the land market has moved a lot.

Bruce Norris: 4:56

The 52% number was is that? What was that pointing out there? It takes 52% of their income?

Craig Evans: 5:02

No, no, no, we priced out 52% of the marketplace can't afford to buy our houses.

Bruce Norris: 5:08

Can they afford to rent?

Craig Evans: 5:10

That's the struggle right now as well.

Bruce Norris: 5:12

Okay.

Craig Evans: 5:14

It is a real struggle. I mean, when you've got a, a $2,500 month payment, and that's now taking even in southwest Florida that's taken 60 to 62% of your debt to income.

Bruce Norris: 5:27

Yeah.

Craig Evans: 5:28

That's not an affordable product.

Doug Duncan: 5:31

The roots of the supply problem. Today were planted in 2007 to 2009. We went from building 2.2 million units to 400,000 in one year, and we stayed there for three and a half years. So all everybody in that supply chain found a different job. So all the surveys of builders, everyone said the same thing, because they're all looking for the same thing to try to grow.

Bruce Norris: 5:54

Okay.

Sean O'Toole: 5:55

And we lost years of apprentices learning that trade.

Doug Duncan: 5:58

Yep.

Bruce Norris: 6:00

That generation...

Craig Evans: 6:01

That's actually a great point. I mean, trying to find trades right now. Trying to find a truck driver that can actually drive a truck. And literally have people apply to our trucking side of things that don't know how to drive a manual transmission.

Bruce Norris: 6:18

Okay.

Craig Evans: 6:19

And they've been to school, they're being trained. It's amazing the lack of the low skill that we have in our workforce now.

Bruce Norris: 6:26

Okay. The generation right now, that's the core I want to buy a house for the first time. What age did they start that? And how different is that from, let's say, my generation, like, you know, 30 years ago, the desire for buying a house was not as urgent, right?

Doug Duncan: 6:51

Well, so, in 2010, there were all these stories that the millennials had learned the lesson of their parents, if you buy a house, you'll go into foreclosure and lose all your wealth. So they want to live in 300 square foot apartments with amenities. That's one of those headlines that I didn't believe there was some fundamental shift in human behavior. So we surveyed and in June of 2010, in the first survey, 92% of millennials said they eventually want a home. But they understood what happened if you bought a house without an income. So the first thing they were looking for was a job. And that expansion was the most urban centric post world war two expansion. So if you're gonna have a job, you're living in the inner city. And what they make there is 300 square foot apartments, not single family detached houses. So they were simply reflecting the structure of economics in their environment, which is first I got a job, then I gotta get credit and shape, then we got to save some money, I'm probably gonna get partnered up or as my mother says, benefit from clergy. Old school 20th century stuff. Sorry. And, guess what, when all that stuff happened, they entered the demand curve, which was 2015. So we saw that coming in 2014, we put out a press release in November, I'll never forget, we got all the phone calls. We said, supply is now the problem. It was like'You are crazy. We just went through 2 million foreclosures, what are you talking about?' So we went through the exercise. And since then, everybody has been talking about supply.

Bruce Norris: 8:36

So you feel that supply, being short is going to be an ongoing thing, like you said, for 10 years?

Doug Duncan: 8:43

The boomers are locked in, the Gen Xers are locked in, it's on the back of the builders.

Bruce Norris: 8:48

You have a senior so there's, let's say a lot of seniors, there's a chart, I've seen that how many houses get added to the mix when those people pass on?

Doug Duncan: 8:58

So we've got a survey that's probably going to come out next week. So I'll give you a little preview, we've surveyed homeowners, the age of 60 and older and ask them how are you thinking about your house, they're thinking they're going to stay there forever, they have no interest in reverse mortgages. They don't want to borrow money against it. All this kind of, it will not surprise you the results that you will see, but I would not expect other than death, that you're gonna get a flood of supply that comes in from the boomers. And by the way, they're going to double in size over the next 20 some years. In terms of sheer population. The older population.

Bruce Norris: 9:46

We're kind of run out of time. I want to ask Sean a question, but I'll ask the question I want to ask everybody just apply to, thanks. Before I asked Sean, so the last question for everybody to respond to is what's the one thing that you'd like to see happen in the next year? And it can cover any topic? Just answer that question. So I look, you know, watch YouTube once in a while, and I'll go in there and there's, oh my gosh, foreclosures are exploding and stuff like that. You actually kind of count on so.

Sean O'Toole: 10:21

Yeah.

Bruce Norris: 10:21

Any any change that's a damaged like enough to damage the outcome. Okay.

Sean O'Toole: 10:28

No, in fact, we're down even year over year.

Bruce Norris: 10:32

Oh, wow.

Sean O'Toole: 10:34

Most states, Texas, the exception up 13%. But, yeah, no, it's, and we're down still from 20ers. Yeah, we're down from 2019 pre pandemic, so as well. And in pretty much every state again, except Texas, Texas is up a little but not substantially.

Bruce Norris: 10:55

Yeah. 13% is nothing because of the starting point is so, I don't know the Texas charts. But let's say California, you know, represented a certain percentage of sales. Those are big numbers. You know, they're 25% of 400,000 sales, 100,000. Trustee sales, you're probably talking about 13% of what 1000 going up, what do you think?

Sean O'Toole: 11:18

A few 1000

Bruce Norris: 11:19

Yeah, so it's still it's not even. It's very small. So you guys, you know, when you hear that stuff, it's really important to put in context. If you're selling foreclosure data, you know, sometimes you can see some exaggerated articles is like because they get the eyeballs. But then you go, okay, well, that's historically insignificant. So it helps to be independently capable of deciphering that.

Sean O'Toole: 11:42

It's actually a real problem, because we have so many people out there kind of pitching that foreclosure story. Yeah. And then folks come to our site sign up, oh, there's no foreclosure and they're like,'your data is wrong.' Very frustrating.

Bruce Norris: 11:59

Yeah. That is funny. All right. Do you expect any glut of those, by the way?

Sean O'Toole: 12:06

No,I mean, just again, back to those equity numbers, you know, 43% of homes own free and clear, 70% equity in the overall market. And a completely different policy framework. We didn't talk as you know, as much about policy, but like, our inflation is a result of policy, right, like, or lack of policy. And this is where we're pretty broken, you know. So our only tool like you just want to figure out what's going on, you got to think about what would the Fed do? Because you don't have to worry about what will Congress do because they're not doing anything?

Bruce Norris: 12:40

Okay. I'm concerned about the Fed in there. I think, you know, when you put out something that everybody looks at, like in 2007, they put out the GDP growth for 2008 would be 2% or something. It was like minus four. And you're just going okay, that's, that's a miss, right? And you're kind of going, what the heck. All right. Now for that. So yeah, let's start all the way at the end. You've been busy all night. What's the one thing you'd like to see in the next year?

Doug Duncan: 13:27

Merle Haggard had a song called Rainbow stew. And the man goes to the White House door and does what he says he'll do that we'll be drinking free bubble up and eat and rainbows too. So I would like to see an agreement between the parties conducting fiscal policy and those conducting monetary policy to rationalize our federal budget in such a way that investors expect there to be discipline and rates come down as a result of that. Because the industry needs that.

Bruce Norris: 14:01

The odds of that?

Doug Duncan: 14:06

Can I get a glass of wine? Great.

Bruce Norris: 14:11

Okay. All right.

John Sebree: 14:15

This won't happen in the next year. Is that on? Yeah. But because it's taken many, many years to get here. But I would like to see us change the minds of our elected officials at the local, state and national level and start to understand the role real estate plays in our economy. Collectively, real estate is 17% of the GDP of our country. And we're not taking credit for that every single home sale has an economic ripple effect of an additional $247,000 in the state of California based on the median price of just over$800,000, every single homesale creates for additional jobs, and if our elected officials and regulators are doing things that don't allow us to build more housing, and sell more housing, they're killing the goose that laid the golden egg. So we all need to join together and change the narrative with our elected officials.

Bruce Norris: 15:18

Thank you. Craig?

Craig Evans: 15:21

I'm gonna talk a lot, I've got kids, and they mean the world to me. So from a perspective of thinking about what does this look like long term, I would like to see kind of what Sean said, the Alexa people with a brain regardless of where they're at, from a social policy, from a fiscal policy to actually be to work together and make decisions that can start to recognize, you know, rates and the whole process that how that drives and what that does to our economy. Because, you know, when when everything that my company does is focused on workforce housing and the workforce that drives our country, it's hard to admit that I'm struggling to build a product that 52% of our population can not afford, because of policies that are made because of both sides of the aisle. And I, you know, I'm not trying to make it, but both sides of the aisle won't sit and fight. So I would like to see us collectively elect people with the brain, regardless of our social policies, regardless of color, race, who we sleep with, do something that sets our country on policy, so we're not fighting China back in the next decade, and that we can actually afford to live a life so that my kids can do that.

Cornelious Burke: 16:54

On 2024, I'm praying and I'm going to be very optimistic that our elected officials in Sacramento and of course in DC and locally, they advanced policies that reduce the costs, complexities and delays to approving and building new housing. Secondarily, in 2024, which is really critical for us with the California Building Industry Association is passing a school bond. Yes, we need to modernize and build new schools. But the way we do it in California is a three prong formula. homebuilder fees, local district fees and the state portion, and there is no state portion. Homebuilder freeze will after increased or quadruple, which will price out a lot of folks buying new homes, essentially be a moratorium on middle class housing. So passing on school bond is critically important in 2024.

Sean O'Toole: 17:46

Interesting, I'm gonna go a different direction. And what I want to see this next year is, you know, all of you again, with I Survived, ending, and Bruce retiring. You know, I look forward to this every year and getting to see everybody here and being on this panel. I've been trying to figure out was 12 or 13 years, it wasn't all the years, but it's...

Bruce Norris: 18:11

They're a lot. Yeah.

Sean O'Toole: 18:12

I really appreciate you having me. I really enjoyed the event. And all my time with you and with Aaron, and and with all of you. And I hope you all connect with me LinkedIn, Facebook, whatever, please do. Sean O'Toole, I'm pretty easy to find. And I hope to come to a lot more of your events, and the rest end and see all of you more often. That's my goal for the next year.

Bruce Norris: 18:40

Thank you I don't remember how often we've asked this question, but I think I've answered it the same way every time. And I'm still waiting for it to happen to be honest with you. I want every elected official, Democrat or Republican to do what's best for America, period. That's all I want. Well, we did it again. Thank you so much for coming. I hope, is enjoyable and valuable night. It was very memorable. Thank you for everything that you meant to Aaron. This was his event. He's

Sean O'Toole: 19:19

Thank you, Bruce. the one that dream this up. You know, I didn't dream this up. Aaron said, How about we put on an event where we pay for all the expenses and we raise money for charity. Okay, that'll work. And it's turned out to be unbelievable. And I don't know, he actually might have thought this out that if we were a charity that people at your level would be able to come to

Bruce Norris: 19:55

Love you guys. Thank you. Thank you. Thank you it. Because it was you know, and so it really changed. It changed to the Norris group ended up being right. And that was amazing. So Aaron, kudos, man, that was awesome. It really was. All right. guys.

Narrator: 20:35

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: 21:44

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.