Welcome to the first episode of the TNG Real Estate New Roundup, it's previously What in the Real Estate. Today we are joined by Craig Evans and Bruce Norris, and Joey Romero. We're still about the latest headlines in the real estate industry.
In this episode:
-Housing affordability in California and Florida
-Potential for homeowners to tap into equity as rates drop
-Real estate investing and home pricing strategies.
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.
Video Link
Radio Show
Welcome to the first episode of the TNG Real Estate New Roundup, it's previously What in the Real Estate. Today we are joined by Craig Evans and Bruce Norris, and Joey Romero. We're still about the latest headlines in the real estate industry.
In this episode:
-Housing affordability in California and Florida
-Potential for homeowners to tap into equity as rates drop
-Real estate investing and home pricing strategies.
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.
Video Link
Radio Show
Welcome to The Norris Group real estate podcast, a show committed to bringing you insights from thought leaders shaping the real estate industry. In each episode, we'll dive into conversations with industry experts and local insiders, all aimed at helping you thrive in an ever-changing real estate market. continuing the legacy that Bruce Norris created, sharing valuable knowledge, and empowering you on your real estate journey. Whether you're a seasoned pro or a newcomer, this is your go-to source for insider tips, market trends and success strategies. Here's your host, Craig Evans.
Craig Evans:Hi, and welcome to our Podcast. I'm your host, Craig Evans. And joining me today is the world famous Bruce Norris. Today's show is our bi-weekly real estate news roundup, where Bruce and I are just going to sit back and toss it back and forth a little bit on what's going out there in real estate. So Bruce, first of all, as a semi retired person, welcome to the show again. How are your holidays, the New Year's how's everything treating you?
Bruce Norris:It was a great holiday, it really was. We sort of start Christmas probably around the end of September. We start decorating stuff and it gains momentum. And then we go to a Christmas stores and buy more stuff. So Sandy and I are really into it. So Carl does a great deal. We probably watched I don't know two dozen movies and you know, that other American channel and stuff. And so no, we both love Christmas, and it's one of our favorite holidays for sure.
Craig Evans:Good. Well, listen, let me ask you this. Before we jump into some of the stuff I want to go over with you today. You know, I am grateful to now be the owner and CEO of The Norris Group. But you as my friend, I'm interested to ask how was the "semi retired life" for the first 11 days treatment?
Bruce Norris:You know, it feels very normal because you know, you and I have some projects going on. And I have speaking engagements today and I have two of them in about four days. So see, that seems pretty normal, you know, it really does.
Craig Evans:Well, let's jump in because I do know you got to speak tonight. So I want to jump in and kind of start working through some stuff. But you know, I was thinking through. And Joey and I were talking about some stuff the other day about how the last quarter of real estate has looked and even what does it look like in the last 1011 days since let's say the second of January, of what the residential real estate market is looking like. And it got me to thinking about what, I've heard you talk so much about in relation to in state and out of state migration, you know, that state to state migration, so to speak. So we looked at some data and from obviously 23 is not out yet but for 2022. We got 32 out of 50 states and an inbound moving rate higher than 50% for 2022. You know now in that they were classifying that inbound moving rate defined as the number of people moving into a state compared to the state's total number of movers. So, you know, when you got 60, was at 64% of the state is seeing an inbound rate higher than 50%. I thought that was interesting. So we kept diving in, the top state in net migration of incoming net migration was Florida go my home state, was Florida with just right at 200 and a little over 249,000 as a net income in migration. The top loser...
Bruce Norris:That's a big number.
Craig Evans:That's a huge number, you know, and I think we're 20 threes number out but that was for 22. But the interesting. And I know you've talked about this a lot. And I want to get this out there and get your pick your brain on this. So the top loser of net migration was California with 342,000. So when you got 32 out of 50, so 64% of the states having higher than 50. You got Florida's number one, California at 342,000 is your net loser. Do you see that trend changing anytime soon? And let's say if you want to call it a mid level micro look for like the next 10 years. Do you see that kind of process changing?
Bruce Norris:No. I see it progressing and gaining momentum. And one of the reasons it gains momentum in Florida is aging. And a lot of people that ended up coming to Florida are connected to the medical industry. Because there's kind of a formula when you're 65, you have two medical people in your life. When you're 80, you have seven. So think about that. There's a lot of people that last now to 80 and they have a 350% increase in the medical people that are involved in their life. Well, that's why you have so much migration to Florida, because it's a pretty natural thing. Most of my renters in Leesburg are nurses, that's just interesting. I didn't think that was going to happen. I thought it was gonna be seniors. No, it's the nurses that came into the area, didn't know didn't know for sure if they're going to buy or not stayed as a renter for two years and then bought. So that's, you know, that's what's going on in Florida, the states that are losing the migration will continue, you know, the Florida and the New York's and the Chicago because of the things that are going on in there. But what's really interesting about California, it's so hard to get a permit that, you know, when used to have a boom cycle, you'd be peeking out 160,000 new homes, this boom cycle was 60,000. So if you look, if you go backwards, say 160 is your peak, and the year before that was 145 and then 130. If you went a whole decade and never passed 60, you didn't build those homes, you know, accumulated those numbers came into, what 600,000 homes, you're short, okay, but now you're losing people, but you didn't lose pricing power, because of the interest rates in place. The new home selling was a very not a big percentage of the market, if it was only 60,000. You know, and you did 250,000 sales. That's 25%, that's much more than normal, much more than normal. But well, anyway, they they didn't take a price hit.
Craig Evans:Well, let me ask you this, because that's interesting. We know, and it's kind of gonna have something to talk about a little bit with you. But I want to bring this up. Now, in the aspect of an affordability side, we know what's happened with the appreciation of homes and the valuation of homes. How do you see that the affordability issue, again, my home state is California or I'm sorry, it's Florida, which you know, I think you're a smart man, because now Florida is your home state. But you've been that California guru for years. How do you see the affordability issue plays into that over, and not just in the past, but even over the next decade?
Bruce Norris:Okay, so typically what happens, you go into, let's say, go back to 2021. When you have something for sale, it lasts a day? No, it may not have lasted. And maybe it didn't even last an hour without 10 people. Okay, that's how you get to a low affordability. On the other side of that there's another formula about what percentage of your income is being taken when you buy a house. So Florida has a history, California has a history, it actually is the same direction, California just as exaggerated. So in a market like this, you're having to spend the median is spending 70% of their income to buy a house, you need pressure on the buying side. To keep that going. That's not a normal percentage. So what's interesting is that's being maintained, because the few buyers that really still want to buy are a higher percentage of cash buyers. So the financing is not as big a deal, right?
Craig Evans:Right.
Bruce Norris:And they're just not a lot for sale, what used to be, you know, you'd expect there would be six months plus of inventory. And now it's you know, two and a half. And a lot of it is new inventory. So the builders, both in Florida and California representing a higher percentage of sales, because it's the only thing for sale.
Craig Evans:Well, so let me ask you this, then because the if I'm looking at US States as a whole, because I don't want to just focus on Florida and California. But if I look at that all 50 states, you know, typical American homeowner saw their equity. Again, this is nationally saw their equity REITs have about $20,000 or 6.8%. Over the last year then that was a 2023 number three, I'm sorry, through the end of that was through the end of third quarter compared to 2022. So in that, what I thought was was interesting was top three states that gained in equity, you know, we just talked about the the net loss of migration out of California, but California was actually Number two of the top three states of equity gains, you got Hawaii that gained on average $63,000 per home, California gained on average $51,000 per resident. But yet, you've also got there the highest net migration of loss of 340 2000 people exiting mistake.
Bruce Norris:One of the things that's happening, so let's talk about that equity position. I'm wondering if it's connected to a median price calculation. So your median price went up X amount of dollars, your median price can be affected by what's actually selling. So in California, you have that home that's under 400,000. Once represented, 45% of the market is now 25. The other you know, there's other inventory, that the higher priced it represents a bigger place, a bigger spot in that formula. So your prices probably haven't gone up as much as that percentage is, the inventory that sold has changed. But to be honest with you is a remarkable accomplishment, that prices are where they are and our firm when your interest rate goes from under three to eight. That's an astonishing accomplishment.
Craig Evans:Right. Well, so there was a report put out by the Federal Reserve that out 66% of Americans who own their property saw their equity rise from 139,000, in 2019, to just a little over 200,000, in 2022. So in a three year span, you know, they've gone almost $62,000 of equity rise. And again, that's a national number. So you got California and Hawaii picking those ratios up. But again, if I go back and take that 10 year number that we're talking about, what what do you think that looks like over the next decade from an affordability, but also, you know, from the equity in their home, but also in affecting the affordability of that? Where do you see that going? I mean, you're the chart Guru, I don't know anybody that can rationalize data, as good as you do. So if you're looking at that, and I'm giving you that snippet of data, what do you make of that?
Bruce Norris:One thing I think about is okay, so we have interest rates that are going down probably will gradually do that. So what's going to be interesting is who comes off the sideline? Is it the seller, that can't wait to sell their house with a two and a half or 3% mortgage so they can get a five now instead of an eight? Or is it the person that's been sitting on the sidelines with didn't want to get or couldn't get an eight that wants to finally get in and a five or so. So what's happening, let's say the equity build up. A lot of people refied not just once, but again, and again, and again, oh, my gosh, I get a chance to get a four, a three, a two and a half, I can go from a 30 to a 15. They're going nowhere by and large, their equity gain is actually multiplying. Because if you have a 15-year loan, the equity gains quicker if you had a 30-year loan in place for now are yours that gains. And I think the mentality is, I'm really not going anywhere. So that's really put a freeze on a lot of inventory. It also is created a possibility of having a positive cash flow from your occupancy where you know, where you live, if you had to move, let's say you got transferred. There's hasn't been too many times in the world where you could go, 'you know what, fine, we'll just rent this thing for a couple grand more than our payment and come back when we get transferred back'. That just hasn't been uttered before. So I think it's just a really interesting time, where typically, the inventory that is sold is 85% existing inventory. And right now it's nowhere close to that it's about 65% and the new builds are 35.
Craig Evans:Well, so let me tie in to something you said a second ago, because we're talking about the, what's happening from the equity position and what they're going to do and they've refined over and over and over. So in building...
Bruce Norris:...get money out, think about what they did with that, if they refied. Maybe they fed you know what we can refi now and actually pull an extra 100 grand and put a pool in or an office and our payment didn't change. So some permanent decisions were made during that timeframe where they just said,'man, we're good.'
Craig Evans:Well, so are, so let me I know I've known you for I think, I don't know, three and a half, four years now. I know that you hate the word I don't say hate, which strongly dislike the word predict, right? But if you had a crystal ball that you were looking into, do you see those people pulling that equity and putting that to play? Or do you think that if they haven't already, and for the new for the new people that in that have gained this equity, let's say over the last 12 to 14 months, being able to refi into a lower process was out of the picture for them, but they've still got an equity position. Do you see people over the next 510 years wanting to try to put that equity to play maybe as the rates come back down? If there's not a you know, because I know you and I've talked a lot about that as the rates come down. Historically, we should see the foot start to step on the gas, again, as far as the amount of transactions that are happening. So as long as there's not price damage, do you see that equity being able to start getting onto the street? Or do you see people sitting on that equity? And again, I don't want to say asking for prediction, but what
Bruce Norris:Yeah, no, that's fine. No, we wrote a report, you if... know, a couple of years ago had a 10-year projection. So that's fine. And the projection was that you're going to have a modification of the mood. So we have this chart called a moodometer. And it calculates the percentage of income you're willing to spend on the house. It's very rarely it's 70%. But it's, it's camped there now, if you're in California, okay. So normally, it goes back down to 45. But it's being stubborn, because it's so little for sale, and the buyers that want it are a bigger percentage cash, and they want to buy. So I think we're actually what will happen is that number that will go from 70 to a less of a number, but it'll do so on the backs of two math equations, you're going to get raises, and your interest rates are going to go from 8 to 6 to 5 to 4 and a half. Now at some point, those people on the sidelines with the two and a half may say okay, what if they want to move to Florida? See, that's what's really interesting. So you could go a million dollars on a $2 million home and in California, and it's a residence and you can sell it and live in a much nicer home in Florida free and clear. That move will constantly make sense.
Craig Evans:Okay, well, that.
Joey Romero:Let me ask you a question from the investor standpoint, Bruce, you know, just like, let's say I have a I, my house that I live in, you know, is worth $2 million, and I owe a million on it. I sell it and I go buy a house in Florida for a million bucks. Like, I'm going to have like a really nice house. But what if I'm an investor and my investment properties are doing that in California? I owe million on it. But now it's, so now can I go, you know, own five properties in Florida, you know, replace a million dollars of equity, but maybe double or triple my cash flow.
Bruce Norris:There's two major things with the California investors, the laws constantly keep changing in favor of the tenant. It is now illegal for you to get a credit report on your rental.
Craig Evans:I didn't, I heard that last week. I was like, You gotta be kidding me.
Bruce Norris:Yeah, so okay, well, that's exciting. So yeah, that's why the whole boot camp idea started to make sense because I did that with my own stuff. I said, 'what do I own?" I own this crummy house in Moreno Valley. And I asked a property manager one time what percentage of the world would rent in this area and he said, 20%. So two and 10 would actually go there and be a renter. But the price was so significant, as far as the movement of it, that when I made that transition, I bought one and a half new homes for every piece of credit I had in California. So anyway, that's California is a very big help to migration to wherever it's going. New York is the same for California, I'm sorry for Florida, Chicago, Canada. Those stories exist where Florida makes a lot more sense. Even though Florida has gone up. It's very different in price still, it's about half of California median price.
Craig Evans:Alright, so let me ask you a different question. We've talked about raising equity and that we've seen homeowners gain raising rising equity. Fannie Mae just came out and had the, they have the thing that they put out called their Purchase Sentiment Index or PSI in the month of December and increased 2.9%, up to 67.2. Now obviously, that's primarily the jump is due to consumers expecting and looking at mortgage rates starting to go down and what they're expecting over the next 12 months. You know, we've got Mark Palin, longtime friend of The Norris group been with I survived real estate several times. You know, he's talking about that the mortgage rate optimism increased, because of I serve a high share of consumers anticipating that coming down. But interestingly, part of what Mark was talking about, he said that homeowners and higher income groups reported a greater rate of optimism than renters. In fact, for the first time in the National Housing Surveys history, on net, that the homeowners believe that mortgage rates will go down, versus going up. So what it was showing was, you've got, you know, a, let's say, I think it was the people they were serving, you've got more people saying it's a good time to buy. And the bad time to buy has decreased. You've got people looking at is it a good time to sell went from 60%, down to 57%? Is it a bad time to sell went from 40 to 42%. Mortgage rate expectations, they're looking at only surveys that over the next, 12 months, that the again, the PSI, they're saying it should go, you should jump over the next 12 months, where they're looking at 22 to 31%, in relation to the purchasing index. So in other words, people are saying, hey, they're looking over the next 12 months that they're looking at almost another 9% increase that people believe mortgage rates are going up, or I'm sorry, coming down, allowing for buying space. In that process, when you got, I just want to kind of tie this back together, when you've got homeowners that have equity. Again, as Joey mentioned, whether it's in their ownership of their primary residence or as a renter, I mean, I'm sorry, as an investor. What do you believe that change, and that sentiment in the interest rates is going to do from a home sale perspective or a home pricing?
Bruce Norris:I think home pricing will be more effective than the volume of sales. I don't know how many people did two and a half percent mortgage, and there's a lot of people. And there's, you know, a very big percentage that have a 3% mortgage or under. So, I mean, I guess the best thing I can do is act my ask myself, if I was in that position, if I owe two and a half percent interest on my mortgage, what would motivate me to go get a five? It probably wouldn't occur. In other words, I probably made that decision. And if I got to refi money out and do a dream home kind of addition, I think a lot of people are just, they're camped out. Now the investor world again, if you're coming from a more expensive state, that financing probably isn't even a strong point, because you'll probably buy something free and clear. With the equity you have from more expensive state. That seems to be bigger trend. You also can prove your location, the age of the property can go from old to new. You know, that's I think that's why that transformation was enticing to me because, you know, I went from really lousy inventory and location to brand new houses. So that was not a hard decision. And I guess that's how, that's why we even started talking to other people because people were meeting with me with their inventory. Okay, I've got 50 houses. So how many of these renters would you want, or these rentals would you want forever? Like 10% of them. The rest of them are, you know, just in rough areas now that that's perfect. Let's talk. because the locations don't improve generally they get worse.
Craig Evans:Right. Well, Bruce, I know it has been a it's been a busy year for you already and you got busy stuff tonight. So I really appreciate you taking time to speak with us and to hand the mantle off to me to continue what you and Aaron have done with The Norris Group it means the world to me to continue that mantle and carry that on. So I appreciate you taking time today with this talk. Joey if you don't mind if you can jump in and tell us what we've got coming up with The Norris Group because I know we're making a lot of good changes a lot of things come and tell me what we got.
Joey Romero:Alright, so if you're in Florida, next week, you're in for a treat that you get Bruce at two different events. So first at noon, in Sarasota at the Sarasota REIA, Bruce will be the keynote speaker there So if you're in that area, you're part of the Sarasota REIA. Don't miss this one. And then that evening, at the Southwest Florida REIA, Bruce will be the keynote speaker there, and that's going to be at Suite 48 in Fort Myers. So he'll be in Sarasota at noon and in Fort Myers at the end of the day. The next time, you'll be able to catch Bruce on Zoom, doing a presentation, How to make money in a flat market, that'll kind of give you a hint of where this is going. We'll be at the Prosperity through real estate meeting on February 13. So we're going to have two events that we'd love to see everybody at one of the personal is going to be at June 8 and you'll probably see a more details on that on a couple months but you know, one of the things that Craig was being peer pressured by the panel, and by everybody, as they left, the event was I Survived Real Estate, they said, There's no way you can let this end. So by popular demand, and by Doug Duncan, you know, getting cornering, Craig saying you can't let this go, you got to be the CEO, this can't be over. So we are going to come back with I Survived Real Estate once again at the end of October, it's going to be October 25. We already have a date. So we look forward to seeing you guys throughout the year. And that's what's going on with The Norris group.
Craig Evans:Perfect. You know, Joey, the thing on that, what I'm really excited about is that I now get to ask Bruce questions on I Survived Real estate, he gets to be on the panel and get grilled on that now. And not have the list of questions in front of him.
Bruce Norris:As you know, I never want. You know where that came from? I'll just be brief. But when we started doing the radio podcast, we would occasionally have people want the questions. And we make the mistake of giving them the questions. And the problem is I don't maybe I don't want to ask question number two after their answer. Number one, maybe it was a different and I got sent in a better direction. Well, if you asked a question that comes to your mind, they're like, 'What the heck', what happened to question number two? So it went from a staccato feel, because the questions were pre planned to, I mean, I listened. And then I was like, Okay, well, that second question just came to mind, and it's so much better than the one I could have thought up. And so we quit giving people questions, and I never wanted them for the same reason because Craig, when you get to questions, you think of an answer. When you give a different answer live, it messes with you.
Craig Evans:Yeah.
Bruce Norris:It does. Then the next question, you're like,'Ah!'
Craig Evans:Well, listen, Bruce, I really appreciate you being here today. Taking the time with us. I look forward to many more of these conversations over the years to come with you is not only the legacy that I choose, and hope to strive to be, you know, somewhat even close to, but also as my friend I look forward to spending these times with you. So for everybody listening, thanks so much. Have a great day. Bye bye.
Narrator:For more information on hard money loans, trust deed investing, and upcoming events with The Norris group. Check out thenorrisgroup.com. For more information on passive investing through the DBL Capital Real Estate Investment Fund, please visit dblapital.com.
Joey Romero: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 to thenorrisgroup.com and click the hard money tab.