The Norris Group’s annual award-winning event, I Survived Real Estate is back! Due to Covid-19, we are virtual. HOWEVER, our 14th annual black-tie gala that benefits Make-A-Wish and St. Jude Children’s Research Hospital will continue. Since 2008, together we’ve raised over $1,000,000 for charity!
Our network will want to pay special attention to The Norris Group Radio Show and Podcast as we will be doing pre-event shows featuring local experts as well as national leaders. There’s a lot at stake in 2021 for real estate investors. Will the real estate market remain scalding hot? Is a crash coming? How will the US handle the disappearance of Covid housing- and employment-related assistance?
I Survived Real Estate was created during a year in crisis and our mission continues to bring thought leaders together for a great cause while preparing our industry for the year ahead.
PLATINUM PARTNERS:
San Diego Creative Investors Association
Wilson Investment Properties,
uDirect IRA Services
GOLD SPONSORS:
Inland Empire Board of Real Estate
Keller Williams Corona,
Keystone CPA Inc.
Las Brisas Escrow
Leivas Tax Wealth Management
NorCal REIA
NSDREI
Pasadena FIBI
Realty 411c
ThinkRealty Magazine
Episode Notes:
Narrator 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 notice. On November 5, 2021, The Norris Group proudly presented our 14th annual I Survived Real Estate charity event, industry experts joined Bruce and Aaron Norris to discuss evolving industry trends, real estate bubbles, inflation, and opportunities emerging 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, San Diego Creative Investors Association, Wilson Investment Properties, uDirect IRA Services. See ISurvivedRealEstate.com for event details, information on all our generous sponsors, watch the video uninterrupted and to connect with our speakers.
Aaron Norris Cornelius, this is a question for you. And it’s an important one because it ties into a few different things. But immigration policy. You know, here in California, we basically shut down the construction industry for 10 years, all those people who have skilled labor may have moved on to other markets maybe moved into other industries, and now we’re experiencing an increase. Jobs not a lot of people like is the building industry preparing for huge wage inflation in the construction industry? And how do we offset it?
Cornelious Burke Absolutely like sub nodes and strong demand is these construction jobs. I mean, on a month to month basis, the National Association of Home Builders say about 300 to 400,000 jobs on construction are vacant, 30% of the construction industries by immigration workers. We need to definitely have a national conversation on immigration. It’s impacting our industry the most. So yes, the immigration, particularly in California is important. And overall the workforce development in this space is critical, critical, critical critical for is, for us to meet our housing goals.
Aaron Norris Okay, got a lot of good questions. Is there anything on the horizon that could create a significant increase in inventory and how that affects pricing? Even if rates creep up a little bit? The inventory seems like it could absorb some buyers lost due to being priced out of, out by higher rates. So, pricing should remain strong, right? Can you please touch on inventory and pricing?
Bruce Norris And…
Sean O’Toole It’s trying to do a lot with like a lot splits and stuff to you know, in California to try to create a little more inventory and take away some of this local control. I don’t think it happens quickly. And the building costs and the rest, I don’t see a large supply of inventory coming.
Cornelious Burke Yeah, Terner Center at UC Berkeley says only 2% of lots, this would apply to based on setback requirements, wildfire and other rules that this law has only 2% the whole entire state, so a very small number.
Bruce Norris And whereas to my earlier point, whereas in a recession in the past, you would have seen some pickup in foreclosures. And that would have been a moderating influence on prices within the market. Now, with all the consumer protections related to preventing foreclosure, you don’t get that same, that same cyclical effect, you know, that sounds harsh relative to people losing their home, but that’s a function of them, then losing their job first, which is the driver.
Sean O’Toole And, you know, the building for investment. You know, you’re talking about rent control, which isn’t just to California things happening in other places, right. California has the lowest rents in the nation. People are looking at me like crazy right now. Right?
Aaron Norris Yeah.
Sean O’Toole As, as a function of price. Right?
Bruce Norris Do you have, so you have a highest prices in the country.
Sean O’Toole Because prices. So, as an investor, I get the lowest return. Right?
Bruce Norris Yeah.
Sean O’Toole So, if you think about rent should be a function of price, right? And I’m encouraged to build rentals because of the return on investment I’m going to get and therefore the price I am charging for rent, as a function of the capital after put out to create that rental is the worst in the nation. And we’re talking about rent control in, in the state that has the lowest rent as a function of price in the nation. It’s crazy. We’re going exactly the opposite direction. We need to go.
Bruce Norris Yeah.
Sean O’Toole We need, we need everyone talking about the fact that California has the lowest rents. And we need to fix that. And we need to bring rents more in line with prices, or we need to bring prices more in line with rents. But that’s the question that needs to happen is how do you bring those two closer together, we have a choice in California, we either need to bring rents up, or we need to bring prices down. It’s a simple binary choice. You put in rent control, you’re going to make that all worse, and you’re going to have even less investment in the state. And in the whole situation is going to get worse, we’re going to have even fewer housing units, we’re going to have less affordable housing, it’s going to get worse. The question can’t be about I understand people can’t afford this rent, it’s problem. People can’t afford these prices. It’s a problem. So, do we bring down prices? Do we bring up rents? It’s got to be one of the two. And I gotta tell you bringing down prices, we have what 65%, 69%, I think homeownership in California should look at my app. That’s 70%, 65, 70% of the population of California don’t want prices to come down. That’s the fundamental issue with affordable housing in California. 70% of people want to see their prices go up.
Bruce Norris It’s probably less than that just in California. But that’s, you know, say 60, something like that. But how would you artificially make a market go down? If it’s a free market?
Sean O’Toole It’s not free market.
Bruce Norris Okay. Can you elaborate on that?
Sean O’Toole So, mortgage rates today. Right?
Bruce Norris Right.
Sean O’Toole So, remove the Fed, remove Fannie, remove Freddie, remove all the government backing from mortgage, we would have a very different market. I’m not saying we should. And I’m not saying we should bring prices down because I think it would cause a lot of pain. And I don’t think anybody votes for that. And we at least apparently live in a democracy, right? So, I don’t think it happens. But we need to have realistic conversations about it and understand the choices we’re making. All these people, we’ve got a lot of folks locally, that run around. And you know, I won’t name the nonprofit, but the nonprofit has two missions, right? One is to protect and preserve the local area. So, they come out against every housing project, and want to add rules and costs. And before you know, more and more and more stuff they want to add to every housing project. So, they make it ridiculously expensive to build, and they’re going to sue you under Sequa. And all the rest, if you want to build housing here. And there other mandate is affordable housing. I mean, it’s the most hypocritical, stupid, you know, dual mandate I’ve ever heard of. And yet, you hear that everywhere. You know, you talk to Californians. And here’s the interesting thing, right? We as Californians represent, we elect people to the state. And we say we care about progressive issues, we care about affordability. So, you get the state, putting in place rules, right, to take away authority from the local jurisdictions to try to help bring housing costs down. But those same people that elected those folks at the state level that said, hey, fix this, make it more affordable, this isn’t okay, show up at all the meetings, to you know, try to, you know, stop the local housing in their area, and oh, it’s gonna, you know, it’s gonna hurt this and it’s gonna hurt that we’re so hypocritical about this, every single of Californian is a complete hypocrite. When it comes to affordable housing and home prices. We all want our prices to go up. And we all believe that there should be affordable housing. Those two things are mutually exclusive.
Aaron Norris And I have a lot of good questions and we only have 15 minutes left, so I only have time for a few.
Bruce Norris I’m glad your throats go… your throat’s doing good man.
Aaron Norris Asset Value question if stagflation seems most likely a deflationary period with asset values staying flat or continuing to rise and interest rates stay historically low, low or decline? What is the constraining factor to run away asset values debt affordability? Do these just get solved with government intervention?
Bruce Norris Over my paygrade that’s got to be Doug. Well, one of the impacts of current monetary policy has been to inflate the value of assets. And I think that when the Fed starts to address the question of measured inflation, and I make that distinction, because people don’t think of asset appreciation as an inflation, but in fact is when the Fed starts to tighten that that will change some of those asset valuations. And to Shawn’s point about who starts screaming about things. When prices change. You’ll hear about it and that’s why it takes Paul Volcker to fix the problem. Somebody that is resolute in returning market relationships back to were things like interest rates are determined by arm’s length transactions by, by parties that are willing, as opposed to under duress. And today, you get tell me what the real interest rate is because the Feds intervention is specific to effect where rates are. So, you don’t actually know to mention, Sean was making that point about government intervention in housing in the price of houses, and when you legislatively or regulatorily introduced restrictions into the market, and you just start the pricing fundamental. So, at the end of the day, I think it when economic historians, right, say 50 years from now, right about this period of monetary policy, you got to be very critical on the Fed suggesting it is at the root of some of the income distribution problems because the deflation of those asset valuations all go to households who have assets to be inflated, and that’s not the poor. And that’s not low income households. That’s a middle and upper income households that are seeing the impact. So, I, you know, I think certainly monetary policy is…
Aaron Norris Inter brings up… a great point about property taxes and cities and Cornelious maybe you have some insight into this thing. Feel like it’s Christmas, the you know, in Texas as an example, I have a friend who bought less than two years ago for 625 relocation for a new job in Jacksonville, Florida. He is now in escrow for his Texas, his Austin home for 1.3 5 million. It doubled in less than two years. In states like, Texas, that’s a that’s a huge bump to their coffers. How are they handling this? In some parts of Florida? I know there’s discussion about them lowering property taxes is California doing it?
Cornelious Burke Well, Prop 13 In California, which, which kept property taxes, but one of the challenges that we have, as I said, these impact fees, so he’s various governmental entities are now funding their, their general fund with all these impacts. These additionally be less special districts in our state. So, this is the flood control district, the park district community college district, the Transit District will also add on to your property tax bill. So, it’s really, it’s amazing visiting system here where we’re funding local government pretty much as a de facto housing tax at this point. And that needs to be addressed at a statewide level as well.
Aaron Norris Has anybody instituted like a CalPERS retirement impact fee? Not yet, it’s coming. I’m, I forget what prop 15 was in California. Do you think prop 15 in California that was narrowly defeated will eventually get passed? And if so please talk about the adverse impact it will have.
Cornelious Burke I think that might be referring to the either the rent control measure that we were able to…
Aaron Norris I think so.
Cornelious Burke I think that was on the ballot twice. And we’re able to defeat that. I know, folks, you’re talking about bringing that back again. So, that’s a bad policy, rent control will make a bad situation worse. There’s also Prop 19 on the ballot last year, which allowed you to transfer your property tax base, which is very helpful for a lot of folks to you know, leave, for example, the Bay Area and move to Sacramento and not have to worry about the property tax base changing.
Aaron Norris I’m going to make the next….
Sean O’Toole …customers are making a killing on that one right now.
Aaron Norris I’m gonna make a few quick comments because there’s some questions. One is should I lock in my my loan now? I I’d say yeah, why, why try to wait and time the market perfectly. It’s it’s pretty stupid low right now.
Kacie Ricker So, right now, I’m wondering if I should have waited for that 1%.
Sean O’Toole I’m really hoping we don’t see that anytime soon. Because I think it’s as the after effect of something really bad. So, please, please, nobody hoped for that one. Please, go home and pray that I’m wrong.
Aaron Norris You can always refi if it gets the 1%. Don’t stress. And then when it comes to builder, there was a builder question. Should I move forward with construction in California, I think double the time frame that you think it’s going to take. Assume you have to get really organized and all over your contractors. And if your contractors are not plugged in and in the know of how bad it is, you’re going to have to manhandle like your construction project. I’m just surprised that I hadn’t heard one year for appliances that’s new and little concerning. But we’ve had to adjust on the fly like we’ve got air conditioners that are been important for three weeks and we had to switch brands just so we can move along and get things done. And so, that impact you know you’re going to holding costs are going to cost longer. Things are gonna cost we’ve had garage doors go up six times this year. So, you just never know which category is going to be upset. So, just assume it’s gonna cost quite a bit more double the time frame. And if you’re still comfortable with what you’re doing great, if not sell to somebody else who wants to take that journey. And don’t stress about it.
Bruce Norris Well, you know, the other thing that comes up into play with the clients, especially and myself, I’m going to 1031 Exchange right now. Well, what’s the odds of that getting finished on time? It may not happen, and it’s no, it would be nobody’s fault. You don’t you can’t get appliances for a year. Well, so I wonder how the IRS is going to deal with that. Because that is a systemic issue, not anybody’s fault.
Aaron Norris We asked the question last week to where, technically, still in the state of emergency, but the IRS has not posted the COVID related supply chain disruption is something that will count. So, sorry about it. It’s not gonna work, that we are rounding out the evening, would you like to close this out?
Bruce Norris Well, I just want to thank, first of all, my son. His courage that he has displayed this year is awesome, the industry and how he’s been supported. I really appreciate all of that. And this event is meant so much. It was his brainchild, you know, he comes up to me, you know, with some of these ideas, you know, why don’t we do this? And this was this was one of them. Why don’t we have a charity event? And why don’t we have the leaders of the the real estate world in the United States on a panel every year? And yeah, first time I heard that I was like, ‘What?’ And now? I love it. I look forward to it. And I think, I think because of the group of investors that we’ve had, you know, it’s interesting, when we first did it, they people showed up, they weren’t really sure what it was. They, it wasn’t a seminar, so what is it and they really just was on Okay, well, we trust you we show up. So, for 50 people show up in formals and tuxes and go and Okay, well, what’s tonight about and it was so fun, and it’s really become our industry ball, is what it amounts to. And when I miss it, not doing it live. But the first year, I remember standing up. And I said, are there any investors here? Would you stand up and four and 4-50 people stood up, all dressed. And I looked at the I looked at the panel, and I said, I just want you to know what an investor look like. Because at the time, we were the bad guy, we were being pointed to as okay, you’re the guys that caused all the foreclosures and all that. And that was a speculator, that was not the room full of people that that you have in front of you. And so it’s been it’s been a great journey. I’ve made some great friends along the way. And I get to ask questions of these guys that I don’t know the answers to. And that’s really good. So, thank you all for participating for another year. And it’s great that we’re raising some money for people that have much less fortune than we have in our life. And so our wall at the office is, got tons of pictures of people’s lives that we all collectively have impacted in a very favorable way. So, thank you from the bottom of my heart.
Aaron Norris You typically ask one final question.
Bruce Norris Okay. What’s the, what’s the one thing you’d like to see happen in the next 12 months? What would be on the top of your list each, each and every one of you or you can pass either way.
Aaron Norris I’ll start, I would really like to see the construction industry go for manufacturing inside its green, 3D printing wall, wall packs. I think it’s time to get a little bit more creative in the construction industry. And I think we’re, I think we’re gonna see in the next five to 10 years. I’m pretty excited.
Bruce Norris Okay, Doug. You got to do your sound. Alright. Well, the first thing that you have to have if you’re going to build a house or an apartment is a piece of land. And if there were some way to have a national wave of land development reform that freed up land and lowered cost, that would be a huge change for the affordability of housing, to the conversation we’ve had about housing affordability. I don’t I don’t expect it, but that would be awesome. Okay, yeah, this is Wish List time. Cornelious?
Cornelious Burke Oh, ah, so many things that I would say in the short term and immediately with all the money that the federal government have provided to the states for COVID. It’d be nice if they would use that money to hold off on fees and use that as an aid economic incentive for folks to go in and say, hey, I want to donate to, you know, fees pay, I want to build housing, no fees. So, all the millions of dollars at the state and local governments have in their conference right now, thanks to the federal government, no fees, and use it as a stimulus for to jumpstart home building and home construction.
Bruce Norris I like that. Sean?
Sean O’Toole I would love to see more focus on facts and more focus on compromise, compromise by both, both parties and understand that. That at the end of the day, you know, a house divided. You know, this is a great big world. And we compete with a lot of folks. And we have a lot of advantages by being the world’s reserve currency. And we have a lot of advantages that I think we have are very at risk of losing if we’re not all rowing the boat in the same direction. And I would just encourage anybody who’s using language about the other side, to dial it way down, and think a lot more about compromise and meeting in the middle.
Bruce Norris Kacie.
Kacie Ricker I’d really like to see, first of all, thank you for having me on the show. It’s been so great, I pinged Aaron and just thanked him for including me. But for me, it’s really about modernizing the transaction, and make it making it simpler for an agent and for consumer, for as many advances as mortgage and title and the sales process have gone through, through COVID. And it’s still a pretty archaic process. And we need to modernize to where consumers are today.
Bruce Norris Joey, would you like to have a voice in this?
Cornelious Burke Actually, I just want to say thank you to everybody. It came together so fast. Everybody jumping on the panel, all the sponsors, all the individual donors, it means so much to us here at the Norris group. And you know, I’m the junior member here, but I get to talk to a lot of you. And you know, a lot of times, you know, maybe they’re a little too reserved to talk to you about certain things, or Aaron. And so I get a little bit more the real investor. And I really do appreciate everything that you guys do, and all the support that you guys show us in our events in our meetings, and especially here with I Survived Real Estate. Thank you.
Bruce Norris All right, I’ll wrap up with the same thing I’ve said for the last dozen years. I would like every elected official to stop being a Democrat or Republican and first be an American. Period.
Aaron Norris Deal. Wow, seven on the dod. Did you do that on purpose? Yeah. It’s Florida time. It’s 10 o’clock here. I get it. But hey, times change this weekend. Don’t forget that.
Bruce Norris That’s right. I will I’ll be walking in the light instead of the dark.
Aaron Norris Thank you so much panel for being here. It’s, it’s just been awesome. Per usual two hours flies by very quickly and Sean, your voice came back. Amazing.
Bruce Norris Yeah. And he’s gonna be up at two, at two in the morning thinking too.
Aaron Norris Our gold sponsors tonight. That came in early Think Realty, Inland Empire Board of Real Estate, Realty 411, FIBI, Keller Williams Corona, Keystone CPA, Las Brisas Escrow, Leivas Tax Associates, associates, NorCal REIA, NSDREI, thank you so much. I really appreciate it. Hopefully next year, we will bring back the Rohny award and we will be seeing you live at the Nixon library. When the video comes out, we’ll shoot an email to everybody if you could help us spread the word and we’ve raised over $43,000 So far, we’d love to see that go a lot higher. So, thanks, guys. Have a great weekend. Change, change your clocks. Don’t forget, and we’ll see you next year.
Bruce Norris Okay. Bye, everybody.
Narrator We’d also like to thank our Gold Sponsors, Inland Empire Board of Real Estate, Keller Williams Corona, Keystone CPA, Inc. Las Brisas Escrow, Leivas Tax Wealth Management, NorCal REIA, NSDREI, Pasadena FIBI, Realt411, and Think Realty Magazine. See ISurvivedRealEstate.com for Event Details information on all our generous sponsors, watch the video uninterrupted and to connect with our speakers. For more information on hard money, loans and upcoming events with the Norris group, check out the Norris group.com. For more information on passive investing with trust deeds, visit tng trust deeds.com.
Aaron Norris 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.