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09-27-2008 |
Part five of ?I Survived Real Estate 2008? picks up with Bruce Norris introducing Tommy Williams, president of the National Auctioneers Association and co-founder of Williams and Williams Auction Company. Tommy has been involved in over 10,000 real estate transactions in his very lengthy career. Tommy starts right away with his solution. Tommy brings to the table an idea he?s been passionate about for many years. Reality in the market place is what it is and there?s no way around it. The entire world sets prices by the auction process and not just real estate. Instead of having a foreclosure process, Tommy suggests we skip foreclosures all together. The foreclosure process leaves an empty house and starts a very expensive process for the bank. The neighboring homes next door to the foreclosure see house values go down because of blight, the bank goes the a long and expensive process, and the foreclosed consumer leaves with damaged credit. Tommy suggests a short sale auction hybrid. The consumer about to foreclosure would still be in the home when the auction took place and the home would be handed to someone ready to fill the home and at true market price. After the auction, the foreclosed consumer and the bank would need to deal with the deficiency but at the least the property would never be vacant. The free market needs to work and the auction process needs to be involved. It would help us get back on track more quickly. Bruce is the last speaker of the evening and starts talking about the cycles we go through and how we as humans often repeat the same mistakes. Solutions can also be from the past. Bruce says that when we have a euphoric period there?s an exuberance that gets people in the market that should not be. The last to get in are usually the ones that are least capable. Emotions come into play and typically they cannot afford the home they purchased. This cycle we saw a record number of home owners but maybe we should never have got to such a high number. Bruce shows a vacancy chart and how it climbed since 1985. Now it?s declining and rightfully so. Bruce thinks about 6% of homes will end up being vacant. Tightening loan standards are creating issues. Bruce reads an article about lenders tightening programs. It makes it harder for people hard to qualify and refi what the already have which will make it worse. We now have to deal with the largest foreclosure issue in history. Foreclosures are already at an all time high and will continue. These foreclosures have caused huge price erosions. Bruce shows the audience a list of 20 homes The Norris Group purchased in the past 45 days through auction or out of the MLS and the huge price hits lenders are taking. On 20 transactions, the banks took a $4.6 million dollar loss. Bruce says he?s worried about the domino effect. Too many people owe more than their property is worth. Bruce says there are three ways to solve a vacancy. We can tear down houses and create an artificial housing shortage. We can leave it vacant and wait for till household formation catches up with supply. Or, we could make it possible for investors to have financing to hold them. Four solutions that are needed to get us back on track. The 203k loan program from FHA should be made available to investors. It was available to investors until 1996 and then FHA discontinued because it had done its job of getting rid of foreclosures. FHA doesn?t have a ton of foreclosures because they didn?t make a ton of loans. However, the loan program needs to be made available for investors to expedite the foreclosure problem. Fannie and Freddie need to increase the number of loans they will give to investors. Both want to open offices in California to help unload inventory more quickly and investors are likely candidates. At the same time, they are cutting back on financing available. Both are in a dire situation. Fannie and Freddie hold a huge amount of the foreclosures. Option Arms are the next wave and these loans represent 50% of Fannie and Freddie losses. Bruce shows the Option Arm reset chart. The chart shows the expected resets and what?s currently happening now. A huge number of these Option Arm loan holders are making teaser payments. Once the loan balance hits a certain percentage, the loan resets. 90% of the borrowers of these loans made the minimum payment. Many won?t walk until the reset because the payment is cheaper than rent. The foreclosure process is now taking longer because the banks are so slammed but because of the new regulations as well. The bulk of these are set to land in 2009. The loan amounts were typically more than subprime and the lenders will have to recalculate what they made because of how they were writing things off. Bruce says a due on sale moratorium would make it possible for investors to buy properties that would undoubtedly become foreclosures, it would allow Realtors and auctioneers to make commission on properties with no equity but favorable financing, allow a consumer to move on with credit intact, and improve liquidity in the system. In the 1980s, foreclosures exploded but price deterioration wasn?t bad. Assumptions of loans saved the market. When interest rates were 17%, people were able to assume better financing. It saved the system. Bruce also suggests the 90 day seasoning period on properties to be removed so investors can fix houses and sell them more quickly. More to come next week. Thenorrisgroup.com |
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09-20-2008 |
Part four of ?I Survived Real Estate 2008? picks up with Bruce Norris introducing CEO of the California Builders Industry Association of the Southern California, Richard Lambros. There?s a little repeat from last week to get the show going. Richard discusses real estate as a speculative investment and the cycles. Richard warns us not to think of it as a cycle because that means we can have no influence over the outcome. Total new home production is down and will produce the lowest number of homes in history. In the building industry, they say it?s a building depression. In three years, production has been cut to one third. 2009 is not looking very good. Riverside and San Bernardino account for much of the cuts. The economic impact of less building is very important. Just in Southern California, the building industry created $48 million of economic activity in 2005. In 2008, reaching $18 billion Homes today are no longer shelter, they are infrastructure. Energy efficiency in California is already cutting edge and new guidelines are making them even tougher. New homes are unfairly being forced to make up for the 99% of retail homes that aren?t energy efficient. This inequality is difficult for builders to manage at times as costs and regulations add not only costs but time. At the same time, a new home is a ?Prius? and an old home is the ?Hummers.? New homes have come a long way in building standards and built-in efficiencies. Buying a home today is very different than buying New home projects are difficult to get approved. He speaks on residual land value and how builders figure price for a project. Builders work from comparables down to land price and not the other way around. Valuing land right now is too difficult and no one wants to loan on it right now. Builders are focusing on costs control and concerned about anything that adds time or costs to a project. Real strength will return to building when strength returns to all the other sectors. The state needs jobs and economic growth for builders to thrive. Bruce Norris then introduces Joel Singer, Executive VP for the California Association of Realtors. Joel discusses the myth versus the reality of the market place. As a former CAR economist Joel has experience after being through other downturns. This downturn is definitely different. It?s unique in that price decline is really steep. The adjustment process we can?t look at past cycles because the adjustment of each cycle is different. Joel gets asked often ?When is bottom.? Joel does not know. Joel is looking at activity picking up and feels we?ve hit bottom. Joel is aware it feels bad because price is down so much. New builders and the civilian sellers have been squeezed out. The market is full of short sales and foreclosures; all have-to-sell inventory. Roughly 2 out of 3 of all sales are distressed transactions. Joel does agree 2009 will be bad and thinks foreclosures will continue but not sure what will happen beyond 2009. Unemployment is a problem. A bigger wild card is the notion that Fannie Mae and Freddie Mac are dead. They are insolvent. (At this point in time, Fannie and Freddie were not government controlled). One they are nationalized, Joel expects a further jolt to the marketplace. Fannie and Freddie account for 90% (with FHA) of all loans in the market place. Affordability has improved and the number of first time buyers will be 50% of the market place. It will be the highest level in three years. Three years ago, any idiot could be a successful investor. In today?s market, good investors will make a difference. The opportunities will be risky, look at the opportunities but don?t assume explosive growth. Assume the property makes economic sense. It will be challenging but the pros will be very successful. Bruce Norris then announces Tommy Williams, president of the national Auctioneers Association and co-founder of Williams and Williams Auction Company. Conversation to resume next week. |
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09-13-2008 |
Part three of ?I Survived Real Estate 2008? picks up with Bruce Norris introducing Philip Tirone who is author of the ?7 Steps to a 720 Credit Score? and President of the Mortgage Equity Group. Philip brings to the table experience from the lending and consumer side of the equations. Philip talks about people still wanting stated income and how much harder consumers are have to work to get financing. Banks are going after co-borrowers more aggressively and doing much more background checking. Philip discusses the issue of consumers that owe much more on their home as a similar home in the same neighborhood because of the market at the desire to buy the new one and foreclosure on the current home. Philip says that lenders are catching on to this practice and has revised lending policy accordingly. As of August 1st, if a consumer wants to buy a home in the same neighborhood, it needs to make logical sense that the consumer needs the new home due to extra bedroom, more space, etc. And if the consumer has less than 30% equity, the consumer cannot accept rental income on previous home and must have 6 months reserves. Philip discusses the top three lending strategies for investors. Many investors that have purchased for cash want to refinance. The best financing is available within the first 60 days. If buying in an LLC, Philip says a single member LLC will get an investor a better rate. Philip also says to go to portfolio lenders for loans. They don?t have the limitations that Fannie and Freddie currently have in place. For sellers, Philip discusses the natural inclination for sellers to drop price if a property is not selling. Instead of dropping price, Philip thinks sellers should consider buying down the buyer?s interest rate. This could save the consumer a great deal of money and also support prices in the area. Philip also addresses buyers that don?t qualify because lack of down payment. If buyers don?t have down payment, FHA allows gifts for down payments. Philip says that although there is a seasoning rule for FHA, investors should make sure all due diligence is done up front so at the 90 day mark the loan will fund quickly. Philip also says consumers and investors should manage their credit actively. 80% of people have an error on their credit report that could possibly hinder them from getting a loan. Philip says credit is really easy to manage and scores can swing 100 points. Using credit to your advantage isn?t as hard as many people think. Bruce then introduces Annemaria Allen who is President of the Compliance Group who specializes in loan complains and is the representative for the California Mortgage Bankers Association. Annemaria talks about the lending industry yesterday being full of unsophisticated borrows, greedy lenders, minimal loan compliance, and inflated home prices. Today, a complete overhaul is taking place. Lending has somewhat stabilized because subprime is gone and full document loans are back. She calls it ?back to the basics? of underwriting. Annemaria says automatic underwriting isn?t used as much and lenders are doing much more due diligence. Annemaria thinks home prices still are too high and that we haven?t seen the worst of it. The adjustable rate mortgages will cause more problems in the next year. HERA (Housing Economic Recovery Act) was signed into law by Bush in July. The Safe Act that passed seeks to protect consumers by requiring loan originators, lenders, and brokers will have to register with the system. Some of these news acts are several hundred pages long and are still being reviewed. Regulation Z means more disclosures to consumers. It is supposed to capture all subprime and Alt-A loans. There will be more advertising restrictions and more disclosures. California has 30 bills in legislature to help with current issues. Foreclosure prevention laws are being passed nationwide along with loan modification and servicing laws. The Non-Traditional Mortgage Guidelines are being adopted nationawide. Annemaria feels it?s a little too late but the biggest solution moving forward will be consumers being more educated and for the industry to prevent fraud. Annemaria feels stronger standards in compliance and safety will prevent this from happening in the future. Bruce then brings forward the CEO of the California Builders Industry Association of Southern California, Richard Lambros. Richard discusses real estate as a speculative investment and the cycles. Richard warns us not to think of it as a cycle because that means we can have no influence over the outcome. Total new home production is down and will produce the lowest number of homes in history. In the building industry, they say it?s a building depression. In three years, production has been cut to one third. |
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09-06-2008 |
I Survived Real Estate 2008 event continues. This is Part 2. Part two picks up with Bruce Norris introducing Christopher Thornberg who represents the economics part of the equation. Christopher is a self proclaimed bear and was one of the few that predicted the downturn was coming. Christopher discusses employment, housing starts and how they can only go to zero, consumer sales, exports, his thought on recession and the varying views that exist, if the worst is yet to come, and where he stands. Christopher talks about the housing market and the false indicator of increases in home sales. Christopher says homes prices got too ridiculous and that prices did not match what people were making. Increases in incomes did not keep up with home price appreciation. The only reason prices got that high was of the crazy financing that took place. Christopher says the pace of home price declines look to be around 30% per year and the mix of foreclosures to home sales is not looking good. Christopher addresses how far prices will fall. Christopher believes financial losses will total over $1 trillion and that several institutions will fail because of overexposure. The leverage of some institutions is 100 to 1 such as Fannie Mae and Freddie Mac. Christopher reviews some of the new features of the newly passed housing bill and how little it will actually accomplish. With the money that the government will release to California alone, doing the math it means California will only be able to purchase around 4,000 homes which is a very small piece of the large REO pie. Allowing banks to revise certain consumers loans. The government actually foots the bill. $140 billion lent to banks but they are still a big mess. Christopher talks about the tax rebate and how it didn?t increase spending enough. He says the consumers are dealing with two bubbles. Savings rates have gone from 8% to 0% and that a great amount of net wealth disappear. Consumers will be forced to save for the first time and will also be bad for the short run. With contraction in spending, it means a slow down in retail and other consumer-driven sectors. Cocktail statement: Keep you?re eye on 2010. Bruce introduces Rick Sharga who is the VP of marketing for RealtyTrac. Rick talks about foreclosures and the implication of the current glut on the market. Rick talks about the media obsession with foreclosures and the huge interest in foreclosure data. Rick talks about how we got into the position we?re in; lending. What drove some of the behavior was Fed policy and that money became practically free. People who should never have been able to get a loan got one in the boom. Wall Street securitized these loans and had a voracious appetite to do so. Due diligence was practically thrown out the window. Bankers went from buy and hold strategy to buy, package and sell and do it again. RealtyTrac captures foreclosure data from 2,200 counties nationwide. 1.2 million foreclosure filings occurred in 2006 and over 2.3 million in 2007. In California the numbers were much worse as a percentage compared to other states. 2008 will be far worse. Rick discusses the areas hit the hardest. He mentions 7 of the top 12 markets hit hardest are in California. In Stockton, 1 in 25 receives a foreclosure notice. Foreclosure homes are outselling the resale of homes at this point. Existing homes sales aren?t increasing like most would think. The resets for subprime will continue. 32 months of foreclosure data increases thus far with no end in sight. Alt A and Option Arms will cause more problems in 2009. While the market is sure to continue its decline, Rick points out there will be plenty of opportunities for investors in the coming years. |
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08-30-2008 |
For the next several weeks we?ll be taking a break from our regular interviews to air the I Survived Real Estate 2008 event over the radio. The event took place August 23, 2008 at the Nixon Library in Yorba Linda California. The event proceeds went to benefit the Orange County Affiliate of the Susan G. Komen for the Cure. Over 400 attended the live event, many more online via Proxibid who aired the entire event nationwide online over the Internet, and many more will watch the videos online. This event was about solutions for our ailing real estate industry and to help an important cause. Eight industry experts from different real estate sectors converged to discuss how we got here, where we're going, and how we move forward together and prosper in the coming years. This is a rare opportunity to hear how leadership from the Realtors, builders, investors, mortgage industry, auctioneers and service providers each would approach and solve issues in the current real estate market. If you?ve been listening to the past 8 shows on the radio, you?ve been introduced to the panelists one by one. The event officially kicked off on June 21st with the first interview prepping the audience for the live event. Video of the live event is also available at under free resources. This first radio segment starts of the show with Aaron Norris introducing the event, introducing the amazing Platinum Sponsors, introducing the speaker from the Orange County Affiliate of the Susan G. Komen for the Cure, the introduction of Bruce Norris, Bruce talking about the importance of this event, the introduction of Christopher Thornberg, Christopher?s presentation on the current state of the real estate downturn and what we should expect in the coming year. Special thanks to the following partners and sponsors without whom the event would not have been possible: Platinum Sponsors: The San Diego Creative Investors Association (SDCIA): sdcia.com Investors Workshops: investorsworkshops.com Frye Wiles: fryewiles.com Proxibid: proxibid.com White House Catering: whcatering.com MVT Productions: mvtproductions.tv Pechanga Resort and Casino: pechanga.com The Denver Nuggets: nba.com nuggets The Chicago Bulls: nba.com bulls The Cleveland Cavaliers: nba.com cavaliers Gold Sponsors: 7 Steps to a 720 Credit Score and Philip X. Tirone 7stepsto720.com Chicago Title - ctic.com Elite Auctions - sellwithauction.com Foreclosure Trackers - foreclosuretrackers.com Investors Resource Center of America LA and Steve and Robyn Love - irca-losangeles.com Las Brisas Escrow - lasbrisasescrow.com National Club of Real Estate Investors and Sam Saddat - ncrei.com Northern California Real Estate Investors Association (Norcalreia) and David Granzella - norcalreia.com North San Diego Real Estate Investors and Linda Wessels - nsdrei.org RealtyTrac - realtytrac.com RE Ventures and Michael Pines - reventuresrealty.com Real Estate Investors Club of Los Angeles and Phyllis Rockower - realestateclubla.com Real Wealth Investor and Scott Whaley - realwealthinvestor.com Saddleback Valley Communities - svc4.com Silverstar Finance and Janet French - silverstarfinance.com Sunset Hills Memorial Park and Mortuary - sunsethills.cc The Mission Inn - missioninn.com The Mortgage Equity Group - http: themeg.net The Naked Real Estate Investor Club - Rosie Nieto - nakedrealestateinvestorsclub.com The Short Sale Processor and Nick Manfredi - theshortsaleprocessor.com Virtual Real Estate Tour and Layla Tusko - 1wealthcreation.com Wholesale Capital Corporation - wccmtg.com |
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08-23-2008 |
This week we shake things up as Carl Angeloff, a radio celebrity in his own right, interviews Bruce Norris (President and CEO of The Norris Group) in preparation for ?I Survived Real Estate 2008? where Bruce will act as investor representative and moderator. Bruce and Carl discuss how Bruce got started in the business, Bruce?s first foreclosure experience, Bruce?s ?California Crash? report written in January 2006, why Bruce wrote the report, Bruce?s mid-90s report called ?The California Comeback? predicting the boom, HR3221 and his view of the solutions it presents, what the potential consequences are from HR3221, California being a non recourse state, when Bruce thinks this downturn will end, what things he looks for when predicting a boom, Bruce?s prediction for the remainder of 2008-2009, the percent increase in foreclosure numbers, what 2010 will hold, why this downturn happen so quickly, this downturn compared the 90s downturn, why the inexperienced got surprised, what The Norris Group does today, purchasing California REO properties, the bank taking 31% of what they were owed, what skills are needed, who the typical buyer is in this California market, the good points of HR3221, what kind of house The Norris Group likes in a downturn, why inventory preferences changes depending on the California real estate market, how The Norris Group fixes the houses, why condition and price are important, why cities need inventors to fix properties, what inventory Bruce dislikes, why Bruce doesn?t like corner houses, what we can do now to help solve the problems, the thought behind I Survived Real Estate 2008, isurvived2008.com. |
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08-16-2008 |
Bruce Norris is joined this week by President of the National Auctioneers Association, co-founder of the Williams and Williams Auction Company, and panelist for I Survived Real Estate 2008, Tommy Williams. Bruce and Tommy discuss the extremely volatile past 5 months, the possibility for more unknowns in the coming year, what caused this to happen, innovative financing, homeownership levels, what buyers should have to bring to the table in order to own a home, what would happen if deposits weren?t required at auctions, people taking advantage of government system, HR3221 and some of the benefits, the unintended consequences of HR3221, valuation of properties and how auctions are part of that process, a correct version of an auction and how it brings out true value, overbids during a boom market, why auctioneers get frustrated because they are typically only considered during a downturn, builders releasing phases via auction and the benefits, if Realtors view auctions as partners or competition, how auctions work with Realtors, why auctions aren?t in the MLS, the task force between NAR and NAA, if Tommy can tell from auctions which areas are in trouble, NAA as a vast resource of statistics, how quality holds much more weight than price, if California is getting worse, the two states with the worst declines, ignoring true affordability, how we can do better in the near future, isurvived2008.com | ||
08-09-2008 |
Bruce Norris is joined this week by CEO of the Builders Industry Association of Southern California and panelist for I Survived Real Estate 2008, Richard Lambros . Richard and Bruce discuss the current market, when the slow down was anticipated, how much worse it?s been than expected, percentage off in building permits in Southern California, how this downturn differs from the past downturns, the speed of deceleration, the leading factors causing the problem, the credit market getting tight really causing problems, light at the end of the tunnel, HR3221 and how it will change and help the market, stabilizing credit markets, helping the foreclosure issue, how HR3221 will help builders directly, FHA and the new loan limits, why it?s so important that limits have changed, median home prices, supply shortage of housing, homeownership levels and how California compares to other states, affordability, misconceptions that builders make huge returns on projects, cities adding fees during a boom, cities focusing on product that produce taxes and creating fees for product that does not, how some cities are actually helping by differing fees in this down market, if a big budget deficit is a concern for the building industry, some cities actually putting together incentive packages to stimulate building but a deficit causing a decline, Prop 13 and concerns, the Builders Industry Association and legislation and how the BIA is involved, how builders are highly regulated, green building and zero net energy homes, the BIA?s stance on green, how California already builds some of the most energy efficient homes in the nation, construction loans in the current market and lenders willingness to lend for building, land prices in the current market, how builders took bad outlooks in a booming market, the statistics builders watch that will suggest a comeback, biasc.org. | ||
08-04-2008 |
Bruce is joined by Randy and Mike Grigg who head California Premier Auctions. Learn how they got started in the business, why auctions worked for them, and how auctions could work for you. | ||
08-02-2008 |
Bruce Norris is joined this week by President and CEO of The Compliance Group and panelist for I Survived Real Estate 2008, Annemaria Allen. Bruce and Annemaria discuss if the current mortgage meltdown was caused by relaxed guidelines or cause by lenders not following guidelines, if compliance issues are federal or state in nature, what state auditors look for when doing audits, what auditors are trained to do, where fraud was most prevalent, example of loan fraud, stated income example, what makes a loan more marketable, the important of compliance and quality control in loans, things lenders might do that makes it unlikely they will sell a loan, appraisal issues in the current market, declining values and lenders not understanding markets, the current market for refinancing, the psychology of the consumer when the market is going up, the difference between mortgage broker and a mortgage banker, who decides what the rules are for the mortgage industries, how new ideas and rules are suggested to decision makers, lobbying for change, the loan compliance guide, if passage of HR3221 will change things, how quickly new rules are implemented, non-owner occupied financing currently available, how the industry sees non-owner occupied financing, thecompliancegroup.com, mymortgagelicense.com. | ||
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