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Ria

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Reply with quote  #1 
Hi All,

If you have read his talk announcement for Feb. 4 event; where do you think Bruce is investing since he will be unloading most of his California real estate properties? 2% interest rate? There's a lot of moving parts in the near future. 

Thanks for your feedback.

Cheers,
Ria
CapeCodGuy

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Reply with quote  #2 
He mentioned that he 1031'd into FL, but for personal reasons that might be unique to him.
larrywww

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Reply with quote  #3 
Bruce's best friend lives in Florida and he was able to buy lots to build upon that he is currently constructing houses on.  (I forget where he said, maybe near Tampa?)

Any hint on when the California market will tank?  (My guess is: not so much).  
brycewheeler

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Reply with quote  #4 
I would guess that Bruce has allocated some of his proceeds to Las Vegas (most) and some to Florida.

If that is wrong, I believe Bruce has decided to go to mostly CASH to ride out the immediate future and see what the government (mostly Trump) does in next couple of years.  There is nothing wrong with a pile of cash for a while.

Bryce
Ria

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Reply with quote  #5 
Thanks for your feedback. That's what I'm doing also is keeping cash. It's sounds like everyone is keeping tight until the next correction or crash. I am not sure though about the 2% interest prediction.

~Ria
larrywww

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Reply with quote  #6 
Las Vegas?  Last I heard was that the State of Nevada had outlawed foreclosures, which had some unforeseen consequences.   Why would Bruce invest most of his assets there?

I had heard that because of their legislative actions it had the effect of slowing down the market so that it didn't crash as quickly.

I have heard the theory that the Las Vegas was in a state of suspended animation, but you couldn't prove it by me.

Anyone else invest in Las Vegas?

This article states that Las Vegas had only recovered halfway after losing 75%.  http://www.reviewjournal.com/business/housing/vegas-home-appreciation-builds-prices-half-peak-value


The other article states that Las Vegas, since it is still somewhat underwater, is one of the safer markets.



http://ochousingnews.com/the-safest-real-estate-investments-are-in-underwater-markets-like-las-vegas/

In any case, it's rather late to get on that particular bandwagon.  (At least for me.)

rickencin

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Reply with quote  #7 
Isn't gambling pretty much the main business in Las Vegas?  With all the California casinos why would you bother to travel to Las Vegas?
My college statistics class convinced me never to bet against the odds.  I don't really see the appeal.

Nevada gaming revenues by year (scroll down a page).  Add three zeros, so millions become billions.
http://gaming.unlv.edu/reports/NV_1984_present.pdf

Any real estate investor will recognize the peak year of 2007.  Nearly a decade ago.

Unless Nevada legalizes prostitution and marijuana statewide, do they really have a future?

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brycewheeler

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Reply with quote  #8 
Why Vegas???  Because real estate was down 75% and Las Vegas has a great future.
Last time I heard it was best to "buy low and sell high".  Plus Las Vegas has thousands of service employees making a huge backlog of possible tenants for landlords holding properties waiting for full or nearly full appreciation, with nice income in the meantime.

Ria.  I am with you.  I am a great believer in never trying to squeeze the last ounce of profit from my investments as I learned the hard way in the 2000 stock market.  I always advocate selling too early rather than too late.  And I think Bruce agrees with that philosophy which is why he is selling.  It takes a long time to get rid of a huge batch of homes.  AND it is nice to sit on a HUGE PILE OF CASH for a while and be ABLE TO STRIKE AT WILL when the next BOTTOM or NEAR-BOTTOM comes in the real estate market of your choice.

BRYCE


larrywww

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Reply with quote  #9 
1. As a factual matter, no one has said that Bruce Norris invested in Las Vegas---this is the first I've heard about that claim.  (Though maybe what you are saying is that he would have been smart to do so---not that you have personal knowledge he did.  I can't tell.)

Given his hard money loan operation, I do NOT think that Bruce Norris has to invest in properties any longer----at 60% LTV (at its highest) I don't think he has to worry much about a market downturn either.  I rather doubt that Bruce would go out of state unless he had a partner on the ground to manage it (as he does in Florida). 

One of the things that I really regret is that you can NOT 1031 into commercial paper---it's NOT considered like kind---or I would have done that myself.   Instead of a 1031 one is better just banking the appreciation and moving on since there aren't many deals to be found in this high priced market.


2. I do know that Bruce sold some of his rentals in some of the grittier areas and invested in nicer houses in San Jacinto.  (And, he is building in Florida).

3. Las Vegas is a hard place to figure, IMHO.  Myself personally I didn't want to go somewhere where I would need to relearn the market---better stick with areas that Bruce Norris knows well and recommends.  And  I know that 3 strikes against Las Vegas are (1) it doesn't generally have high paying jobs like you might find in large cities in Arizona and California and (2) the school systems aren't quite as good either.  (There is a magazine directed to companies looking to move that had an article about the subject).  And (3) since it's a different state, you have to relearn the rental rules and get licensed there, if appropriate.


Which is not to say that it would have been a bad place to invest in 2007--there were probably alot of places that would qualify.  But it has the advantage of not being too far away from Southern California, so it has been somewhat popular as a place to invest.
suh6

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Reply with quote  #10 
Anybody attend the report seminar on 2/4? Notes/predictions would be greatly appreciated. Thanks in advance.
larrywww

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Reply with quote  #11 

So, I found this video on Youtube about Bruce's presentation, which involves a California realtor who attended his presentation.



Apparently, the major conclusions:

1. Bruce doesn't see any factor that will increase inventory to the point where there will be a serious price decline.  Right now we are at 31% affordability.  Bruce's view is that 17% is the normal peak (11% was a one time event in 2006 / 2007 due to improperly lax lending)

2. The speaker mentions a prediction of 3% growth over the next 10 years, basically a stable market that is slowly increasing.  The last several market cycles have been 7 year cycles and we are already in our 8th year.    But if we stay flat or slightly upscale for 10 years, then we will end up with a 17 year (or so) cycle.  Apparently, the closest analogy is the slightly upscale market that existed during the Kennedy Administration / Johnson Administration where there were 8 years of economic growth.  Most of the later cycles have been 7 years of economic growth.  

3. So, based upon that kind of cycle, we are looking to have a recession in the next year or two.  In 2008, the Fed dropped interest rates from 5% to zero.  The previous cycle the interest rates dropped from 6% to 2%.  Given that we are at a 1/2% for the Fed Funds rate, and the rate is basically rock bottom, it's going to be difficult to solve this problem with a serious rate hike.  So, the only option would be for the Fed to drop the interest rate to a negative interest rate, which has never been done before in the United States.  Although other countries have at times adopted a negative interest rate.  (Japan apparently does). 

3.  Japan has had a very low interest rate, at times at zero and at times negative or slightly positive for over 20 years.  Their current 35 year fixed mortgage rates are at 1.5%.  And this underscores how bad their real estate market has been, it has been in a freefall since the late 80s / early 90s---over 30 years.  The low interest rate has been a factor in trying to draw the Japanese economy out of a recession, but it hasn't triggered a buying spree in real estate.

4. The speaker recommends putting your property on the market since there will be a negative trend in prices in the next year or two, though a dramatic correction isn't forecast.  Another factor is that there won't be as many buyers for your property during this time frame. (He doesn't make clear the overall price decline, but it sounds like there will be one).  

5. I'm unclear about what Bruce is saying about the real estate market, but it appears that real estate is undergoing the kind of deflationary spiral (the negative interest rates, eg.) that has sidelined Japanese real estate for decades.  Does that mean that, aside from buy and hold on a cash flow type basis, we (or most of us) are basically finished with the real estate market in California until it finishes its deflationary spiral?  I'm not sure.  And does this mean that those who earn a living in the real estate industry (agent, mortgage broker, escrow, title, appraiser, etc) would be wise to start looking elsewhere because the low inventory isn't going to support much of an industry.

6.  However, aside from this slight dip, Bruce predicts a roughly 3% annual increase in prices over the next 10 years.  Median price is 500 /510 so we should see 525 (approximately) in the next year.  And California real estate will still be under demand with slight increases over the next 10 years.

It sounds like Bruce's conclusions involve a balancing act that is occurring in a relatively flat market: A Recession in the next year or two, but not a dramatic crash.  And eventually a slight increase in the next 10 years.   

I'm a bit puzzled by the prediction since it involves a 17 (or so) year cycle.

The relatively flat nature of this market may be why Bruce decided he needed to go outside California----since the flip side is without a major crash, we won't have a great buying market with seriously reduced prices.  (Though the speaker doesn't say what % decline we will see in a year or two).

What do you think? 

BTW, Bruce Norris is going to give his annual market forecast for Town & Country real estate on March 7th, so that might be more detailed.

Further conclusions (You come up with your own):


1. Arguably, a good time to buy a house----slight price increases over 10 years and rock bottom interest rates.  But not the seriously reduced prices we saw in 2009, etc.

2. Those investors who depend on volatility might be better off going outside California.  So where has the volatility gone----and which state(s) are at the best stage for entry?

3. Since volatility won't guarantee huge price declines, maybe look to other avenues for cash flow.

4. We have turned into (to a great extent) a cash flow state for the next 10 years since the annual 3% bump isn't going to make many millionaires.  This is a very different market than previous markets.

I doubt that I have accurately expressed the potential negative downsides in the Norris Report, but the above video doesn't seem to focus as clearly on that---or maybe Bruce just isn't that pessimistic, overall---I'm not sure.  In past reports there was an urgency about avoiding a crash, but in this cycle it doesn't seem to be that much of an issue, although we are headed for a recession in the next year or two.

In some respects, the most important report to have gotten would have been Bruce's previous report since he indicated he was going to Florida.  At the time, I didn't know Bruce did this (in part) was because he believed that California was about to turn into a cash flow state.  (He also did it because he had a partner in Florida and a crew, etc).  

If California real estate isn't going to be volatile for the next decade, this is going to be a problem moving forward for alot of beginners.  Given how expensive it is to be a landlord in California, it really is a game changer if you are eliminating appreciation from the picture, etc.

Another point of view about Bruce's report comes from Tom K Wilson in his interview with Robert Campbell.

Wilson indicates that Bruce believes that due to population and other trends California real estate will not have the volatility it traditionally has experienced, but prices will tend to change more like cash flow states.



Sean O'Toole indicates the following with his recent interview:

1. He believes that sales of real estate will be flat (no real increase)---as has basically been the case since 2008.
2. He believes that prices will be relatively flat going forward.  (Bruce says 3%, but that's pretty flat).
3. He believes that we have increased our debt to previous bubble levels (almost), but that we have decided to keep interest rates low so as to be able to service that high level of debt.  Although 100% GDP debt level is scary, keep in mind that Japan is at 250% debt level, although they have been caught for 2 and 1/2 decades in a deflationary spiral.
4. As long as we look like the best horse outside the glue factory (or cleanest shirt in the laundry), we will probably still be able to soldier on.
5. Given that we are chasing yield, real estate will still probably look attractive given the declining yields likely available elsewhere in our economy.

The truth is that Bruce's overall message that real estate is going flat ought to mean a sea change for alot of those involved with real estate.

It's kind of bizarre to me that now---when flipping shows are multiplying in the cable universe----is precisely when real estate experts feel that this oil gusher of money is about to go dry for many investors----really strange world we live in now.





abc

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Reply with quote  #12 
Interesting if you check out Bruce's 2nd recent interview with Tony Alvarez on his radio show seems that Tony has also been building in FL.  I didn't listen to the show I just read the transcript (which isn't always clear), and it seemed that they were building to rent and found there was a lot of demand from tenants who are caretakers to the elderly (Tony has also found this to be the case in Southern OR).  Bruce and Tony must have seen something really compelling to go build in FL, as I don't think either has ever built out of state.  I'd be very curious where in FL they built and what their all in costs were (lot + improvements + vertical).


larrywww

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Reply with quote  #13 

I would be cautious about jumping on that particular bandwagon.

Bruce was going to interview the economist for Fannie Mae in the first quarter of 2015.  He was reading their annual report and was astonished to learn that 25% of the losses came from Florida---which was the # 1 state for foreclosures by a wide margin.  He asked his friend Alex to look for building lots and they found some for $13,000 apiece.
This wasn't a new situation----Florida was the # foreclosure state in the first quarter of 2014.

http://www.housingwire.com/articles/29552-top-5-states-with-the-most-and-least-foreclosures.

Here is another report, which shows that Florida accounted for 118,000 completed foreclosures, with the nearest state at 49,000 (Michigan).

http://www.corelogic.com/research/foreclosure-report/national-foreclosure-report-december-2014.pdf

See also this report:  http://www.corelogic.com/research/foreclosure-report/national-foreclosure-report-december-2014.pdf

Keep in mind that Florida requires judicial foreclosure so you are talking about a court case that could take several years.  Alot of the states that experienced a foreclosure bump (much later than the rest of the United States) were judicial foreclosure states (Florida) or passed laws halting the foreclosure process (Las Vegas).

Trying to predict how many foreclosures hit the market in a judicial foreclosure state is inherently tricky----you need to know how many are in the pipeline and how many are going to hit the finish line during the relevant time frame.  And since judicial foreclosures can take multiple years, you either have to be extraordinarily patient or really lucky---or maybe both---to buy a foreclosure, etc.

However, things change.  A more current report now finds that Florida is 5th in the nation in foreclosures:
e current report that Florida was now 5th in foreclosures.

http://www.bankrate.com/finance/real-estate/foreclosures-by-state/

This was from December of 2016---at which point Florida foreclosures were fifth in the nation.

In short: Everything changes and timing is critical.

Right now, Fannie Mae foreclosures are at 10 year low.  http://www.dsnews.com/daily-dose/03-01-2017/freddie-mac-hits-10-year-low-delinquency-rate

 I would hazard a guess that one can no longer get building lots for 13,000 apiece.  My understanding is that Bruce isn't selling these homes at this point, he is keeping them as rentals.

Also, Bruce had his best friend in Florida---so he had someone to organize the sale and construction.

The other thing I would caution you about: If you are 1031ing into a property your standards are different----I would be happy just to preserve my capital and the gains made in the previous market.  (Hint: alot of investors tend to lose all their gains during the 1031 process).

I don't want to necessarily say this was a "one off" event, but when you are dealing with a market that has inventory at historically low levels, it's going to be harder and harder to find deals.

mlreits

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Reply with quote  #14 
To supplement to Larry's summary of Bruce's seminar from the realtor above, below is a summary of Bruce's seminar from a friend who attended the event.

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Minh

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larrywww

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Reply with quote  #15 

Thanks, Minh.

But I think there's another lurking issue here: What is our incentive to continue to invest in California real estate for the next decade or so?

Bruce entered the stage in 1997 and encouraged investors to get on the bandwagon and it has been very good returns during this time frame.

But the incentive for investing in California has always been that it will be a volatile market---not a cash flow market, say like Oklahoma, etc.

An annual return of 3% (or 3.3%) will have inflation at around 2% (2.3% I hear for the last year).  I have never had any illusions that, without appreciation, California would be a sucker's bet.
A 1% return???!!!!   That's a sucker's bet!

Real estate investment is only a good deal if you are being appropriately compensated for the risk you are assuming.  The returns to date arguably fit that equation---but going forward, not so much.

If we are only going to get single digit---and low single digits at that---cash flow type returns----given that we aren't paying anything remotely as low as houses in a cash flow state like Oklahoma----what's in it for the investor to invest in a high priced market like California?  What's the incentive to pay top dollar for houses when your returns are going to be so marginal?

If we don't have a crash we are still going to be paying astronomical sums for houses here.  And it's not the rents will multiply exponentially to make that bet worthwhile.

I think Sean O'Toole is one of the smartest investors around---and he did 150 transactions, which was before the Great Crash---so he had considerable experience.

Anyway, Sean O'Toole has said in the past that he has no great love for real estate (in itself)----if he can get the same return for tiddly winks, then that is what he will do, etc. etc.

I suppose if you already have buy and hold type investments, that you might have adequate incentive to stick around.  Or maybe if you are invested in  trust deeds.  (Though Bruce indicates that there is an underwriting rule that says you can't have more than 10% of your net worth in this asset---or he won't be able to lend to you above that amount).

But even those I know who have these type of investments, it's not like they are 100% invested in buy and hold and/or trust deeds.  So even for that group, the question will remain: Where do I invest the rest of my money?

Given the shrinking returns and declining yields one sees across various type of investments--this is going to be an increasingly important question.

Also, if I was a new buyer---or if I was already compoletely cashed out of California----I must say this must be a real question going forward.

I am not answering the question---but what I would really like to hear from Bruce Norris and/or Sean O'Toole is this----Is that all there is?  

In the immortal words of Peggy Lee:

Is that all there is?
Is that all there is?
If that's all there is my friends
Then let's keep dancing
Let's break out the booze and have a ball
If that's all there is

(Boy, am I dating myself with that reference).

Or maybe a more apocalyptic reference might be (per R.E.M.):

It's the end of the world as we know it.
It's the end of the world as we know it.
It's the end of the world as we know it, and I feel fine

Maybe it's time for Bruce Norris to lead his investors to the Promised Land---the One Beyond Real Estate Investment in California.

mlreits

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Reply with quote  #16 
Larry,

My take on the predictions is that our coastal markets have matured in terms of growth. I don't see the coastal markets ever become a cash flow markets due to their desirability. Forced savings, MID (mortgage interest deduction), Prop 13 and schools have to be taken into account for calculations to determine if it's worth buying over renting. This highly depends on each individual's situation. 

3% average annual appreciation for CA in the next decade. Can the coastal markets outperform the inland empire and Central Valley markets and have higher appreciation due to their desirability? Would 2% mortgage rates help to push prices higher in the upcoming correction in addition to creating a refinance frenzy and releasing more liquidity into the market even though it's going to be short-lived?

Given where we are in the cycle of the market, I've been thinking for the last several months on where to place my bet in the future. Unfortunately, I haven't found a viable option yet. I'll share when I can think of one. In my market, it seems like there's too much money looking for yields. I can understand why Bruce said our market is in speculative territory. I wish I have the answer, but I'm stuck as everyone else.

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Minh

"Be formless, shapeless like water." Bruce Lee
Paul

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Reply with quote  #17 
Minh, You wrote, "
  • Bruce is shifting his rentals to Florida in the area where The Villages are. However, this does not mean he is not investing in CA. He is involved with 10 spec homes in the Riverside area. Five of which was started in the last month or so with profits of 20% each. He cannot find margins like this anymore. 
Is there any additional information about that? The Villages is huge and spans three counties, so that leaves a large area where Bruce could be doing his new thing. I've been there a few times, and I think it's a great, unique place. I asked a friend who lives there seven months of the year if he wanted to do some flips. He's a snowbird not a snowflake – there's an actual difference. He wasn't too interested because it would take away from his golf time. 

Knowing Bruce is invested in The Villages area tweaks my interest again.
larrywww

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Reply with quote  #18 

I recall that Bruce bought an entire project with lots costing $13,000 apiece.

I don't think you can pick up an entire project like that at those prices.

I am not sure, but I think this occurred in 2013.

But, you're right, The Villages is this massive senior citizen development---I think they own like 30,000 golf cards between the various projects.

It sounds like a really massive development.

It's only like 25 to 30 miles south of Ocala---and since you are talking about the middle of Florida, hopefully there is less hurricane activity.  (Not sure how far inland the hurricanes penetrate).

I think the real question(s) moving forward are:

1) If California is no longer volatile, then what states remain on the volatility list?  Or are other traditionally volatile states going to follow suit (because, for one thing, lack of inventory and lack of building this cycle seem like they are a nationwide trend.).

2) Which state(s) will crash the soonest----which also has inventory that will be undervalued?

I don't think Bruce's report extended beyond California, but it would be interesting to know how he would answer these questions.

I am unaware of many studies of nationwide bubbles at this point.  

This report indicates 6 states with potential for a bubble---although one of them is California---and 1 out of the 6 is Florida.

So maybe Florida is a good bet.

https://www.gobankingrates.com/mortgage-rates/states-biggest-real-estate-bubbles/

This is another list of bubble states---which omits California, but also omits Florida.  So, maybe not---who knows?

http://www.cnbc.com/2016/08/29/were-in-a-new-housing-bubble-why-its-less-scary-this-time.html.

In a more serious review, Bloomberg looked at the top 10 markets to score on Realtor's Bubble Index---though no Florida city was in the top 10---and 4 out of the top 10 were in California.

And these were the top 4 cities on the list.  (BTW, the list included Fresno---which was mentioned in another thread in this website).

As far as I can see, we are theorizing about bubbles at this point and we don't really have any serious crashes (quite) yet.

I have heard that the Miami market may be in crash mode---though that is in part due to the Zika virus scare, which has scared away international buyers, who were fueling that market particularly.

And no one would be surprised if the Bay Area, etc. crashed.

I think it's true that Vancouver imposed a foreign tax that halted its foreign buying market---and Toronto is proposing to do likewise (though hasn't done so yet).

But the # of cities with a full swing bubble type crash aren't terribly great yet---though that may change soon.

My belief is that the location(s) that may hit the bubble at full speed are those with vigorous construction industries.  If you look at the chart in the Bloomberg article, nationally, current building is about half of normal volume---though arguably places like Texas and Florida may be closer to normal, I'm not sure.  If there is low inventory in a state (like California) for whatever reason, it's not going to have the classic bubble and crash that makes real estate investors wealthy.  Bruce's next report should be about which state(s) are going to have a bubble and crash---that would be the best place to invest.

Keep in mind that bubbles are not a national phenomenon.  According to the wikipedia entry, only half of the US states participated in the bubble.  https://en.wikipedia.org/wiki/United_States_housing_bubble.

The remainder are the cash flow states where the prices never seem to rise or fall all that much.  

mlreits

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Reply with quote  #19 
Quote:
Originally Posted by Paul
Minh, You wrote, "
  • Bruce is shifting his rentals to Florida in the area where The Villages are. However, this does not mean he is not investing in CA. He is involved with 10 spec homes in the Riverside area. Five of which was started in the last month or so with profits of 20% each. He cannot find margins like this anymore. 
Is there any additional information about that? The Villages is huge and spans three counties, so that leaves a large area where Bruce could be doing his new thing. I've been there a few times, and I think it's a great, unique place. I asked a friend who lives there seven months of the year if he wanted to do some flips. He's a snowbird not a snowflake – there's an actual difference. He wasn't too interested because it would take away from his golf time. 

Knowing Bruce is invested in The Villages area tweaks my interest again.


Paul,

I know the difference between snowbirds and snowflakes. [biggrin]

I didn't realize the Villages were that big. I've asked my friend. He will check his notes and get back to me. 

Let me give a word of cautious. Rich Weese, the author of the book "From Janitor to Multi-Millionaire" has been building new homes at the Villages in the last several years. He recently stopped building due to the profit margin was getting compressed.

As Larry mentioned, looks like Bruce bought these lots years ago, and they may cost quite a bit more now, which may have contributed to the margin getting compressed in addition to construction costs. Didn't mean to tweak your interest again. [wink]

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Minh

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mlreits

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Reply with quote  #20 
Larry,

One of the questions that Bruce threw out there was - What if the elements that made CA a great investment in the past 30 - 40 years are no longer there? He did not really say that CA is no longer a good investment. However, he cited that CA is no longer the destination for migration. We're actually losing in domestic migration (ex: Paul and abc), but gaining in international migration. FL and TX are the growth states.

What the Bay Area has going for it is a lot of VC money. A recent report depicted that the Bay Area got 43% of VC fundings. All in all, did coastal CA markets become international markets such as Vancouver, Canada, New York, Paris, London, etc?

Seems like emerging markets are where the money is. Portland, Raleigh and Dallas made their name to the news quite often. Looks like it's kind of late to get into the Denver, Seattle and Austin markets. FL seems like a baby boomer play.

One interesting thing about the Millennials is that they want everything handed to them. Locally, companies such as Google and Facebook are working on building on-site housing for their employees. Looks like Google got the green light to build 9,850 units on campus for their employees. We see first time home buyers buying million dollar houses. That's how well these employees are being compensated. I can understand it's hard for outsiders to phantom why real estate in the Bay Area is so nose bleeding expensive. 

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Minh

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mlreits

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Reply with quote  #21 
Paul,

Bruce said he was building in the Villages and asked the crowd do they know where that is. He went on to say Leesburg. Sounded like Bruce is building rentals there. I just did a google search and found this link.

https://www.55places.com/florida/communities/the-villages

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Minh

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Paul

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Reply with quote  #22 
Quote:
Originally Posted by mlreits


Paul,

I know the difference between snowbirds and snowflakes. [biggrin]

i just realized that snowflake is a new political term. In the Villages, a snowbird owns her own house and visits during the winter months. A snowflake doesn't own a home but instead rents during the winter months...heh

Let me give a word of cautious. Rich Weese, the author of the book "From Janitor to Multi-Millionaire" has been building new homes at the Villages in the last several years. He recently stopped building due to the profit margin was getting compressed.

I don't think he could be building within the actual Villages because I believe those homes are only built by the Villages developer. I'm not 100 percent sure of this.

mlreits

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Reply with quote  #23 
Paul,

I know you were trying to be funny. [biggrin]

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Reply with quote  #24 
I'm sure us baby boomers will be needing hundreds of things in the coming decades.  Can you imagine an entire generation that wants every medical procedure ever invented?  (Paying into Medi-care for 40 years can make you really cranky.)
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Reply with quote  #25 
Quote:
Originally Posted by mlreits
Paul,

I know you were trying to be funny. [biggrin]


That's actually a true story. Last February, I was visiting a friend at The Villages, and we were at a block party. Someone corrected the term snowbird with snowflake. I asked what the difference is and got that explanation. I had never heard the term snowflake used that way.

Our friends used to rent their house but don't any longer. If I remember correctly, rent was around $3,500 per month in winter, and they were lucky to get $1,000 the other months. That's for a small 2/2 and about 1,100 sq.ft. The winter rentals are in great demand.

BTW, The Villages has 48 golf courses – 36 are executive and 12 are regular.
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Reply with quote  #26 

This place, The Villages, sounds interesting.

Although I have no clue about Florida, I wonder whether it is similar to Sun City (and other 55 plus communities in California).

When Bruce mentioned The Villages he came up with this weird statistic---that the average resident buys 2.5 units there. 

Given how inland and remote these communities, and how many communities have sprung up, I rather wonder when (and if) we hit a bubble, how hard these type of communities would be hit.

Actually, I don’t know if there is sufficient inventory there to support a bubble.

The other thing that I have found about 55 plus communities is that frequently you can’t sell for full market value since your potential buyers are limited.

Maybe this isn’t a problem in a retirement capital like Florida, but I have sometimes found that to be true in California.

Could Leesburg---or wherever Bruce is building---be (in Bruce’s view) the next Rosamund?

Maybe not, but who knows, right?

Bruce doesn't exactly understand Florida's cycles, so there may be some risk there.

The other thing is the currently Florida doesn't look like the place to invest.  This list of the best places to invest for 2017 doesn't even hit a Florida city until # 17---even though plenty of California cities are in the top 10 (in fact, 5 out of 10).

http://www.gordcollins.com/real-estate/case-shiller-home-price-index-predictions-2017/

But given the low inventory (practically everywhere), the cycle risk isnt that unreasonable.

But my one prediction is that once a bubble hits Florida (which may take many years) this may be one of the places that will be hardest hit.

I suppose I shouldn't be too completely negative about California real estate.  Bruce indicates that he has funded 5 million in loans on flix n flips this month alone.   Investor have to be more disciplined in a market where they can't bank on appreciation, but it is still possible to do so\y

The truth is that we are going to see a seller's market with no likely crash scenarios for most of the nation for the foreseeable future.

According to an article from Money Magazine:


Nationally, inventory is 9% lower than a year ago, and all but four of the 35 largest markets tracked by Zillow now have fewer homes for sale than at the same time last year. “We’re seeing low inventory in places not usually associated with housing shortages—places like Nashville, Raleigh, iand even Kansas City,” says NAR chief economist Lawrence Yun.

http://time.com/money/4285854/real-estate-markets-housing-price-forecast-map/

Without inventory, it's going to be hard to see any crash scenarios (In at least 31 out of the top 35 markets).

The other thing that I would wonder about is the statement by Bruce Norris that this is the only report he will issue for the next 10 years.

Is this a prelude to retirement?  How rich do you really need to be?  (The business may continue, but it may not require him to go into the office every day, etc.

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Reply with quote  #27 
Some more bad news: Sellers aren't moving nearly as often.  In fact, sellers are moving much less than before, resulting in fewer deals.

This is just one statistic which has cramped resale:

"Homeowners are selling the homes two and a half times less often than they did just a few years ago—and now it is clear that it’s not a temporary aberration."

According to the report:


"Over the past 16 years, homeowners have been steadily increasing the time that they stay in their homes.  For about 20 years, from 1987 to 2008, homeowners sold their homes an average of every six years. When the housing recession hit homeowner tenure began to rise and by 2014 homeowners were selling only every nine years.  Following a bump up the ten years in 2014 the average homeowner is again selling every nine years, according to a new analysis by NAR’s Amanda Riggins."[1]


http://www.realestateeconomywatch.com/2017/01/as-homeowners-move-less-often-will-agents-sell-fewer-homes/

The bottom line: fewer sales, which are going to require fewer real estate agents.

Then there is the reverse migration factor: About 5 million people have left California in the last decade or so---which amounted to a loss of 1.1 million, since 3.9 million entered the state.  But this caused a loss of 26 billion dollars.  

http://www.sacbee.com/site-services/databases/article32679753.html

Reverse migration has accelerated due to the unaffordability of housing.  
http://money.cnn.com/2016/11/04/pf/people-moving-out-california/


There are so many factors reducing potential inventory:  lack of resales, reverse migration, historical drop in homebuilding, unnecessarily strict financing criteria for buyers to buy your deal---the list goes on and on.  In a relatively flat market where you will need to factor in transaction costs you are going to be severely limited in terms of the kinds of deals you can accept, especially since you can't rely upon significant appreciation.

On  the plus side, I suppose, at least the market isn't declining at this point---I suppose that's something.

But I would HATE to be a novice starting out in this market.


We are in the grip of a low inventory market.  Interesting, but Leslie Appleton Young indicated in her market forecast that California has been stuck in neutral (no inventory, no serious change in the market ) since the 1st quarter of 2014.   In 2009, REOs and distressed sales were 60% of the market, everything was on sale for cheap.  By January of 2014, REOs and short sales were only 10% of the market----and it has been dwindling ever since.

And she further indicated that this really isn't going to change much in the foreseeable future----low inventory is the "new normal".

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Reply with quote  #28 
Bruce Norris is slated to release the Chapter in his Report on "Rentals" (Chapter 17 of the overall report), which was not included in his 2/4/2017 Report.

This will be released as part of their quarterly TNG Economic Letter for their VIP Subscribers.

It should be an interesting report---though I'm surprised that they couldn't fit this into their original 2/4/2017 report.

I'm curious about what Bruce has to say about rentals.  Does he address the multifamily market---or is it just single family homes?

Also, Bruce Norris, Christopher Thornburgh and John Husing appeared at the annual Coldwell Banker Real Estate Market Forecast.  Pioneer Real Estate always posts the video for the forecast on their website and/or Youtube---though they haven't gotten around to doing that yet.
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Reply with quote  #29 
The video for the Coldwell Banker Market Forecast for 2017 just posted on youtube and elsewhere.

Bruce's talk is only about 30 minutes long.  But he does say something interesting: It is his opinion that although there is an inventory shortage, he attributes this more to (1) Overly Strict lender criteria; (2) The absence of moveup buyers----70% of the time when a house sells there is no moveup buyer---which normally increases the overall sales transactions and (3) the relative absence of capable buyers.

Bruce also mentions that when we have a recession---as he predicts in the next 2 years---the Fed will normally lower interest rates by 4 points.  The problem is that if our fed funds rate is already so low, then the only way to lower it further would be to proceed into negative interest rate territory---which he thinks is a possibility.

But he believes that even though interest rates are low right now, they will go even lower after the upcoming recession.

The other interesting thing he said----that he knows investors who bought lots in Victorville and the high desert for 10,000---and they still do NOT pencil out in order to build.  That's kind of amazing.

Bruce indicates that he bought lots for $3,000 in some cities---where the math still does NOT work.

Bruce finally indicates that although he is building in some areas right now, he had to wait over 3 years before the lots would pencil out in the cities where he is building.

He also made the observation that south riverside county would not economically rebound until construction improved.

The overall video is about 3  hours and 45 minutes and includes presentations by 3 other economists, so it is well worth listening to.

Here is the description of the lecture on Youtube.

[photo]
Published on Apr 13, 2017
 
Lance Martin and Coldwell Banker Town and Country presented the 2017 Real Estate Market Forecast on March 7, 2017 at the Hilton Double Tree in Ontario California. Our speakers this year included Lance Martin, Bruce Norris, John Husing, Iddo Benzeevi and Christopher Thronberg. We hope you enjoy the video. If you like what you see, please reach out to us so that we can send you an invite to next years event.


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Reply with quote  #30 
Larry, thank you very much for posting it!
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