Norris Speaks I Listen
For nearly 20 years now, I have been a faithful attendee of the Thursday morning breakfast meeting held at The Inland Gateway Association of Realtors. Over these past two decades I have built many strong friendships. And, I have secured many transactions that might otherwise have been missed.
But the main reason that I have religiously attended these meetings is that on this one day every week I am forced to focus on my craft. And, I am given access to information that I might not otherwise receive because of the speakers that they invite to enlighten us.
This past week I sat in pure awe as Bruce Norris, a man whose opinions I respect greatly spoke to us at great length about the current real estate market. And, the challenges and opportunities that this market offers those willing to participate.
There is no way that I can possibly cover in any detail all that he shared with us in such a limited space. I will however do my best.
First it starts with our current interest rates. I have said often that Money is on sale. In fact according to Mr. Norris, interest rates today are less than half of what they were in 1990. Now I ask you can you name anything else that cost less today than it did in 1990? I sure cant.
In fact with a median sale price of over two hundred seventy five thousand, statewide and nearly three hundred and fifty thousand in Corona, homes today still have great value.
Even more interesting is the mix of values when separated by types of sales. First the traditional sale (non-distressed) is still king, with a median sale price of over three hundred and fifty thousand dollars. But, now is where it gets interesting. The short sale listing has a median sale price of approximately two hundred seventy five thousand dollars state wide while the bank owned (foreclosed) property has a median sale price of two hundred thousand. This once again demonstrates the need for lenders to cooperate at a much higher level with short sales.
Today (according to Norris) nearly seventy eight percent of all first time home buyers can afford the median priced home. That number drops to fifty percent when all potential buyers are considered.
In terms of home sales overall, 2010 saw a much more robust market and, the sales numbers were better than they were in 1998. In Riverside County, sixty five percent of all homes sold were distressed sales twenty four percent short sales, and forty one percent bank owned properties. This would indicate that thirty five percent of all home sales were traditional equity sales.
At the end of 2010 (the latest date we have statistics for) forty four percent of all homes were purchased by first time buyers. And, today all indications are that we are experiencing more of the same in 2011.
The big problem with first time home buyers today isn’t that they can’t qualify. Instead it is because they just are not that excited to buy. We are seeing for the first time major publishers questioning the value in homeownership.
On the cover of the September 2010 issue of TIME Magazine, was the caption ReThinking Homeownership Why owning a home may no longer make economic sense. Besides the obvious wealth building aspects of homeownership, there are other positive realities of a neighborhood that is mostly owner occupied. On average owners invest far more time and energy in the maintenance and care of their home then absentee owners or renters. Crime rates tend to be lower in a neighborhood that is mostly owner occupied. All of this contribute to the fact that values will remain (on average) more stable and overall the homes will be much more desirable.
When you look at real estate, you have to examine how it performs over time. Most of us have a tendency to look at snapshots of the market if you will. For example, some would look at the peak of 2006 and the free fall to where we are today and conclude that real estate is a volatile and risky business.
The fact is, if you look at the market over the last twenty years, (1990 to 2010) real estate in Riverside County has appreciated by twenty percent. In Corona, property values have appreciated by over thirty percent over the same time frame.
Real estate can build great security when invested in over time. However, like any commodity, if your intent is strike it rich in a short period of time, you are just as likely to crash and burn as you are to succeed.
As for Norris, when explaining his feelings on the market today, he says (as I have) buy. Don’t wait. Buy now. And, he illustrated his belief that this was the right thing to do by advising us that he has purchased over one hundred homes this year. And, he is not done.