I SURVIVED REAL ESTATE 2024
The Norris Groups 7th annual award-winning event, I Survived Real Estate, is Friday, October 25 at the Nixon Library in Yorba Linda. Our 17th annual black-tie gala will benefit Make-A-Wish. Since 2008, together we’ve raised well over $1,000,000 for charity!
In a year of lingering inflation, housing shortage, sticky high interest rates, national affordability challenges, a dangerous war and an uncertain upcoming election are just some of the headwinds we face as an industry and a nation. What will the FED do as year year finishes out? How big will the FED decision loom on this year and the expectation of a better 2025? Oh yeah, there is that little decision the country is going to make as this year looks like a big presidential election in terms of what the economy will look like for the next four years. Our panels are always some of the brightest minds to help us tackle topics we never thought we’d have to consider and how they might impact real estate.
In this episode:
- Evolving Real Estate Trends and Market Forecasts
- How Policy Changes are Shaping the Real Estate Industry
- The Role of AI and Technology in Real Estate Market Predictions
- Exploring Future Economic Trends and Policy Impacts on Real Estate
Episode:
Narrator  Welcome to The Norris Group real estate podcast, a show committed to bringing you insights from thought leaders shaping the real estate industry. In each episode, we’ll dive into conversations with industry experts and local insiders, all aimed at helping you thrive in an ever-changing real estate market. continuing the legacy that Bruce Norris created, sharing valuable knowledge, and empowering you on your real estate journey. Whether you’re a seasoned pro or a newcomer, this is your go-to source for insider tips, market trends and success strategies. Here’s your host, Craig Evans.The Norris Group, proudly presents, I Survived Real Estate. industry experts discuss evolving industry trends, real estate bubbles, inflation, and opportunities emerging for real estate professionals. We want to thank our Platinum partners. uDirect IRA Services, San Diego Creative Investors Association, White Feather Investments, MVT Productions, Inland Empire Real Estate Investment Club,DBL Capital, Douglas BrookeHomes and Realty 411Magazine. See, isurvivedrealestate.com for event details, information on all our generous sponsors and to connect with our speakers.
Craig Evans  But both of you kind of hit on something you know, Mark you were talking about, you know, short of the economy moving sideways. Some of you talked about, you know, volatility in the market. I don’t want to talk about a Black Swan. That’s the easy one to go to. But whether it’s geopolitically, you know, nationally, internally, situations that could happen. What are things that you see that could say, Hey, these are the things that could move our economy sideways to where now we don’t hit five and a half.
Selma Hepp  You mean, you remain higher?
Craig Evans  Right? Yeah, what would you, what were what are things that you believe, that are not necessarily believe? What are situations, when you’re looking from a forecasting perspective that you say, Hey, have we looked at this? Are we thinking about this? Again, not COVID, but, but what’s the the things that the levers that could potentially be pulled that could say we had, we had forecasted five and a half by 2025, and we’re six and a quarter because here’s where we went sideways. What do you think those things could be?
Mark Palim  Yeah, I mean, so it’s perfectly plausible that the five seven is wrong, and it could be, you know, six and a half right. That’s well within the range of the plausible. How could you get there if we get inflation and growth a little stronger, what’s in our forecast, you can get there, right? You just get and, you know, stronger growth would be good, be good for the country. So, you know, people like this gets back saying, Bruce was saying, oh, higher mortgage rates are definitely bad for real estate. That’s not the case. It depends why is the rate higher? If the rates higher because the economy is doing really well. We’re creating tons of jobs, and inflation turned out to be a little sticky. You know, the last mile, getting it down from 2.9% down to two was hard, and so we’re sitting at two six. The Fed doesn’t cut as much as the bond market expects today. You know, so mortgage rates is six, seven.That’s not implausible, right?
Bruce Norris  Can I ask, and this is a true question, who would have the decision making power to say, we’re going to let the, sorry. Who has the power to say we’re going to change the rules of the mortgages that are in place? Is anybody capable of doing that? Where you could say we decided that we’re going to let them move them forward to a new buyer, or we’re going to allow that and create some kind of a hybrid to where the interest is raised somewhat? And the reason I’m asking that, because that would give a lot of boost to the the real estate agent economy, for sure, and the escrows and all that. But it would also, you know, those charts that I was showing you, where we’re maxed out in low affordability and high percentage of our income being taken if you get a break of an interest rate at two or 3% less than the mortgage market. Well, then you’re in a whole different world of real estate. So who could make that decision? Is there anybody in charge of the country who can say you have to do that?
Mark Palim  So, you know, I think the question around assume ability of mortgages, so let’s assume… that Bruce is king for a day, and he gets to wave a magic wand, and all mortgages, jumbo, conventional, conforming, all of them are assumable, right? So if that happens…
Bruce Norris  I don’t even want to be assumable. I want them to be transferable without the lenders permission.
Mark Palim  So you want a portable mortgage the current owner, and you want to make them assumable. If they so choose to, they can sell them. I guess the economist to me says, you know, that’s a king for day cool change when I think about what’s the impact going to be, the supply of homes available for sale. The overall supply of homes in the country hasn’t changed. When I think about what’s holding the buyers who can qualify, have the credit score, have the down payment, have the savings, presumably, some of the, some of the sellers are going to say, okay, you can. I’ve got $280,000 left on my house at 3% mortgage, and I’m listing the house for 450 you can assume my mortgage. Oh, you don’t have that much money? Now you got to go get a second to make up the difference, right? So now we got to think about what that second is going to be priced at, and some of the potential savings at a lower rate will probably go into the home price, because the seller is going to say, Hey, I’m giving you an advantage. You don’t have to go out and get one of these 6.3% mortgages the credit union or the banks offering I’m going to give you my 3% mortgage, but you know, I’m going to want something from it. So those are two things that mitigate a little bit.
Bruce Norris  Well, you know. Okay, so we’ve been around through 2008, nine and 10. When did they decide to give eight grand to the new buyer of real estate when the price was already in half? I mean, who is in charge of that decision? I’m just curious now. I’m being honest, who, where does that come from?
Mark Palim  I’m sorry, you have to, I couldn’t quite hear that.
Bruce Norris  I’m sorry.
Mark Palim  …follow the hypothetical. What you’re saying?
Bruce Norris  Oh, this was…
Mark Palim  …no wait, I’m sorry.
Bruce Norris  I remember there was a $8,000 free. $8,000 if you bought a house the
Mark Palim  First time, the first time, right in 2010, or 2000.
Bruce Norris  Okay.
Mark Palim  Yeah.
Bruce Norris  Okay.
Mark Palim  That was done by Congress.
Bruce Norris  That was Congress. They could do that, okay? And…
Mark Palim  Congress can do all sorts of things as long as the president sign.
Bruce Norris  Why did they wait so long? Because in California, that price was already half of what it was, and then they said, Well, here’s eight grand.
Mark Palim  Here’s,the first time, I’m sorry, the first time, home buyer tax credit.
Bruce Norris  Yeah.
Mark Palim  They did it for a window, and then they extended the window. If you look at a chart of sales and Selma, you might have a different perspective. But my recollection of what was went on is it did lead to an increase in sales, and then when the tax credit ended, it dropped back down again. So at the margin, did it bring in some more buyers? I’m sure it did. Was it as much as the spike you got? No.
Selma Hepp  But the difference then was, is that the demand was so low. You know, they were trying to boost demand the today, we don’t have a demand issue. We do because it’s unaffordable, but we don’t have, you know, if affordability improved, we wouldn’t have an issue with the demand at all. Can I go back to the your assumability or transferability mortgages? So Canada has that model, right? Canadian mortgages are not, how do you call it? People can take the mortgage with them as they move to another home, but you know investor community response to that, and so their mortgages are three to five years. And look what happened in Canada when mortgage rates went up in 2022 their prices actually dropped some 10 to 15% so you have that then, because you have to refi every three to five years, you’re more sensitive as a consumer to these different mortgage rates, and can actually push you out of a home if mortgage rates surge, as they did in 2022.
Craig Evans  So then, as we’re talking through this, because I’m, listen, I asked the one question, and you guys are going, and this is fantastic, but in listening to Bruce question through and you guys respond and answer, what would be the one policy change, if you could be king for a day, what would be the one policy change that you think would be a benefit on the economy, but also a benefit to the real estate market?
Selma Hepp  Well, making building…
Craig Evans  You know what? Let me change that question. I’m sorry, because that…
Mark Palim  We’re rushing to answers.
Craig Evans  Right. Well, and the reason why I want to back, I want to pull that one back. I don’t want to play King for the day we got to investors that live in the real world, right? So from a real life perspective, what is one policy change that we could say Congress could enact, that the President would sign, regardless of who’s in there 11 days from now? That is something that a policy that could be effectively engaged, written, past, signed, put into law. That has a positive effect on the real estate market? That may take a few minutes to think about, but so
Mark Palim  Maybe…
Craig Evans  Talk amongst yourselves.
Mark Palim  That’s right. We’ll ask the audience. I mean, I actually think that the things that ail the real estate market the most is, I have a favorite chart that shows single family and multi family construction back to the mid 1960s per 1000 people in the country, and it’s just striking, particularly how much multi family housing starts has have gone down over the decades. They peaked in the 70s. In terms of overall when you look at the cost burdens that families have, it’s far higher among renters, particularly in multi family so if we could see zoning changes that made it easier to build apartment buildings that helped renters lower the cost, the monthly cost of renting. It would help them with their credit score. It would help them to just the other priorities in their life, and then it would help them to save up money for a down payment if they choose to want to become a homeowner, so we could do something at the state and local level to make multi family construction go up that would be my number one thing.
Selma Hepp  Yeah, but I would, you know, so we, we always, sort of, when we talk about what should be done, we talk about it and we ask, what the federal government should do, but it’s usually the local government that’s the biggest obstacle in new construction. And who runs the local government? It’s you and I, right. It’s local residents. It’s constituents, local constituents who you know, go to the zoning meetings and town hall meetings and say, No, I don’t want this, this type of development in my backyard, in the nimbyism, that nimbies, that we are, you know, that’s really, to me, the biggest constraint. It’s really us who is the problem. It’s really very little that the federal government per se can do. I mean, even with these zoning changes, you’re talking about adding more density, that’s a local issue, and that’s, it’s not a federal government issue.
Craig Evans  It’s the people in my area that are changing zoning issues and restricting, yes, you know from an aspect of density ratings that that kill the process on affordability in certain areas where you’ve got high growth and you’ve got high appreciation, and you can’t change that at times because of density ratings and what they’ll allow you to build it. That is a challenge. So, did you want to say anything on that? Okay, I want to, I want to ask one more question, and we’re going to bring the other two gentlemen back up and have a joint panel as we finish up tonight. But Sean O’Toole is a long time friend of I Survived Real Estate and of The Norris group. Sean ,today is actually his birthday. We had him on the podcast a few last week, I believe it was, and he asked me to ask you guys a question so.
Bruce Norris  Sean you’re listening, this is or you. He’s a troublemaker. You gotta be careful.
Craig Evans  So, you know, the reality is, technology and AI is changing a lot of things. AI is here to stay, whether we like it not, regardless of which side you fall on, on that process of it. You know, Sean’s question was from a forecasting perspective that both of you guys deal in. Are you guys currently using AI in any of your forecasting models?
Selma Hepp  Yes, yes. So basically, AI is just using previous data to make decisions about future. That’s sort of what AI is, right? And when you think about home price forecast, or HBI home price index. You know, you have Fannie Mae has you guys have home price index. CoreLogic has a Home Price Index. Case-Shiller there’s a Home Price Index. You know, everybody has a Home Price Index that’s basically AI is using the data on home price transactions and projecting that trend into the future. That’s what AI is. We use AI many other ways. At CoreLogic, we do a lot of sort of propensity models. For example, what is your likelihood to sell your home given that you have this much loan to value ratio you’ve been in the home at X long you’re this old, your even credit score may matter. What is your likelihood to sell a home? Like we usethose type of data points in developing some of these models, which in essence, is AI model, because it’s using data from the past to tell the future.
Mark Palim  So I’m gonna, you know, I work in Washington, so I’m gonna answer a different question that’s sort of related. So I’m gonna assume that Sean would might have been asking about the large language models, which is the latest thing that everyone’s talking about.
Craig Evans  You’ve been in those conversations.
Mark Palim  And he’s always thinking about the latest technology and things. So I would say, from the forecast perspective, we’re not using it yet. We’re playing around with it for some things. The other thing I think is really interesting from the real estate business perspective is when I’ve been meeting with lenders recently on the origination side, but especially on the servicing side, I’d say, give or take, 60% of them are actually implementing it in their business. I mean, they’re using it to help run their call centers, to provide a higher level of uniform service to make it so when you call in with a problem, you call in the question about your mortgage that so these are examples of some of the best uses I’ve seen the person the other end of the phone now has a summary of all your interactions with that bank. It can go through the email records the chat bot records the phone summaries, and so the agent is that much better prepared. And instead of them having to search you an FAQ, it’s the computers listening to the conversation, suggesting to the agent, I think this is the answer they’re looking for. So I mean, that’s just one example. It’s going to change the way a lot of business is done but you got to integrate it in your current business process, and you got to do it in a highly regulated environment when it comes to mortgages. But it is an exciting time to see these technologies and how they being used in the industry.
Craig Evans  Were you about to say something?
Bruce Norris  I was going to say, I always enjoyed riding in the limo with Sean, because he would always talk about something I’ve never heard. So I’m talking, you know, 10 years, 12 years ago he’s like talking about 3D Printing. What are you talking about? He kind of told me what that was, and sure enough, you know, here it is, self driving cars, and he mentioned that that was coming. And I said, Oh, man, I can’t wait till I’m driving next to a car that doesn’t have anybody at the wheel. He said, Well, it’ll get to the point where it’ll drive better than you possibly can. And to be honest with you, it was interesting. I found out something that every Tesla that goes through an experience, it’s instantly shared with every other Tesla that’s on the road. That’s astonishing. It’s every Tesla is teaching every other Tesla how to deal with the circumstances they don’t have to experience. You’d have to think that would become as close to perfection as possible.
Craig Evans  Yep. So I’m going to kill myself. Because, if I don’t get these questions, because there’s three things that I want to ask you guys shouldn’t say I’m gonna kill myself. That’s not true, but I want to get these questions answered. From AI, you know, in technology, technology is brings about deflationary situations, right? As AI is coming in, we’re starting to look at things that it’s already creating and pulling away jobs. I was talking to Kyle, or the agent that I use that runs our sales center for us and runs our division of sales, he has already transitioned that the people that write all the copy for us that is no longer a person that is now AI that rates that, and it’s so much better than what the people we were paying money to write copy for doing that. That’s the initial situation that I began to think through. And it started me thinking in the real estate world, whether it’s sales, construction, investment, whatever that is, are you guys looking at and looking ahead at as AI starts to become more into the world of what we do, from forecasting and reading models and and gain large language starting to become smarter and smarter, being able to tell us what we’re thinking before we’re thinking. And that whole process, how much of a how much unemployment do we think that’s going to create once, once that starts to create a deflationary situation, we’re talking about rates, right? I mean, what a big driver of rates is going to be unemployment? Well, is what we’re so giddy about creating an AI, is that creating our own unemployment, and do we even see it coming yet?
Bruce Norris  I’ll comment on that first.
Craig Evans  All right.
Bruce Norris  Again in Sean comment in the car coming here years ago, he said, ultimately, what we’re going to have to solve is how to have a society where 50% of the people are unemployed. Because he said that’ll be the future of everything that will be automated will ultimately be better and cheaper than people. So that was his concern, actually, that is coming. Um, you’re in construction. There’s a company that Elon Musk has called Boxable. Okay? Is that a functional it may not be at that stage yet, but is that a functional replacement for stick built houses at some point? Just curious.
Craig Evans  It could be not in southwest Florida, correct? You know, currently, just because of codes, things like that, but, but all of that could very easily be overcome. I mean, there are already building techniques that we can put into play, that instead of taking us three weeks to get dried in, we could be there in six days, you know, there’s a cost to that right now, and it is cost prohibitive in an affordability setting. But yes, as technology is creating that, I’m having to look, as we talked earlier about pivoting. You know, one of my businesses is Trinity. That is a subcontract company, and we do 1000s of homes a year of shell and underground utilities and all that stuff. And I’m looking at, hey, the reality is, in five years, my shell department may be obsolete. What do I do with those 60 employees? You know, and that’s part of why I’m trying to get us to look at the reality is we’re so gung ho about this stuff, and that’s great, because it’s here to stay, but we’ve got to look at the reality. There is going to be a causation and effect to that.
Mark Palim  I guess I have a couple of thoughts. One is, we don’t know what it’s going to do to employment, right? This is a general purpose technology, just like the semiconductor was or the internet, right? Remember the first time someone showed me an iPhone? Oh, my God, that did change a lot of what we do, right? So we don’t know what it’s going to do. The 50% unemployed. I’m skeptical, from the perspective of at least the studies I’ve seen it look at different jobs. Some jobs could be entirely replaced. Some of them, you look at the job and is multiple functions in that job today, and it’s parts of what people do that could get replaced, but then it’s parts that aren’t. So, you know, the natural language model might write the first draft of your advertisement, but you’re probably still going to want a human being to look through it and make sure that that it isn’t. You know, those models, the one thing they’re not lacking in is self confidence, and so you still want a human in the loop, right? Computer Programming, you’re seeing that, you know, the first writing code from scratch like little those of us who started out doing basic in the 80s, right? It’s pretty tedious. So not a bad thing if those models help you do that, but you’re still going to want someone to test that software and look at it and understand it. So and then last, let’s say, Are there any unmet human needs that we have? You know, children who could use an extra tutor in the classroom, old people who are lonely. So I think there are going to be this unmet human needs that some of the people with displaced can help work on that I don’t want to minimize the transition difficulty, but I’m not in a 50% unemployment camp.
Craig Evans  So the last thing that I want to ask, and Joey is down there telling me, I got to cut this off, but I got the mic, so unless he’s gonna jump up and tackle me. So one last question I’ll ask, and I wanna bring everybody else up. Next year I Survived Real Estate 2025 okay, what do you believe, barring a black swan event, right? What do you think we’ll be talking about as the number one topic that we’ll talk about from an economic policy and culture perspective next year. Now we’re running light on time. I don’t want a 20 minute dissertation. How do I want us to keep it as topics? What do you guys believe will be the number one economic policy that we’ll be looking at next year at this time?
Selma Hepp  Okay, so I think, Well, we already started talking about this this year, but I think it becomes more relevant even next year. We have more wetter events that are more destructive and more costly. We have people that are uninsured. They don’t have homeowner insurance. It’s very difficult to get that homeowners insurance, or the cost is prohibitive. There is cost of you talked about energy earlier, and I was going to talk about a little bit about data centers. You know, all this, AI a larger language model, they require enormous amount of energy. And so when the energy is more, that use is more, in a sense, profitable going towards large language models, versus keeping your house cold or hot, it becomes more costly for you to heat or cool your house. So cost of energy to households. That’s what my big concern is going forward, because data centers have proliferated all over the country, and they all big tech companies are building them, and they’re so energy draining, in a way that I wonder what happens to you and I when we need energy down the road.
Craig Evans  So energy, okay, all right.
Mark Palim  I think in the real estate space, the commercial real estate cycle terms, what’s happening in the office market and what’s happening to downtowns will be an issue next year that we’re going to continue to be dealing with.
Craig Evans  Okay. Thoughts, nothing?
Bruce Norris  I’m good.
Craig Evans  You’re good?
Selma Hepp  Left him speechless.
Bruce Norris  I’ve taken up too much time.
Craig Evans  Listen. Let’s give a round of applause for these four our panels
Narrator  We’d also like to thank our Gold Sponsors, Inland Valley Association of Realtors, Keystone CPA, NorCal REIA, NSDREI, Pasadena FIBI, PropertyRadar, The Collective Genius. Thompson Group, Aloia Roland, Coldwell Banker Town and Country. See, isurvivedrealestate.com for event details.For more information on hard money loans, trust deed investing, and upcoming events with The Norris group. Check out thenorrisgroup.com. For more information on passive investing through the DBL Capital Real Estate Investment Fund, please visit dblapital.com.
Joey Romero  The Norris group originates and services loans in California and Florida under California DRE license 01219911. Florida mortgage lender license 1577 and NMLS license 1623669. For more information on hard money lending go to thenorrisgroup.com and click the hard money tab.