Riverside Real Estate Investor Bruce Norris Sees 2011 Upsurge Coming
Falling home prices offer opportunity for Bruce Norris, a professional investor and founder of The Norris Group in Riverside. Norris, 55, nimbly adjusts his investment tactics in anticipation of the real estate market's ups and downs.
The high school graduate, who says he learned his business through "the school of hard knocks," gained renown with the accuracy of a 1997 report he wrote that predicted California's housing boom.
Then in January 2006, he butted heads with economists who predicted a "soft landing" for real estate. Norris rightly predicted foreclosures would explode and home prices would plummet.
During the point when home prices were rising, Norris bought houses and rented them out. He also built houses. In 2005 and early 2006, before houses became unaffordable for too many would-be buyers, he sold his real estate inventory and slowed down new acquisitions.
"It was safer ... because we knew the prices would start descending very quickly," he said.
Having also sold his longtime headquarters and rented office space near Riverside Plaza, Norris said he is flush with cash and ready to buy houses. They will look increasingly enticing for investment as lenders discount the prices on a mountain of homes seized in foreclosure, he said.
In an interview this week Norris answered questions about his investment strategy. He said he figures California home prices will continue to fall for another 18 months. By 2011, California real estate values will start attracting retiring baby boomers from nearby states, he predicted with a smile -- and once again it will be "off to the races" as a resurgence of buyer demand pushes the state's home prices higher.
Q: When did home prices start getting attractive enough to lure investors like you?
A: At first when you had lenders getting properties back for the first time in 10 years, their attitude was "we will sell them and make a profit." You need lenders to capitulate. I would say in the last 60 days it has been more obvious that lenders have become willing to take less for the houses.
Q: What is the kind of house you are buying for an investment?
A: We try to stay in the first-time buyer price range. I want to be able to sell it for under $400,000 and I'd rather it be under $300,000.
Q: How far below market price do you need to buy a house to make an acceptable profit?
A: We want to have a 10 percent profit when we are done. So we are probably buying the property at about 30 percent less than market because we have to pay for repairs, sales costs and holding costs. We also have to take into account that over time in this housing market downturn the price we can get for a house will decline. We literally reappraise the house every week. We want to offer the best value so the house sells within a month.
Q: Where is the best place to shop for a bargain home?
A: In this cycle, it is definitely lender-owned property.
Q: Why can't you find houses offered by desperate individual homeowners?
A: Most of the desperate sellers owe more than the house is worth, so there is no deal.
Q: Why are lenders becoming more willing to lower their prices?
A: The quantity of houses they are getting is so huge they have to do something. They can't hold out. Typically the lender lists a house with an agent and tries to get full price and it doesn't work. Then they give the listing to another agent. Then they go to auction. When they finally get to an auction, the lenders are more likely to believe the bad news that the price is much lower than they thought.
Q: Could an economic recession further handicap housing sales?
A: We are going to have a double whammy. The next 18 months will be the toughest time California has ever experienced to sell a house. But I am going to sell 50 to 100 every year because there is always that first-time buyer who wants to go from renter to owner.
Q: You believe there is another up cycle ahead for California housing?
A: Starting in about 2011, hundreds of thousands of people are going to retire in California who never could have afforded it before. It is going to cause a boom cycle that wouldn't be possible unless this down cycle occurred.
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Why are you taking about upside in housing i know it is good to stay positive but hey homes have to start going up meaning peole will have to bid up house for them to go up
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Why can't you give the lenders what they want? They want to take less for the houses, then give them a house that will take them less but with still good structure of house but also affordable for them.
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