COVER STORY
BRUCE & AARON NORRIS
my name was on them,” he recalled ruefully. “Unfortunately, I built all seven and nothing sold. I had seven custom homes that didn’t sell, $21,000 a month of overhead, and payments that I made for two-and-a-half years while I got rid of those houses one at a time. “By the time I was out from under that mistake, Aaron was graduating from high school and I bought him a car, a Honda Civic. It cost $15,600, and the only reason I remember that is because I bought a three- bedroom house in Riverside, California, the
next day for $13,300. It just struck me: Five or six years prior to that, I was so confident in the real estate market (and I was not alone) that I thought I couldn’t make a mistake. Just a short time later, I was buying a house for less than a Honda Civic. “I thought to myself, ‘I have been doing this for 15 years and I have no idea what makes prices go up or down. I have no idea.’ So, I decided to study it onmy own. I took 18 months and I put together a 25-year price chart going back to 1970. Then I got 25 years of data in every category I thought could
influence price, which wasn’t easy back then. There was no Googling that information! It was literally going into libraries, pulling books with data, handwriting data on note pages, making charts of that data, and then looking at all of it. “I finally took it all on vacation with me and I just started playing with those charts to identify trends that happened during each boom cycle and bust cycle. I was looking for the initial event, if you will. It was repetitive, and I found it. Once I found it, I wrote that first report,
published in 1997, called ‘California Comeback: Why Prices Will Double in the Next Eight Years.’ That report would take us all the way to 2005, by which time prices had actually tripled, and The Norris Group was on the map for getting the direction correct, if not the intensity.” In 2005, Bruce debuted his second major report. This time, his son was by his side. “I came to work at TNG with the intent of rebranding our company and to work on our education,” Aaron said. “‘California Crash’ was our first major project together,
and it consisted of about 400 pages and 800 charts dealing with why Dad was telling California real estate investors to get out of the state in 2005: Our foreclosures were going to increase by more than 3,000 percent and our prices would go down by half. It was a pretty big deal.” Aaron’s unique background made him perfect for the task at hand. After spending seven years in New York City as both a professional actor and a Wall Street temp creating acquisition and merger presentations for multimillion dollar hedge
funds, Aaron’s keen eye for imagery and uniquely adept methods of communication were perfect for conveying a message that no one wanted to hear in California at the height of the housing boom. “It took us two days just to produce the presentation after we had created the materials,” Aaron remembered. “Dad feels very responsible for conveying his insights and information to investors, and it was really important to be able to show people not just what we were saying, but also the rationale behind it. It was really important
TIMELINE OF CALIFORNIA REAL ESTATE
M ost real estate investors will agree that the vast majority of U.S. housing markets are cyclical, meaning that home values rise and fall intermittently over long periods of time. The phrase, “What goes up, must come down,” and vice versa, might come to mind. However, in California, that cycle tends to be less of a gentle swelling and ebbing and more of what analysts refer to as a “boom- bust cycle.” This simply means that over time, housing markets in California tend to experience extreme highs and extreme lows instead of more muted fluctuations. At right, you can view a brief timeline charting these cycles in California’s housing history, starting in the early 2000s. On page 25, read Bruce Norris' predictions for the rest of 2018.
2011 Median home values statewide were more than 40 percent below peak values recorded just five years earlier. California homeownership fell to 56 percent.
Bruce Norris publishes "California Comeback," predicting massive price increases over the next eight years.
1997
California experiences double-digit annual home-price appreciation for the first time since 1980.
2002
California markets post annual price increases in excess of 20 percent. 2004-2005 Bruce and Aaron Norris publish "California Crash," predicting astronomical increases in foreclosure rates and similarly dramatic declines in home values. California home prices fell 6.6 percent between Q4 2006 and Q4 2007. Twice as many homes were in foreclosure in California as were nationwide. Construction permits fell 49 percent from their peak in 2004. 2007
California “mortgage burden” is 33 percent of the average homeowner’s
2013
income. 30 percent is considered the upper boundary of housing affordability.
53.8 percent of homes in California are owner- occupied. Nationally,
2016
62.9 percent are owner-occupied. At the peak of the housing boom, 69.2 percent were owner-occupied. The average California homeowner spends 25.4 percent of their income on housing (more than any other state).
The rate of decline in home prices slowed, but the damage was done.
2009
CoreLogic declares multiple California markets “overvalued.” 37 percent of homebuyers tell Redfin they are considering leaving the state to buy. 75 percent of Southern Californians cannot afford to buy a home (according to California
2017
Merced, Modesto, and Stockton home values fell particularly hard (by 65 percent or more) after experiencing huge run-ups in value during the boom.
Association of Realtors, CAR) California median home price is $561,000 according to CAR.
Vacancy rates in rentals are well below national rates (7.5 percent vs. 10.2 percent).
2010
22 | think realty magazine :: february 2018
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