Bruce Norris, of the Norris Group in Riverside CA is known for having his finger on the pulse of California’s housing market.
He says home values will rise in the Golden State by 20 percent in the New Year.
Frankly, that’s not a stretch.
The California Association of Realtors recently reported single-family home sales rose nearly 26 percent on the year. ending in November. Condo prices were up 26 percent.
Norris effectively concedes his prediction could be a little conservative.
“My best guess is that California we will have significant price inflation. Prices could escalate so strongly that we will think we are in 2004 instead of 2013,” says Norris.
In January 2006, Norris, a real estate consultant, investor and educator for the past 30 years, foretold of the current mortgage crisis – more than a year before the nation’s leading economists and real estate industry analysts would even acknowledge the possibility.
Norris also correctly forecast both the real estate boom that began in 1997 and the subsequent doubling of home prices.
According to Norris, here’s why California home prices will skyrocket.
“In many areas, there’s one month of inventory. Inside of that one month of inventory are very few REOs (bank owned properties) and a lot of short sales that may or may not really be available to buy and close anytime soon,” Norris says.
“The properties that would normally be purchased by owner occupants are being snapped up by billion dollar hedge funds. These hedge funds, unlike the smaller investor types, are keeping all of the properties as rentals. There’s a little inventory for sale by ‘normal sellers with equity,’ but, right on cue they are getting the idea their property just might be worth more than the last sale,” Norris added.
Without sufficient supply, prices have no where to go but up.
Former homeowners return
Norris also says demand from homeowners who suffered forecloses in 2008 and 2009 will help spike prices.
“The numbers of trustee sales in those years were staggering,” Norris said.
“As a percentage of whatever had happened in the past, 2008 and 2009 will go down in history as the California Real Estate Collapse of all time. The numbers differ across the state but the percentages are similar. In San Bernardino, the numbers of foreclosures exceeded the number of sales in 2008 and 2009. Fast forward to 2012 and you now have those same people ready and capable of buying a home again,” he added.
Provided FHA remains sufficiently solvent, it will provide loans for many of these buyers. FHA allows foreclosed buyers to return to market after three years.
“Buyers have realized that their house payment would be less than their rent, and that’s fueling demand and pushing up home prices,” Norris said.
Interest rates are near record lows and the Federal Reserve’s plans should keep them that way, at least through 2014 and maybe as long as 2015.
“Interest rates are at all-time lows, and that allows for price increases to take place without significantly increasing mortgage payments,” Norris said.