Kingside left this comment regarding the Norris seminar:
I attended Norris’s presentation at SDCIA on Tuesday. Well worth attending.
He acknowledged that wages have not gone up, but he believes we are truly in a new normal. The phrase “lowest interest rates in 50 years” we hear is because they don’t keep records older than 50 years. He recently went to DC to research the history back to 1850 and said that rates have never been this low. It is an unprecedented event.
His perception of course is based on the Riverside market, but he made a big point of saying that a 20% price increase will not significantly affect a buyer’s mortgage payment, and even after such an increase the rent to buy comparison will still be overall cheaper for the buyer to buy than rent. This affordability comparison is a rare event for California. He believes there is a lot of room for price increase in California as long as rates stay low, and everything he sees is that there will be no government policy change that will affect rates.
Some of the many other points he made:
A 20% increase will eliminate a lot of negative equity. Banks know this and there will be no dumping of inventory. Their strategy to not foreclose for years and leave the borrower alone might actually be better for them financially.
If the fiscal cliff or whatever creates a national recession next year, the national government response will be to lower rates further, and California real estate prices may actually benefit from a national recession.