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Has California Real Estate Peaked? Bruce Norris Answers

If you follow me on Instagram then you know I spent a full Saturday in Riverside…for NINE HOURS. Why, you ask? I went to hear Bruce Norris’ latest California real estate market report and predictions for California single-family home prices. This dude is amazing.

I started following Bruce back in 2007 when I began my real estate career. He was and still is very well known for producing excellent reports which in turn deliver accurate predictions for California real estate.

Bruce Norris’ Background

Bruce is a professional real estate investor who focuses on southern California homes. He does this via buying and holding, operating a large home flipping business at foreclosure (trustee) sales, along with running a very successful hard money operation lending to local single-family investors and flippers. He is heavily invested in California real estate and as a result, he is highly incentivized to understand market cycles.

Not only does Bruce have his pulse on the real estate market through his businesses, but his research is second-to-none. He has traveled to Washington D.C. to get the oldest and most thorough statistics from the Library of Congress and even gathered real estate data provided by Cal Poly Pomona that is virtually unheard of outside of a few people.

Due to this in-depth research, Bruce Norris has released three reports over the last 20 years. The first in 1997 titled “The California Comeback” which correctly predicted the massive California run through the 2000s; the second titled “The California Crash” in 2005 which correctly predicted the meltdown in California home prices, and lastly a third report titled “All in or Fold” which I was lucky enough to attend in 2010 in the Bay Area that correctly predicted the next run up that we have enjoyed today.

I paid $600 and spent almost 12 hours in attendance. That tells you how seriously I take his reports. The room had what looked to be 600 to 800 people in the Riverside Convention Center. We were not disappointed…

The Report in Summary

The first 75% of the live event was going through buckets of data. Bruce has about 40 different buckets that he dives into during his research, and then he selects 15 or so of the most impactful buckets. Some included: affordability, sales and inventory, lending, interest rates, employment, construction, demographics and migration, pension math, national debt/social security/medicare, the Presidency and past financial outcomes, oil, and changes in technology to name a few.

The beauty of this live report is he actually showed us how he weighed all of these buckets and their value in the analysis. Most importantly, he shared with us how to calculate how much California home buyers can afford at the peak and 10 years into the future as data changes in real time. That said, I came away most interested in affordability, lending, interest rates, and the demographics/migration sections. These are the main drivers that will determine the peak of California median prices, when to back away and how hard we will fall.

It is impossible for me to give you an accurate summary of the event, but the data points to a California single-family home correction in 2018 or 2019 depending on interest rates, affordability, and what the market does in the short term. During the correction, Bruce is predicting that interest rates will fall to 2% for a very short period of time. The Fed has very few resources to assist the economy with already ultra low rate policy.

Lastly, over the long term, California will be greatly affected by migration out of the state and multiple “negative straws that will hurt the camel’s back” and prevent large price gains like we have seen in the past. California single-family homes, however, still have favorable growth potential if your hold period is 10 years or longer.

My Take on the Data and Bruce’s Conclusions

My take away from Bruce Norris’ live report is that when the next real estate single-family home correction hits, it will be mild. Think between 5% and 15% as your range. The fact that lending is strict and nothing like the loose standards of the 2000s, California will not come crashing down, nor surging upwards. Look for our market to become a slow growing state that really works over the long run rather than making millionaires in a few years or bankrupting people in the following years.

I believe that this will make the market better for all home buyers. Post-correction (whenever that comes), the next cycle will punish speculators, and we will go back to a normal market that is much less volatile than the past.

For current clients, playing the long game is now in style. If you buy today even pre-correction, Bruce projects a median home price of $715,000 to $740,000 in 2027. We currently sit at $513,000 today with some room to run. That is still a 42% jump in the next 10 years…just a much slower and steadier march upwards. A new California now exists and it is much different than the past.