Tuesday, July 28, 2009

Bruce Norris on Nightline Last Night: Good Inteview, Not so Good Advice?

I saw (quite by accident) an interview with real estate guru and investor Bruce Norris on ABC's NIGHTLINE last night.

You can see the same interview by going here.

I am a fan of Bruce Norris. He offers excellent advice on real estate investing through his website and his seminar offerings. I can't dispute that he knows what he is talking about and is honest about real estate as a career and investment.

But I strongly disagree with his suggestion made on NIGHTLINE that investors offer a way out of the housing mess by soaking up extra inventory. He suggested that Fannie recind the "Ten House Rule" on investments even to the most financially solid investors.

I couldn't disagree more.

Investors are a huge part of the problem in today's housing mess. Getting many of them out of the market is a better solution. Much of the excess inventory Norris and others bemoan was specifically created as fodder for investors. In places suffering the greatest pain these days like Miami, Las Vegas, and Riverside, CA (Norris' home turf) spec building specifically for investors to flip is the single largest reason there are so many unsold new homes never lived in by anyone.

Investors walk away from properties a whole lot faster than homeowners that live in them with their families. This logic is inescapable.

I agree with Norris that the government needs to do more to soak up the inventory choking the balance sheets of builders and developers. Obama's first time tax credit is doing little to accomplish this.

A much better solution than Norris or Obama offers is to monetize the tax credit up front so potential homebuyers can actually buy real estate. What good is a tax credit to buy property if you can't afford the purchase up front? This idea is working in California and is overcoming the prime barrier to home ownership---no down payment. The Obama tax credit should be extended to include all home buyers and last beyond the current December 2009 expiration date. It should monetize the tax credit up front so homebuyers that qualify for the credit can borrow against the credit to actually buy a home. This "loan" is then paid off at closing with the tax credit.

This would get empty homes filled with the most stable of occupants. Not tenants, but homeowners with families that plan on sticking around for a while.

America needs to view single family and condo home ownership as it has been since the dawn of time. A place for people to live, not capital to speculate. Homes should be viewed as homes, not rental properties. Real estate investors have plenty of other options beyond single family homes and condos. In fact, these alternatives offer much higher ROIs, cash flows, and more at lower risk.

This all said, I applaud ABC for giving Bruce Norris the chance to speak. He's a smart guy and well worth listening to any chance you get.

Robert J. Abalos, Esq.