Leo Nordine's advice: Rent now, buy in 2010

Advice from L.A.'s "king of foreclosures," Hermosa Beach real estate agent Leo Nordine: Now is the time to rent and save your money. The time to buy is 2010.

Check out this excellent profile of Nordine by Ann Brenoff on latimes.com. Nordine, a favorite of this blog for some time, is an unusual figure in L.A.'s real estate world: a soft-spoken, low-key contrarian -- and big wave surfer -- who works in his bare feet, prefers to sell mainly foreclosed houses, and is wildly successful.  Don't let the Zen/surfing vibe fool you; his secret is his work ethic. He has sold 3,500 bank-owned houses over the last two decades. In the attached video, Nordine describes himself as an "atypical" agent:

"Try to find another Realtor who has been telling everybody not to buy. ... For someone out there who's renting, I'd recommend saving as much money as possible. Pay down all your debts as much as possible. And seriously look at buying around 2010."

--Peter Viles

Your thoughts? Comments? E-mail story tips to Peter Viles
Photo Credit: L.A. Times

Hat tip: When I began writing this blog 19 months ago, a number of readers -- including Sunsetbeachbuy  and, he thinks, Mr. incomestream -- first suggested I talk to Leo and include his thoughts on the blog.  Great tip.

Comments

[Just Call Me Maria]

One thing about Nordine- he is a SELLER'S agent. He doesn't rep buyers. There were years when he did not have even a courtesy agent to help buyers- his office would just refer you out to find someone to show you the house.

[anonymousgal]

Moppy - in our area, house prices are still dropping at a slow, steady rate. The lowest detached house (a modest 3/2 on a 7ksf lot) is listed at $339k, but it's been sitting there for a while with no takers. There are a handful of 4 and 5 bedrooms under $400k but they aren't where we want to be. Anybody and everybody with a scrap of credibility says the price decline won't stop before the end of next year. The world economy is shaky. You're actually telling me my money isn't safe in FDIC insured accounts with stable banks or in indexed funds, that it's safer in a house that will absolutely be worth less in a year? Funny, 'cause my financial adviser, who's been doing his job for 30 years, disagrees with you.

And guess what? If the right house never comes along, we'll buy a rental property in the area where we want to retire. We'll go on making southern CA salaries, paying cheap rent, socking away money, and doing just fine. yeah, it looks like some speculators are going to get rewarded for their stupidity. But my anger over that isn't going to cause me to get stupid with my money.

[Crash and Burn]

In his video he says something like how can it be the time to sell now and the time to buy, it has to be one or the other, and then in the column he is quoted as saying don't sell now and don't buy now!!!

You all should have been clued in when he represented himself as a surfer. NOT! He's a paddle boarder (not that there's anything wrong with that . . .).

[kc]

Leo, thanks for the advice. I am a 40 year old single male looking to purchase my first home. I have since decided to save my money, so that I can put down 20% and not have to pay PMI. Thank you for reinforcing what I already planned to do. Peace

[Jmay]

If the prices of homes keep going down for 2 years, I guarantee you housing bears won't be rushing out to buy a house. You'll be even MORE bearish in 2010 and you'll be swearing you'll never buy a house in L.A. You won't magically be able to smell the bottom, and you will continue to sit on the sidelines, as you did all the way up the last time around.

With all this talk about subprime, people seem to forget how incredibly LOW the interest rates were for people with good credit. So a lot of the inventory will be sticky because a lot of people have great rates on their 30 year mortgages that they'll never be able to get again.

By the time the economy gets going again (in 2010 or 2011) all the trillions of dollars that have been dumped into the U.S. economy will cause inflation. (Do you know who Obama's main financial advisor is? Paul Volcker -- the guy who raised interest rates to 18 percent in the early 80s -- 18 percent!!)

That means much higher interest rates are coming -- if your interest rate goes from 6 to 8 percent, you pay an additional $150,000 in interest on a $300K mortage over the life of the loan.

Meanwhile, the current homeowners (buyers between 2003-2007) will get a special deal from the government where they can refinance into a 30 year 5.25% mortgage. This will be part of a new "keep people in their homes" bill in the next (Democratic) congress.

Finally, mortgage interest and property taxes are 100% tax deductible. So, if you're making enough money, your tax savings can be substantial.

So there are several bright spots for current L.A. homeowners amidst the general malaise.

[Cal]

Jmay,

If you are really worried about high interest rates, then it is all the more reason to wait. Affordability is the number one factor right now, the higher the interest rates the less affordability there is. Volcker is definitely a guy who knows how to tame inflation... but the Fed is trying to fight deflation in all major asset classes (check every commodity, look at stocks, and of course housing) and is so far losing. Someday they will "win" but winning in other areas means losing in housing. Housing is all about incomes and interest rates. If they somehow start moving incomes long rates will go through the roof. Either way there isn't a scenario which is positive for housing, the only thing that is good for housing is low rates and a good economy.

[FZ6]

Jmay-

Give me a break!

If rates go up that is good for housing affordability! You see the funny thing about rates going up is that it is done to fight off inflation (among other things). If this happens that means that house prices will have to come down to make homes more affordable. I will give you an example.

Person A: Buys a $500K home at the peak and has their loan reworked to 5.25% 30 yr fixed by Uncle Sam. This person has a payment of roughly $3381 PITI. His mortgage interest and tax deduction amount to $31581 their first year.

Person B: Buys a house next to Person A but now market rates are 8.25% 30 year fix which I think is very likely. In order for both Person A and B to have the same affordability the loan value must be $383,500. This person has THE SAME payment but his mortgage interest and tax deduction amount to $35743 their first year. I know that a lot is assumed but my point is still made.

Now the interesting thing, after ten years Person A has a principal of $409,741 and Person B has a principal of $350,404 an equity difference of $59,337. Person B earned a higher interest deduction over those ten years, has more equity, and can sell faster than Person A if they needed to.

Who is in a better position Jmay?

[who cares]

My 2 cents: How does a guy with no money at 20 years of age ( minimum ) buys 20 properties in 6 years? Hats off to him, I need some of his guts! But where is the mention of his first child in his biography? Family first?
More likely: Surfing first, then current family -then work.
One thing is for sure: he is hot!!!!!!!!

[i wonder]

why are his other children not mentioned in the article? it doesn't seem like family first selling all that property...