Americans don’t spend a lot of time watching traditional network television anymore, but when we do occasionally turn on the news or check the weather, the proportion of advertisements for pharmaceuticals certainly is striking. There are ads for drugs for high cholesterol and arthritis pain relief, but very few drug ads aimed at young parents or the health needs of the middle years. The vast majority of pharma advertising focuses on remedies for older Americans.
One reason is because Medicare-eligible Americans are pretty much the only ones left watching traditional network TV. Nielsen studies show that the people who watch the most traditional television are either between the ages of 2 and 11, or over 65. The over-65s watch almost twice as much TV as those between the ages of 18 and 34. Younger viewers make more use of time shifted viewing and are likely to skip over advertisements altogether. Networks aim to allocate their advertising budgets as efficiently as possible, and it is clear that the pharma companies are betting that the most likely demographic to be watching has a need for pattern baldness and other ailments.
As television viewing habits have changed over the years, so too has hard money lending. Two-thirds of the hard money brokers in business in 2007 went out of business thanks to the Great Recession. Pacific Horizon Financial spent the time from 2008 to 2012 taking back most of the assets we had outstanding loans on, and then completing unfinished projects or repositioning assets or just waiting for a better market on our portfolio. In essence, we became a cross between a developer, a receiver, and an owner and did not refocus on lending until late 2011.
Fast forward just a few short years from 2008 and the market is flooded with new hard money mortgage companies. There are now more hard money brokers in business than at any time in the last 30 years. They come in all shapes and sizes. We now have Crowd Funding, Hedge Funds, Distress Funds, Family Offices, and various forms of institutional backers for Mortgage Bankers and Brokers. Additionally, the proliferation of the internet and email marketing has them all competing on price. Our little secret is out.
As a result, yields have plummeted, especially for California trust deeds. In Southern California, where the competition for trust deed loans is the most intense, a mere 6% net yield to the investor has become commonplace. The competition for first trust deed loans in the Central Valley and in the Greater Sacramento Area is almost as intense as in Southern California. You can get 7.0% – maybe – but not much more. It’s the law of supply and demand. There is far more investor money chasing trust deed investments right now than at any time in history.
It helps to put it in perspective: 10-12% 1st TD’s are now as rare as hen’s teeth, but even 6% is about 4 times the prevailing CD rates.