Real estate & the housing industry. What happened and where is it headed?

The housing industry. What happened and where is it headed?

Allan Glass, President of ASG Real Estate Inc. ® based in Los Angeles, California says from an early age through the end of his teens he loved the idea of helping people solve problems. So, he turned to real estate.

And although this line of work is not necessarily a business venture many might consider today, in Part I of my interview, Allan shares why he thinks it should be a career choice for several reasons some may not have considered.

Now, in Part II, Allan talks about the downfall of the housing industry, what caused it and what those in the industry should expect to see in the next 5 to 10 years. Allan has also provided some industry-related articles to offer some inside information in real estate as an investor and in other areas.

For now, Allan shares his thoughts as to why the housing industry came crashing down.


Gillean Smith: In your expert opinion, what caused the housing market/real estate market to plummet and begin to spiral out of control?

Allan Glass: An overabundance of cheap liquidity and a natural tendency towards speculation helped inflate the “bubble.” The market’s ultimate undoing sprang from the realization that cheap, abundant money would not be available forever.

When the investment banks like Bear Stearns and Lehman Brothers met their demise, it was like someone turning off a spigot. Overnight the money available to main street lenders began to disappear, leaving new potential homeowners unable to qualify for loans. Then the sub-prime mortgage brokers went away.

With fewer buyers in the market, and new banks scrutinizing every new loan, home values dropped precipitously. As this happened, many new homeowners found themselves upside down on their current mortgage, unable or unwilling to continue paying on their mortgage. As this problem continues to grow the retail banks, like Washington Mutual or Bank of America find themselves dangerously close to failure and unable or unwilling to extend new loans to consumers.

You can see how this quickly spirals out of control.

Gillean Smith: On the other side of the coin, when it comes to buying or selling homes or property, how should one go about finding a qualified realtor?

Allan Glass: Track record, comfort, and trust. Not necessarily in that order.

In today’s market it’s especially important to align yourself with someone who has a record of success in distressed or challenging markets. You should also feel comfortable sharing sometimes uncomfortable financial situations with this person. Trust should be there in this buyer/seller and realtor relationship every step of the way. However, I’ve learned that a person in distress will sometimes believe anything in order to end the stressful situation.

Unfortunately, there are people out there who prey on that, and make their living exploiting those situations. Check references, seek referrals, and do your homework before making your choice. If something sounds too good to be true it probably is.

Gillean Smith: When considering investing in real estate, what are the tell tale signs that this is a good investment and what signs should give you cause to run the other way?

Allan Glass: Answer the question, “Is it a good deal today?”

Most all real estate deals tend to have a best case and worst case scenario. The investor bringing the deal to the table will typically know all the details about the best case scenario; on the other hand the lender or equity partner he is seeking will look diligently into what the worst case scenario may be.

Unlike the early part of the decade when everyone seemed to think prices just continued on an upward trajectory, lenders and equity today are more pragmatic. If a deal does not “pencil” today in a worst case scenario, the deal in unlikely to be done.

Of course, if you’re working with your own capital, you may not have that same problem. Then again, I think the saying goes, “A fool and his money are soon parted.”

(For Part One of this interview, click here.)


To contact Allan Glass and ask him a specific question or to visit his website for more research information, click:

ASG Real Estate Inc.

Industry-related articles provided by Allan Glass