A private Realtor, a restaurant owner and a market owner (former state farm branch owner as well); these are things that describe the professional affairs of Gopal Sood, an experienced worker to say the least. Though I originally planned to investigate on the economic status of his very delicious 23rd Street Café, upon discovering that Gopal was also a Realtor I was urged to interview Gopal the Realtor. Considering how the housing market has diminished so much since 2007 the opportunity to know more about the real estate industry was a chance I could not miss.
Let’s go back before 2007 before the crash of the housing market. At this time I always heard from friends and relatives talking about how great it must be to work as a Realtor. One of friends’ mothers even told me at elementary school how great it was being a Realtor during a career day event. I believed her when I saw her rolling out of the school parking lot in a convertible Jaguar. It was also likely at this time Gopal felt the same. I asked him how his business was at this time.
“You wouldn’t even believe it now; I was closing 10 to 15 houses … a month.”
Considering how little I knew about the business, I figured that was a lot.
I asked him how it was now.
“Maybe one or two”
The housing market essentially crashed in 2008 and combining the edges of my memory I remembered how frequently the term housing market came about within conversations about the recession. So I asked the next question off my list: What economic data do you think impacts your business the most? He said the economy itself is the data that gives him the most information. Not really sure what that meant, I asked instead: What happened?
He explained that because the banks are unwilling to give out loans it is harder for people to buy homes and since current homes prices are so low people are unwilling to put their homes in the market as well. This leads to less, almost none, real estate inventory making it very difficult for the real estate industry.
Still a bit confused I looked up information on the housing market trend in the local area. In all of Los Angeles, between 2007 and 2009, the recession led the house market price to drop almost 25%. It is only since the beginning of 2012 that the prices of homes are slowly beginning to increase. Currently the average price of homes has recovered about 40% of the amount it lost from the recession. So, even though prices of homes are cheap, it is difficult to buy a home because loans are not being given by the bank.
It was at this time I remembered from my Economics class how the recession occurred when banks met a higher than expected rate of foreclosures after eagerly giving out loans to people who were unable to pay the mortgage. So essentially, because of the recession banks are unwilling to give loans to home buyers.
He adds, “Unless you have a job that is what’s called recession proof. Even I, an owner of several businesses would not be able to get a loan for a house.”
That may be why he does not do any marketing whatsoever. All he has is his card and word of mouth (which is the same for his restaurant).
Curious to know more about the condition of his real estate business, Gold Star Realty, I asked him more on the current affairs of his business. What he told me was surprising.
The majority of his clients are attorneys. He enlightened me that because the yield on interest rates for savings accounts dropped so low, people have grouped together to collectively buy a house with the purpose of gaining a higher yield in their investments. It’s no wonder why as soon as a house becomes available, it is almost instantly bought.
But like I questioned earlier, how can it be possible that the housing market is bad if home prices and loan interest rates are so low? Banks are unwilling to give loans to people who do not have recession proof jobs; so, it would be likely that it is the practitioner professionals who the only ones making these investments. But, this is untrue.
The number of individuals and families that enter this collective contract allows middle-class earning investors to afford the purchase of properties in places such as Beverly Hills.
“The last house I sold was in Beverly Hills and it sold for $1.3 million. I met with the attorney and he brought it all — in cash.”
The obvious assumption is that the middle class people have continued their real estate investments by collectively purchasing a house with on-hand cash, since they are unable to get a loan from banks.
“What many will do is buy a house, and then flip it so they can sell it for a higher price. That’s what I do”
Gopal truly is a man of experience. His real estate company is housed in a small suite in San Fernando Valley and uses it only during the rare moments he is with a client. He pays zero dollars for marketing and relies purely on the word of mouth. Nonetheless, this strategy was able to benefit him very well before the crash of the housing market. Luckily the crash of the housing market did not put his business in debt due to his realty business being self-run. Today his realty business survives through the rare occasions he is able to come across an open house as well as through his other businesses.
“People say to me all the time after seeing my car that my business must be doing great. But that’s not true. I got that car back when I was selling all those homes”