Housing Bubble Bursting

Kipperhell wrote:

5 months on from this thread being started makes me wonder if all the doom and gloom being spoke about has come true. As far as I can see the answer is simply no!
Nothing that could be called an actual slump in the market has happened. Prices have gone down but that is not a slump. I personally believe the stamp duty issue being resolved shortly will have a big effect and I doubt that it will cause prices to drop when it done.
How long now before there will be a 40-50% drop from 12-06?

Slicknik wrote:

Well according to this article in RTE the house prices in Dublin increased by 0.1%. Not much but it indicates that there's still a strong demand for houses in certain areas.

http://www.rte.ie/business/2007/0530/houses.html?rss

Do-more wrote:

Hope you put the house on it Blackiguana!

One gaff around the corner from me has been on the market for about 6 or 7 months now.

It's in a really nice estate with a new hotel and leisure centre on the doorstep. Started at €475,000 or €485,000 then went to excess €450,000 now it's "Property of the week" for about the third time in the local rag quoting €430,000.

No sign of anything moving at the moment and the situation is unlikely to change especially with interest rates rises coming down the road...

dochasach wrote:

...
Here is what happens. You try to sell your house for 10% more than what you paid and back in 2001-2006. A couple years back you might have easily got 20% more back when demand far exceeded supply. But some of that demand was speculative and some of that demand was based on fear of rising prices and some of that demand was caused by historically low interest rates. Now look at daftwatch.atspace.com or the 80,000 houses built this year or the 250,000 houses sitting empty or the rows of for sale signs in your neighborhood and tell me that a house is a rare find.

If you care not to call it a slump or crash thats fine, but unless you've priced below the other houses your neighborhood, don't expect to sell it immediately. So you drop it to 10% above market, then you drop it to "break-even" price. (If you pretend that no inflation happened since you bought it and ignore mortgage interest, the house still seems to have been a good investment.) And now you are only competing with all of the other houses in your neighborhood who are priced at market.

"Fine", you might say, "I can wait." And so you do, as do many others in your neighborhood, convinced that infinite continuance of this easy-money boom is just around the corner. But something happens, someone loses his/her job, can't make rising ARM payments, gets divorced, dies or meets another emergency that forces them to sell their house, so they price their house below market.. And it doesn't sell, or maybe it does but either way potential buyers are no longer in a panic to buy, so they wait and sooner or later another house becomes available below market (daftwatch is up over 40,000 homes now), this time its a builder who can easily cut his profit margin and who has the "no stamp duty" advantage brought to him by our developer-owned government. The builder also throws in a car, so it's a no-brainer for that buyer. You wait a while, sure those two houses went below market, but not yours by God. But then someone else decides to sell up and move to Luszanne, Switzerland where property is less expensive. They find a buyer in just a few days but with high interest rates and tighter lending standards, the buyer doesn't qualify. Another potential buyers says "screw it" and moves to Australia, a 3rd moves back to Poland because his construction company laid him off. A few weeks later another buyer comes along and your neighbor settles for 20% below what you paid. They're in a hurry and they bought in 1995 so they can take the hit. Your house remains on the market, the screws in the for sale sign are getting a bit rusty but eventually it will sell. And so it goes... This is why the property slump in Tokyo lasted more than 15 years (so far), and why a slump isn't something that will appear in your daily weather report.

Slicknik wrote:

Maybe that's because most people buy houses to live in and not as investments. Inflaiton will generally make the mortgage easier to pay (as salaries tend to increase as well).

Afuera wrote:

Spain also has about 20% of its GDP coming from construction too. This is probably just as unsustainable as our own economy though so I can imagine a huge bust there as well in the near future.

Iristxo wrote:

I am in a highly desirable area of Dublin south with 3 bed semis scoring between 550K and 650K depending on proximity to the shopping centre, better stablished areas, etc.

My state is not the most desirable but certainly not the least. This time last year:

- 3-bed semis were scoring bout 595K. At any given time there was one for sale tops, sometimes none. Properties never stayed in the market more than 2 months or so. You would have expected to pay between 725K and 800K for a four-bed in my state. All of these were asking prices and all sellers would have expected to get more than this.
- The situation a year later: In my state, where there was one or no 3-beds for sale now there is 4 (state has about 400 houses). Asking prices are between 565 and 595 (reckon they would have to sell for less than 565 if they really wanted to sell). There is one stubborn seller that has had his house for sale stubbornly at 595. It has been on the market for nearly 7 months now.
- 4-beds are now between 695K and 725K. There was one recetly (one of the worst ones, quite small) with an asking price of 600K. That’s 5k more than the 3-beds’ asking price the year before! This particular 4-bed for 600K flew off the market in just a few weeks.
- On the other hand, there was one particular case of a very big detached 5-bed that was put on the market last year for 1.1M. It took 8 months to sell it and price went down twice. In the end, the owners had to get over 20% less than they would have gotten had they sold at the peak of the property bubble. They “lost” over a quarter of a million. The new owners have not moved in yet. They’re my neighbours, that’s how I know all this.
- Similar states but less-desirable, had last year 3-beds scoring between 550 and 560K, depending on the particular property. Now they range between 495K and 535K.
- Have been monitoring the property market for a while now. If you were looking for a 3-bed house or more in my area last year you were getting around 20 results back in myhome.ie. For the last few months this has been increasing slowly. When I started monitoring this thread there was a bit over 30. A few weeks before the election there was more than 40. Now there’s more than 50 (54 to be exact).
- There’s about 3500 houses in this whole area (small). I know this for fact cos I was sent the figures when doing a leaflet distribution for my business. At the moment, there are 4 housing states under construction, one of them with planning permission for 1000 houses (nearly all of them built already) and another one (don’t know if they have started it yet) for a whooping 5000 houses. This two states will both belong to my area and will have, between them, nearly double the amount of houses there is in the area at the moment.

Of course all of this is anecdotal evidence and I won’t provide links.

Note: excuse the typos, it's late at night and all that