Housing Bubble Bursting

nesf

tHE vAGGABOND wrote:

I just dont understand giving a mortgage to someone who does not qualify for a loan from a conventional bank. But what we will go is give them one at a higher interest rate and worse conditions, that will make it all better?

That's pretty much the principle behind the entire high-yield bond market.

SkepticOne

Gurgle wrote:

Despite years of this housing bubble, there are still no signs of a reduction in property values.

What about the PermanentTSB/ESRI figures indicating falls in prices?

SimpleSam06

Gurgle wrote:

Despite years of this economic bubble, the celtic tiger is still alive and people are still paying their mortgages.

That people are still paying their mortgages doesn't neccessarily mean the economy is doing well.

Gurgle wrote:

Despite years of this housing bubble, there are still no signs of a reduction in property values.

What?

robd

Gurgle wrote:

Enormous profits?

Its simple, they can't lose what they don't have.

In order for a lender to lose money on an investment secured on property, the borrower stops making the repayments & the property has to actually fall in value.

Despite years of this economic bubble, the celtic tiger is still alive and people are still paying their mortgages.

Despite years of this housing bubble, there are still no signs of a reduction in property values.

The sub-prime lenders are in the best position: limited companies, where the directors/shareholders have been taking great dividends for the last couple of decades. Profits are calculated on a year by year basis, so the value at the end of any given year allows the company to declare profits based on a risk factor based on the property value. If the property has risen in value they can calculate feck-all risk and pay dividends accordingly.

The company owns the debts secured by the properties. If the economic bubble bursts, followed by the housing bubble, the limited company finds itself in the position of bankruptcy and sinks like a rock. The directors/shareholders put their hands up and say 'oh well, **** happens' and retire. The money they have made already is not part of the limited company's assets.

Net result: Inflation. You, me and the guy next door absorb the losses.

This is a very incorrect analysis. House prices are reducing in value. All you have to do is look at the PRTB/ESRI reports, Thursday article in the IT or www.irishpropertywatch.com

Indeed sub prime lenders did seems like they can't lose. This is not because they are a limited company though, it is because they were able to sell the debt on at a much lower margin through securitisation to various investors such as hedge funds. Their profits were based on the margin (diff between what they charged customer and what they sold debt on at). They did not carry the risk of the load. Recent events would suggest that this is no longer the case. There are loads and loads of articles about the whole sub prime problem. Basically a number of big lenders have gone out of business, a number of hedge funds have been shut down, and sub prime lenders have had to up their margin by 0.5 - 1 %. What will happen in the future is very uncertain.

It is likely that ECB rates have another at least another 0.5% to go over the next year. Euribor and Libor are getting more expensive due to the sub prime fall out and the problem that no-one really knows which loans are sub prime and dodgy and which are not. Thus customer mortgage rates are likely to go up to. I'd expect them to be circa 1% higher than today. That would be approx 6%. I'd expect the sweet discounted deals to end also.

In general people cannot afford the current asking prices of houses. Money is simply too expensive and getting more expensive to borrow. September and October are key months for Irish property. What happens over the next too months is likely to influence the direction of property over the next 2 years.

miju

Gurgle wrote:

Despite years of this housing bubble, there are still no signs of a reduction in property values.

Your either:

A: trolling
B: have your head buried in the sand
C: have not been paying attention to recent reports

Given you've been involved in this thread for quite a while I'm guessing A :rolleyes:

DublinDilbert

I've been pondering this one for the last few days...

In a strong market when prices are rising, if you went into an EA's office with a bag of cash saying "here's the asking price i want to buy that house" you were told, "that's just the asking price, it will go for much more than that".... And houses were selling well in excess of the asking prices in some cases...

In a weak market when prices are falling, houses are selling for less than the asking price in many cases, even though most of the asking prices have already dropped a few times...


Basically what i'm trying to say is, that if a survey by some bank says that asking prices have dropped by 10%, from the hight of the boom, the actual prices that people are paying for houses has probably dropped by 15 or 20%... would people agree/disagree?

digitally-yours

DublinDilbert wrote:

I've been pondering this one for the last few days...

In a strong market when prices are rising, if you went into an EA's office with a bag of cash saying "here's the asking price i want to buy that house" you were told, "that's just the asking price, it will go for much more than that".... And houses were selling well in excess of the asking prices in some cases...

In a weak market when prices are falling, houses are selling for less than the asking price in many cases, even though most of the asking prices have already dropped a few times...


Basically what i'm trying to say is, that if a survey by some bank says that asking prices have dropped by 10%, from the hight of the boom, the actual prices that people are paying for houses has probably dropped by 15 or 20%... would people agree/disagree?

I would say its a fair comment

The prices have dropped and some people who are working in this property industry are trying to keep these drops secret so it dosent get widespread

But i think its widely known that the trajectory is downward.
Atleat for the moment and in shortterm

Glenbhoy

Herald front page outlines a development in Delgany Co. Wicklow where a number of purchasers had paid 700K for 3 bedroom properties and received the keys 2 weeks ago, however as of yesterday the developers reduced the prices of the remaining (and seemingly identical - although it was in The Herald, so must be taken with a grain of salt) 3 bedroom units to 590K - (only 8 had been sold at the original price).
2 Bedroom units in the same develpment were reduced from approx 550K to 480K.
The developer couldn't be contacted, but Sherry Fitz who were handling the sales have stated that the reduction is due to prevailing market conditions.
I don't have the actual story to hand, but figures above are reasonably accurate.

nesf

SimpleSam06 wrote:

What?

He could be trying to say there's no substantial crash yet?

patrickolee

DublinDilbert wrote:

Basically what i'm trying to say is, that if a survey by some bank says that asking prices have dropped by 10%, from the hight of the boom, the actual prices that people are paying for houses has probably dropped by 15 or 20%... would people agree/disagree?

I'd say that's about right too. You might even get lucky and hit a nervous seller, from whom you could get an even bigger discount. Now would be a v good time to buy, if you had the money.

JackieChan

Links to front page
http://i181.photobucket.com/albums/x283/gurra2011/DSC00043.jpg
and inside page
http://i181.photobucket.com/albums/x283/gurra2011/DSC00042.jpg
from Evening Herald

expediateclimb

"Links to front page
http://i181.photobucket.com/albums/x...1/DSC00043.jpg
and inside page
http://i181.photobucket.com/albums/x...1/DSC00042.jpg
from Evening Herald"

It's about f***king time. I've been waiting for this crash to finally happen.
Looks like all you greedy pricks out there who were trying to get as much for their property as they could will be learning an important lesson in the nxt few months

And before anyone asks I am a homeowner for the past five years and would be perfectly happy to sell my house tomorrow for what I paid for it.

Glenbhoy

expediateclimb wrote:

And before anyone asks I am a homeowner for the past five years and would be perfectly happy to sell my house tomorrow for what I paid for it.

Would it not have made more sense to have sold it 6 months ago? Do people not understand the implications of a crash in irish property prices - it's not going to be good for anyone, maybe next election people might seek retribution from the instigators of the crash.

iguana

expediateclimb wrote:

It's about f***king time. I've been waiting for this crash to finally happen.
Looks like all you greedy pricks out there who were trying to get as much for their property as they could will be learning an important lesson in the nxt few months

Yes, but unfortunately 100's/1000's of people who bought "starter" homes in the last few years will find themselves screwed too. Long-term this crash will be of benefit to the country, but it isn't just the greedy who will be hurt by it right now.

BobbyD10

To avoid a situation as described in the Herald, the best thing to do is to have the house valued as close to the point as you sign for the house, this may help/reduce the chance of negative equity.

You may/will lose your deposit if you pull out but that's better than having a house that is thousands cheaper than you bought it.

We are coming into the autumn season so should be interesting to see how the market goes.

BendiBus

patrickolee wrote:

Now would be a v good time to buy, if you had the money.

Later might be an even better time given the current direction of property prices.

Gurgle

JackieChan wrote:

Links to front page
http://i181.photobucket.com/albums/x283/gurra2011/DSC00043.jpg
and inside page
http://i181.photobucket.com/albums/x283/gurra2011/DSC00042.jpg
from Evening Herald

The only people this affects are the gobshìtes who 'invested' off the plans, expecting to sell at a profit the day after they got the keys. They fully and completely deserved to lose their money/get stuck with a lemon.

The people who bought a house there as their home for the next couple of decades are completely unaffected by this so-called valuation.

If you paid €700,000 for a home, then presumably its worth €700,000 to you. Why would you care if some twat goes around valuing your neighbour's houses at €600,000?

btw, where the fùck is Delgany, and why is a 3-bed semi there worth twice the national average?

jdivision

Glenbhoy wrote:

Would it not have made more sense to have sold it 6 months ago? Do people not understand the implications of a crash in irish property prices - it's not going to be good for anyone, maybe next election people might seek retribution from the instigators of the crash.

How do you vote against the German economy?

DublinDilbert

Gurgle wrote:

If you paid €700,000 for a home, then presumably its worth €700,000 to you. Why would you care if some twat goes around valuing your neighbour's houses at €600,000?

Cause you get made redundant and have to move to Galway to get another job in your field, hence you have to sell up and move....

iguana

Gurgle wrote:

If you paid €700,000 for a home, then presumably its worth €700,000 to you. Why would you care if some twat goes around valuing your neighbour's houses at €600,000?

Because you would be paying over €500 a month extra on my house. That's a total of over €210k over a 35 year term. I don't think there are too many people that would just shrug off a loss of €500 every month. Hell I lost €500 out of my pocket back in 2003 (I was going on holiday) and it still upsets me.

Not that I think those who bought off the plans would be complaining if the estate had gone up in value by €100k and it was the newer purchasers paying the extra €500pm.

Gurgle wrote:

btw, where the fùck is Delgany, and why is a 3-bed semi there worth twice the national average?

It's near Greystones.
This is it's myhome page. The developer originally charged so much for what seems to me to be a pretty small house 26km from Dublin because The atmosphere is relaxed and welcoming, making Delgany the ideal place to settle quickly, make friends and enjoy everything the area has to offer. Here you can both relax and live to the full.

Gurgle

miju wrote:

Gurgle wrote:

Despite years of this housing bubble, there are still no signs of a reduction in property values.

Your either:

A: trolling
B: have your head buried in the sand
C: have not been paying attention to recent reports

Given you've been involved in this thread for quite a while I'm guessing A :rolleyes:

Yes, the first 6 months of 2007 showed a drop of 2.6%, bringing the annual change from June '06 to June '07 to a rise of only 0.9%. Looks to me like prices are levelling off, but that would hardly make an eye-catching headline. Overshoot is expected when they're levelling off, I've guessed many times in this thread and the others on the subject that the overshoot could be as high as 10% to 15%.

But of course we're not looking at annual figures unless they support our positions.

Tell you what, I'll agree its a bursting bubble when the Permanent TSB report shows a drop of 15%+ in national average house prices over a year. I'll even admit I was wrong and you were right all along. Thats not unreasonable is it?

Now, I've put a figure on it (again), why don't you go ahead and do the same. Under what circumstances would you ever admit you were wrong?

Iguana wrote:

The atmosphere is relaxed and welcoming, making Delgany the ideal place to settle quickly, make friends and enjoy everything the area has to offer. Here you can both relax and live to the full.

lol, priceless!
1044 square foot 3-bed semi 26km from Dublin. That almost perfectly describes my house which is allegedly worth around €300k
Some people will buy anything. Sounds like an ideal place to go door to door selling life insurance.

Sarsfield

Gurgle wrote:

bringing the annual change from June '06 to June '07 to a rise of only 0.9%.

Does that 0.9% rise account for inflation?

Or are we looking at yoy fall of 4% in real terms?

DonJose

Gurgle wrote:

The people who bought a house there as their home for the next couple of decades are completely unaffected by this so-called valuation.

If you paid €700,000 for a home, then presumably its worth €700,000 to you. Why would you care if some twat goes around valuing your neighbour's houses at €600,000?

Of course they are affected, they paid €105k more than those in phase 2, If you took out a standard variable rate mortgage with PerTSB for €700k minus 8% deposit your monthly payments are €3,596.18.

If you took out a standard variable rate mortgage with PerTSB for €595k minus 8%deposit your monthly payments are €3,056.75.

The people who bought at €595,000 would pay €47,600 (8% deposit) + €3,056.75 x 360 months = Total payment including interest €1,148,030.

The people who bought at €700,000 would pay €56,000 (8% deposit) + €3,596.18 x 360 months = Total payment including interest €1,350,624.

So at the end of 30 years they have paid (roughly) €202,594 more for the same house.

DonJose

iguana wrote:

Because you would be paying over €500 a month extra on my house. That's a total of over €210k over a 35 year term. I don't think there are too many people that would just shrug off a loss of €500 every month. Hell I lost €500 out of my pocket back in 2003 (I was going on holiday) and it still upsets me.

Writes note to self to real the full thread before replying

DonJose

Cached : €690k

Current price : €610k

patrickolee

DonJose wrote:

Of course they are affected, they paid €105k more than those in phase 2, If you took out a standard variable rate mortgage with PerTSB for €700k minus 8% deposit your monthly payments are €3,596.18.

If you took out a standard variable rate mortgage with PerTSB for €595k minus 8%deposit your monthly payments are €3,056.75.

The people who bought at €595,000 would pay €47,600 (8% deposit) + €3,056.75 x 360 months = Total payment including interest €1,148,030.

The people who bought at €700,000 would pay €56,000 (8% deposit) + €3,596.18 x 360 months = Total payment including interest €1,350,624.

So at the end of 30 years they have paid (roughly) €202,594 more for the same house.

Yes, but I doubt any of them borrowed 700K, or anywhere near it. They would have been trader upers and probably just lost money that they previously gained. I'd say it still hurts though

Pa ElGrande

Gurgle wrote:

Yes, the first 6 months of 2007 showed a drop of 2.6%, bringing the annual change from June '06 to June '07 to a rise of only 0.9%. Looks to me like prices are levelling off, but that would hardly make an eye-catching headline. Overshoot is expected when they're levelling off, I've guessed many times in this thread and the others on the subject that the overshoot could be as high as 10% to 15%.

But of course we're not looking at annual figures unless they support our positions.

Tell you what, I'll agree its a bursting bubble when the Permanent TSB report shows a drop of 15%+ in national average house prices over a year. I'll even admit I was wrong and you were right all along. Thats not unreasonable is it?

Just be aware of the PTSB/ESRI index methodology before you base any decisions on that, see Shane Ross article from the 'Sindo' a few weeks back.
Tucked away at the end of their reports the PTSB do admit that their figures may not be accurate.

Hail the house-price slump July 24, 2007

Last week I was staggered. I had always blindly believed that the Permanent TSB/ESRI index traced a well researched pattern of movements in house prices. It does nothing of the sort, It is a virtual index, a ragbag of flawed guesses. This supposedly definative house-price index, does not include a single house transaction!
It is a mix of valuations, not prices. It is the industry insiders' estimates of the value, never the price, of various houses. The numbers inserted into the index are set long before the sale of a house. The gurus guess.
The valuations are done by agents of the Permanent TSB, on houses valued exclusively for mortgages. All prices are predictions. They are pre-sale or pre-auction. No doubt, in the case of the Permanent TSB, the valuers are sympathetic to a high valuation. That way, the Permanent TSB lends more money. What an industry.

Dublin V Rest of Country

The methodology used to calculate the permanent tsb standardised indices is applied separately to
a) the samples of houses in Dublin and outside Dublin,
b) the samples of New and Existing Houses,
c) the samples of first-time and second-time buyers and
d) the combined sample of ALL Houses.
It is therefore possible for the percentage change for ALL Houses to be greater or less than the percentage change for the sub-categories.

DonJose

DonJose wrote:

So at the end of 30 years they have paid (roughly) €202,594 more for the same house.

I doubt very much those valuations will stand still over 30 years, and presuming all of these people have 30-year mortgages!

Tom123

Deleted User wrote:

I doubt very much those valuations will stand still over 30 years, and presuming all of these people have 30-year mortgages!

It doesn't matter whether the valuations stand.

The people have paid €70,000 -€100,000 more than their house are now worth. This money will have to repaid over 20-35 years so it is going to cost them anything between €120,000 and €200,000.

Even assuming that most of these people are on €100,000pa they have just given away 2-3 of after tax income to the developer that they could have kept for themselves!

Colonel Sanders

Gurgle wrote:

Yes, the first 6 months of 2007 showed a drop of 2.6%, bringing the annual change from June '06 to June '07 to a rise of only 0.9%.

also doesn't take into account all the 'extras' that developers are throwing in with new house developments. I have seen figures of 50k worth of extras and even in wexford a developers is offering a 20k car with a new house (have been informed he'll also do a bit more work on your house (eg build a garage and gargen shed) too if you ask nicely).