Housing Bubble Bursting

latenia

There's a massive tell in the shape of today's property supplement in the Irish Times. At this time of year, in what is supposedly the beginning of the peak Spring selling period, there is not one full page ad from any of the large agencies-in fact there's very few ads for any houses at all. In previous years there would be a double supplement with the likes of Sherry Fitz, HOK etc taking several pages each as well as the Felicity Foxes and Daphne Kayes taking at least half-pages.

Today's supplement is 12 pages consisting mainly of features and filler.

Hopefully their fawning partisan coverage of the property bubble will now come back to bite them on the ass in the form of cut-backs and lay-offs now that this particular cash cow is gone.

gurramok

We maybe in recession.

CSO data out for Q4 '07 shows seasonally adjusted GDP at -0.8% GDP and -2.2% GNP from Q3.
http://www.breakingnews.ie/business/mhojmhsncwql/

This housing bubble bursting is having a huge affect.

indiewindy

latenia wrote: »

There's a massive tell in the shape of today's property supplement in the Irish Times. At this time of year, in what is supposedly the beginning of the peak Spring selling period, there is not one full page ad from any of the large agencies-in fact there's very few ads for any houses at all. In previous years there would be a double supplement with the likes of Sherry Fitz, HOK etc taking several pages each as well as the Felicity Foxes and Daphne Kayes taking at least half-pages.

Today's supplement is 12 pages consisting mainly of features and filler.

Hopefully their fawning partisan coverage of the property bubble will now come back to bite them on the ass in the form of cut-backs and lay-offs now that this particular cash cow is gone.

Don't forget that they bought myhome.ie at the top of the market:o

is_that_so

Seeing as the US has been cited as a good example of what will/could/might happen here what is to be made of this?

U.S. Economy: Existing-Home Sales Rise, Prices Fall (Update1)

By Courtney Schlisserman

March 24 (Bloomberg) -- Sales of existing homes in the U.S. unexpectedly rose in February as prices fell by the most in four decades.

Purchases increased 2.9 percent, the first gain in seven months, to an annual rate of 5.03 million, the National Association of Realtors said today in Washington. The median home value dropped 8.2 percent from a year earlier, the most since the organization began keeping records in 1968.

``It looks like this may be a temporary pause,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts. ``The price declines have helped.''

Housing, now in the third year of its worst recession in a generation, is unlikely to rebound quickly as a glut on the market depresses property values and lenders toughen mortgage requirements to stem credit losses. The Federal Reserve last week said the outlook had worsened and pledged to do whatever was needed to revive economic growth.

``I would not read too deeply into a single month's data'' Lawrence Yun, the real-estate lobby group's chief economist, told reporters today. Yun projected sales would improve in the second half of the year as lower prices and cheaper mortgage rates make houses more affordable.

The Standard & Poor's 500 homebuilder index rose 8.8 percent to 448.6 at 11:22 a.m. in New York.
...

Full story here.

SkepticOne

is_that_so wrote: »

Seeing as the US has been cited as a good example of what will/could/might happen here what is to be made of this?

Full story here.

I would expect sales volumes to pick up here too once sellers get more realistic about prices. So far in Ireland, the slowdown/crash has manifested itself as huge build up inventory rather than substantial lowering of prices. This is obviously an unstable situation. It means the real price falls are yet to come and could still be some way off.

The_Conductor

Back ontopic guys.
Any off-topic posting, personal abuse, trolling or baiting will result in bans.

S.

johnnyskeleton

smccarrick wrote: »

Back ontopic guys.
Any off-topic posting, personal abuse, trolling or baiting will result in bans.

S.

Eh? Is that a thinly veiled bump?

gurramok

johnnyskeleton wrote: »

Eh? Is that a thinly veiled bump?

Nah, there were abusive posts that were deleted by a mod.

SkepticOne wrote:

I would expect sales volumes to pick up here too once sellers get more realistic about prices. So far in Ireland, the slowdown/crash has manifested itself as huge build up inventory rather than substantial lowering of prices. This is obviously an unstable situation. It means the real price falls are yet to come and could still be some way off.

I don't think its sunk in yet to a large section of the property owning/selling populace yet how overvalued their property is. There are some out there who still think a 1bed going for 300k in dodgy parts of the city centre is a 'good reasonable' price and if it fell in price recently to this level 'its bargain territory'.

From speaking with a few clueless colleagues, the sentiment seems to be that 'when interest rates fall this year, buyers will come back en masse'

Not IF rates fall but When, remember there are those out there still following the herd mentality of what the VI's spout over the airwaves.
They still believe rates are high which is rubbish, they believe cutting in new supply will cause drastic housing supply issues which is rubbish and they fail to recognise that the German economy is very resilient(as found by data released recently) and what happens there is more important than what happens here.
Also the PPS numbers issued to immigrants has halved this year in compared to last year, an ominous sign for the BTL brigade.

jmayo

gurramok wrote: »

Nah, there were abusive posts that were deleted by a mod.

I don't think its sunk in yet to a large section of the property owning/selling populace yet how overvalued their property is. There are some out there who still think a 1bed going for 300k in dodgy parts of the city centre is a 'good reasonable' price and if it fell in price recently to this level 'its bargain territory'.

From speaking with a few clueless colleagues, the sentiment seems to be that 'when interest rates fall this year, buyers will come back en masse'

Not IF rates fall but When, remember there are those out there still following the herd mentality of what the VI's spout over the airwaves.
They still believe rates are high which is rubbish, they believe cutting in new supply will cause drastic housing supply issues which is rubbish and they fail to recognise that the German economy is very resilient(as found by data released recently) and what happens there is more important than what happens here.
Also the PPS numbers issued to immigrants has halved this year in compared to last year, an ominous sign for the BTL brigade.

Even weirder is you find people chasing planning for mini developments, e.g 3 townhouses, 5 apartments, or two houses in the garden etc.
Why invest at the moment in a development that you could be left with a year down the road ?
I know people will say the stock market is not safe to invest in either, but how wise is it to take out a loan or extended mortgage to build something that might be almost unsellable, unless it is in a very desirable area.

Do these people believe that demand is suddenly going to increase and the current oversupply is going to vanish ?

IMHO as mentioned earlier the worse has not hit. There are people hanging on, living in cuckoo land trying to achieve prices that were the norm a year or two ago, but sooner or later they will either have to offload or else stay put.
There are surely developers beginning to hurt and they will have to offload at whatever price they can get.
Add to this the continued loss of real jobs (not the ones working in this mythical service industry) in the economy, the drop in numbers of new immigrants and the return home of existing immigrants, which should result in a decrease in the numbers seeking accomodation.
Where does that leave the buy to lets sector where some investors have saddled themselves with big mortgages (often interest only), based on renting their property for high rents ?

It would also be interesting to know the number of "sale agreeds" that have fallen through.

mathie

jmayo wrote: »

Even weirder is you find people chasing planning for mini developments, e.g 3 townhouses, 5 apartments, or two houses in the garden etc.
Why invest at the moment in a development that you could be left with a year down the road ?
I know people will say the stock market is not safe to invest in either, but how wise is it to take out a loan or extended mortgage to build something that might be almost unsellable, unless it is in a very desirable area.

Do these people believe that demand is suddenly going to increase and the current oversupply is going to vanish ?

IMHO as mentioned earlier the worse has not hit. There are people hanging on, living in cuckoo land trying to achieve prices that were the norm a year or two ago, but sooner or later they will either have to offload or else stay put.
There are surely developers beginning to hurt and they will have to offload at whatever price they can get.
Add to this the continued loss of real jobs (not the ones working in this mythical service industry) in the economy, the drop in numbers of new immigrants and the return home of existing immigrants, which should result in a decrease in the numbers seeking accomodation.
Where does that leave the buy to lets sector where some investors have saddled themselves with big mortgages (often interest only), based on renting their property for high rents ?

It would also be interesting to know the number of "sale agreeds" that have fallen through.

I don't want to play devils advocate but I feel I have to

What if sellers don't start to lower prices?

A friend of mine just bought a house - against my opinion (I wouldn't advise anyone in this topic) - and they got it at roughly 8% below asking which they thought was a great deal. :rolleyes:

miju

eh forgive if im wrong but if your friend got it at 8% below asking does that not imply that sellers are lowering prices?

Tom123

mathie wrote: »

I don't want to play devils advocate but I feel I have to

What if sellers don't start to lower prices?

A friend of mine just bought a house - against my opinion (I wouldn't advise anyone in this topic) - and they got it at roughly 8% below asking which they thought was a great deal. :rolleyes:

Eventually sellers will have to drop the prices.

There are so many properties for sale that buyers will only purchase from the people who DO reduce the price.

Gurgle

Tom123 wrote: »

Eventually sellers will have to drop the prices.

There are so many properties for sale that buyers will only purchase from the people who DO reduce the price.

Assuming, as always, that sellers have to sell more than buyers have to buy.

Afuera

Gurgle wrote: »

Assuming, as always, that sellers have to sell more than buyers have to buy.

Its a pretty good assumption though. Especially when you consider the large amount of newly built properties that are lying vacant and how much the property developers collectively owe the banks.

Unless the banks give the developers indefinate payment holidays or the developers themselves are happy to keep paying large sums of interest until the pre-crash prices are reached, there is no way around it.

Note also that there only needs to be some sellers doing this to reprice everything in the market. Prices, after all, are set on the margins.

smooth operater

miju wrote: »

eh forgive if im wrong but if your friend got it at 8% below asking does that not imply that sellers are lowering prices?

when buying a house, the norm is to throw in an offer nothing new there, but maybe sellers are letting them go alot easier now than when they had the choice of holding out and waiting for a better offer.

SkepticOne

Gurgle wrote: »

Assuming, as always, that sellers have to sell more than buyers have to buy.

Sadly for sellers at the moment, not an assumption but a fact.

With extraordinarily high and still rising inventory and still overpriced properties and falling prices, the balance of the pressure will be on the sellers not the buyers.

Capitulation might still be a way off though.

jmayo

mathie wrote: »

I don't want to play devils advocate but I feel I have to

What if sellers don't start to lower prices?

A friend of mine just bought a house - against my opinion (I wouldn't advise anyone in this topic) - and they got it at roughly 8% below asking which they thought was a great deal. :rolleyes:

Sellers will eventually have to cut prices if they need to sell, because they can no longer afford to keep the proprty due to either not self financing or they are out of a job.

Hundreds of others will be trying to do the same and they will also be competing with developers who have just built huge apartment complex that carry huge loans from banks.
Sellers will have no choice but to drop prices.
It is either that or continue to get into a bigger hole.

Just like with Eircom shares, the smart investors have long left and gone elsewhere where there are better returns for a considerably less capital outlay.

But then again house prices never drop in Ireland, so we may buck the world wide trend of bubble and burst :rolleyes:
BTW your friend should have held out for bigger drop in price or else found out when they were signing for upgrade property and then pulled the plug on the deal unless got good discount.

iguana

smooth operater wrote: »

when buying a house, the norm is to throw in an offer nothing new there, but maybe sellers are letting them go alot easier now than when they had the choice of holding out and waiting for a better offer.

That has not been the norm in Ireland for quite a long time. Up to two years ago it was normal for houses to go for 10-50% above asking price. It's only in the last 6 months or so that most sellers are accepting that this is no longer how it works.

iguana

jmayo wrote: »

Even weirder is you find people chasing planning for mini developments, e.g 3 townhouses, 5 apartments, or two houses in the garden etc.
Why invest at the moment in a development that you could be left with a year down the road ?

There is still an awful lot of houses with large corner/side gardens being sold as "large garden with development potential." I'd imagine that at least 30% of the asking price is down to the "development potential" and these properties may have the furthest to fall.

faceman

I was told of a case recently where a "friend of a friend" was selling their house at it was valued at 400k However the EA said they would price it for sale at 410k so that if they sold if at 400k, they buyer would think they were getting a good deal.

I thought that kind of malarky was illegal???

SkepticOne

faceman wrote: »

I was told of a case recently where a "friend of a friend" was selling their house at it was valued at 400k However the EA said they would price it for sale at 410k so that if they sold if at 400k, they buyer would think they were getting a good deal.

I thought that kind of malarky was illegal???

He is entitled to price it at whatever he wants though he runs the risk of no takers.

Gurgle

faceman wrote: »

However the EA said they would price it for sale at 410k so that if they sold if at 400k, they buyer would think they were getting a good deal.

That EA obviously gave up an excellent career in the used car industry to take a ride on the gravy train of housing.

Do-more

There still seems to be a huge portion of the population in denial regarding the health of our economy and house prices in general.

I was talking to a guy last weekend who is hugely exposed with both "investment" properties and a business reliant on house building. He was convinced that the market would "take off" again in the summer, no amount of rational argument would have him believe otherwise.

There's a good piece in today's Irish Times about FTB's deposits which highlights the latest addition to the problems facing the property market.

It concludes that most FTB's will be unable to purchase as they don't have access to funds for a 20% deposit which most banks now require due to tightened lending criteria.

Without FTB's to keep adding funds, the Ponzi scheme that is the Irish property market ceases to function. Being an illiquid market this or the other pressures on the market are not going to cause an overnight collapse, but my opinion is that we are in the last six months of the end game.

It's the actions of the banks which have helped fuel the boom that will decide how and when the collapse will finally occur.

EnoughSaid

faceman wrote: »

I was told of a case recently where a "friend of a friend" was selling their house at it was valued at 400k However the EA said they would price it for sale at 410k so that if they sold if at 400k, they buyer would think they were getting a good deal.

I thought that kind of malarky was illegal???

Surely when you are selling anything you should always ask for more than than want in order to leave room for negotiation/bargaining. I would have thought that that is normal practice in selling houses and previously owned vechicles.

It may discourage buyers though when the market is plummeting, like the housing market of today.

gurramok

Do-more wrote: »

There's a good piece in today's Irish Times about FTB's deposits which highlights the latest addition to the problems facing the property market.

It concludes that most FTB's will be unable to purchase as they don't have access to funds for a 20% deposit which most banks now require due to tightened lending criteria.

Without FTB's to keep adding funds, the Ponzi scheme that is the Irish property market ceases to function. Being an illiquid market this or the other pressures on the market are not going to cause an overnight collapse, but my opinion is that we are in the last six months of the end game.

It's the actions of the banks which have helped fuel the boom that will decide how and when the collapse will finally occur.

80% mortgage already, thought it has gone back to 92% only?

Anyway, FTB's will have to learn to save now, that thing what their grannys thought them and which most duly ignored with snapping up 100% mortgages in the past

faceman

100%, 95% and 92% mortgages are still around. Albeit 100% are harder to get now.

DublinDilbert

Do-more wrote: »

I was talking to a guy last weekend who is hugely exposed with both "investment" properties and a business reliant on house building. He was convinced that the market would "take off" again in the summer, no amount of rational argument would have him believe otherwise.

There's a good piece in today's Irish Times about FTB's deposits which highlights the latest addition to the problems facing the property market.

It concludes that most FTB's will be unable to purchase as they don't have access to funds for a 20% deposit which most banks now require due to tightened lending criteria.

I don't get where people think all these FTB's are going to come from?

Lots of people rushed into buying appartments to "get on to the ladder" they need another wave of people coming behind them so they can "move up the ladder", from what i can see there isn't another wave of people coming behind them...

The_Conductor

faceman wrote: »

100%, 95% and 92% mortgages are still around. Albeit 100% are harder to get now.

100/95/92% mortgages are almost exclusively being ringfenced for those with pre-existing assets they can use as collatoral, or are in rock solid employment (e.g. Gardai, teachers, civil servants). Recently drawn FTB mortgages are increasingly at the 75-80% levels, and at higher margins than even a few months ago.

I agree that an even bigger problem than those FTBs getting their first properties is the tens of thousands who bought shoebox apartments with the notion that they could upgrade to a better proposition at some point in the future. There are an awful lot of people are totally stuck, and will continue to be for years to come.......

smooth operater

DublinDilbert wrote: »

I don't get where people think all these FTB's are going to come from?

Lots of people rushed into buying appartments to "get on to the ladder" they need another wave of people coming behind them so they can "move up the ladder", from what i can see there isn't another wave of people coming behind them...

Thats actually a very good point, and if houses prices keep dropping, its the apartments that are hit the worst

seamus

DublinDilbert wrote: »

I don't get where people think all these FTB's are going to come from?

Lots of people rushed into buying appartments to "get on to the ladder" they need another wave of people coming behind them so they can "move up the ladder", from what i can see there isn't another wave of people coming behind them...

The price of housing removed almost every FTB from the market. The increased cost of credit discouraged new investors and caused many investors jump ship. The net result being an increase in property onto the market and no-one to take it up.

The investors are mostly gone, but the FTBs aren't. There won't be a huge "wave" of them sweeping in and the volumes being sold won't approach what they used to be, but the FTBs are there, waiting for affordability to return to the market.

As of 2006, one-third of the population was under 25 and 91% of the population was under 65. So that points to a steady flow of FTBs for a number of years to come and not a massive amount of people trading down or dying off during those years.

The inventory is there which needs to be soaked up and will probably take 6-12 months to be properly absorbed into the system, once prices have dropped to "real" levels.