Housing Bubble Bursting

BobbyD10

SkepticOne wrote: »

Now we will have a situation with Tom Parlon (quite reasonably in many people's eyes) arguing that it is now in the State's interest to prop up the builders with subsidies and government schemes since, if they builders fail, it will be the tax payer picking up the pieces and holding worthless development land in the middle of nowhere.

Yeah, I was thinking about this the other day.

If the state, bascially takes the land banks and developments from the developers, for a reduced price of course, is it then in the state and tax payers(ironically) interest that some time ahead that these start to rise in value so as to achieve a good return. I can't imagine a fire sale as they may not get the value for money?

Will we have the state as a vested interest (though more visible than before) wanting the value of land and property to go up again.

Freddie59

SkepticOne wrote: »

Now we will have a situation with Tom Parlon (quite reasonably in many people's eyes).

Maybe that should read in SOME people's eyes.....

ambro25

karen3212 wrote: »

So, if you don't mind me asking, how many times salary is it for the house?

I assume you mean 'excluding deposit': 3.33 x
Don't need the gold stars or an attaboy, happy enough as is, 'ta

bobbiw

It amazes me that people have some notion that house prices should be on average 3 times the average wage.

Thats complete nonsense and a very uneducated view of how things work.

Thats the first point.

secondly for houses to drop to very low levels you need a catastrophy in Ireland, dont think for one second that this little recession is that because its not.

Prices may go through the floor but for that to happen you are going to need to have massive layoffs, nothing like what is happening now and you will need to have the goverment increase taxes significantly to 60% say.

No one is going to sell you a house for 80k, it would need to be a reposession and it will take longer for that to get to the average.

But to the guys and gals who are looking forward to swooping in an getting that 75k home based on your 30k salary, dream on.
You will be the first to be fired and let go when things get worse.

Thats the irony, you guys are thinking you are safe when noone is.
And the low paid people are the ones who are least valued, hence the salary.

bobbiw

bobbiw wrote: »

It amazes me that people have some notion that house prices should be on average 3 times the average wage.

Thats complete nonsense and a very uneducated view of how things work.

Thats the first point.

secondly for houses to drop to very low levels you need a catastrophy in Ireland, dont think for one second that this little recession is that because its not.

Prices may go through the floor but for that to happen you are going to need to have massive layoffs, nothing like what is happening now and you will need to have the goverment increase taxes significantly to 60% say.

No one is going to sell you a house for 80k, it would need to be a reposession and it will take longer for that to get to the average.

But to the guys and gals who are looking forward to swooping in an getting that 75k home based on your 30k salary, dream on.
You will be the first to be fired and let go when things get worse.

Thats the irony, you guys are thinking you are safe when noone is.
And the low paid people are the ones who are least valued, hence the salary.

http://www.daft.ie/1442406

The income multiples is really to do with responsible lending and borrowing more than "what's it worth", prices will fall until demand is sufficient to stop them falling.

Ultimately these prices will be determined by how much money is in the economy, and not in banks.

ambro25

bobbiw wrote: »

It amazes me that people have some notion that house prices should be on average 3 times the average wage.

Dunno if you posted that in reply to my post just above, but just for the record, I'm stating a fact (the house I've put an offer on is 3.33x my wage) rather than 'a notion'.
After that, of course, it's all down to local market particulars (i.e. price differential across the board between Sheffield, UK and Dublin, IE: 50 to 70% at least !): there's no point comparing apples and oranges
Seconding Deleted User about the principle of multiples (it's not correlated to what a house in particular is worth: e.g. in any market, given a particular wage, there will always be houses worth 2x, 3x, 4x... 100x that particular wage).

asdasd

secondly for houses to drop to very low levels you need a catastrophy in Ireland, dont think for one second that this little recession is that because its not.

It seems like we are technically in a depression. Last time that happened ... oh wait, it didnt happen.

gurramok

bobbiw wrote: »

But to the guys and gals who are looking forward to swooping in an getting that 75k home based on your 30k salary, dream on.
You will be the first to be fired and let go when things get worse.

Thats the irony, you guys are thinking you are safe when noone is.
And the low paid people are the ones who are least valued, hence the salary.

Whoever you are directing that at, its a very snobbish elitist attitude which ruined your post. Guess all those managers chopped recently don't count as valued.

Too many chiefs and not enough indians comes to mind

oceanclub

bobbiw wrote: »

secondly for houses to drop to very low levels you need a catastrophy in Ireland, dont think for one second that this little recession is that because its not.

Frankly, it's not worth reading you beyond this point, as the above quote shows you haven't a clue what you're talking about. To call what is already (we're not even part way through it yet) the second worst recession of the century - second to one which led to extremist governments across Europe and a war of 10 million deaths - "little" shows you have no idea of the scale of the problem.

P.

Calina

bobbiw wrote: »

It amazes me that people have some notion that house prices should be on average 3 times the average wage.

Thats complete nonsense and a very uneducated view of how things work.

Thats the first point.

secondly for houses to drop to very low levels you need a catastrophy in Ireland, dont think for one second that this little recession is that because its not.

Prices may go through the floor but for that to happen you are going to need to have massive layoffs, nothing like what is happening now and you will need to have the goverment increase taxes significantly to 60% say.

No one is going to sell you a house for 80k, it would need to be a reposession and it will take longer for that to get to the average.

But to the guys and gals who are looking forward to swooping in an getting that 75k home based on your 30k salary, dream on.
You will be the first to be fired and let go when things get worse.

Thats the irony, you guys are thinking you are safe when noone is.
And the low paid people are the ones who are least valued, hence the salary.

Historically, they have been around 5 times average salary. So they are still well out of whack.

It amazes me that people think the property market as it was is sustainable without some modicum of money to pay for it. We have none. There is a global credit crunch which is frying the debt driven nations and screwing up the prudent exporting ones because the debt driven nations can't afford to buy the stuff exported by the prudent non-bubblicious economies.

As for the rest of your post, it smacks of bitter elitism. I don't know what world you inhabit but I wouldn't like to live there. I see no reason why houses should cost more than 3 times salary. At least more people could afford houses and the property market wouldn't bubble and burst the way it did over the last 10 years. It would tick along nicely providing some sustainable employment for people instead of temporarily leeching from the rest of the economy before temporarily messing up said economy.

Also I don't know whether you know this or not but we have an economic mess of monumental proportions happening at the moment and because of the nature of the layoffs it is going to have serious social implications as well. At some stage last year for every 1 woman losing her job, 7 men were losing theirs. Do you know what that does to families? Social cohesion? Communities? Very often these are the primary breadwinners in a family unit. Put that with the planning related issues causing a lot of people to move to places with few local resources, like public transport...this is not good.

Currently the profile of job losses include solicitors, accountants, architects, car salesmen. These are not people who were on 30K. They are people who were on quite a lot more.

I am not sure your view of the economy in Ireland really reflects reality at all.

oceanclub

To some people like bobbiw, words don't seem to have any affect, but maybe this graph does:

http://www.biggestpurchase.com/images/hpgraph.jpg

It's a US graph, so we can take it that an Irish graph would probably be even more extreme. For 50 years, the "real" (inflation adjusted) price of a house barely changed. Within a 10 year period, 1995 - 2005, the real price almost doubled.

According to people like bobbiw, the period 1995- 2005 was the normal one, and 1945 to 1995 was some weird abnormality.

I'll let you make up your own minds.

P.

Fr0g

There is a graph for irish inflation adjusted house prices that is identical to that one. I will find and post it later.

Mugatu

Fr0g wrote: »

There is a graph for irish inflation adjusted house prices that is identical to that one. I will find and post it later.

When you are looking can you also try to find one for inflation adjusted wages in Ireland?

That would be interesting to compare.

I found this for the US.

http://upload.wikimedia.org/wikipedia/en/thumb/5/5d/Household_income_65_to_05.png/500px-Household_income_65_to_05.png

oceanclub

Mugatu wrote: »

When you are looking can you also try to find one for inflation adjusted wages in Ireland?

That would be interesting to compare.

I found this for the US.

http://upload.wikimedia.org/wikipedia/en/thumb/5/5d/Household_income_65_to_05.png/500px-Household_income_65_to_05.png

I'm surprised by that, as I had thought that real wages in the US had actually gone down.

P.

Mugatu

oceanclub wrote: »

I'm surprised by that, as I had thought that real wages in the US had actually gone down.

P.

I found it through google so I can't be sure its 100% accurate.

I would be interested to see something similar on Ireland.

fricatus

oceanclub wrote: »

I'm surprised by that, as I had thought that real wages in the US had actually gone down.

P.

I had the same impression as you, but I think you're right in that real wages probably have gone down for all except the top 5 or 10% of earners.

The reason the average has probably gone up is probably that old adage about why we shouldn't always trust averages: if you have one millionaire and 99 destitute paupers in a village, the average wealth is about €10,000.

bobbiw

I was not saying that the economic climate is petty or a little recession.

I was saying that for prices to drop to 80k for a house in dublin you need a much larger catastrophy.

People will not sell their homes unless they have to and one person having to doesnt set the balance for all homes.

So for the average to be 80k you need to have people selling en-mase and if people paid 200k for a home there is no way 10 people are going to sell at a massive loss unless they are all forclosed on.

For that to happen they have had to all have lost the ability to pay for their home.

ionapaul

bobbiw wrote: »

I was not saying that the economic climate is petty or a little recession.

I was saying that for prices to drop to 80k for a house in dublin you need a much larger catastrophy.

People will not sell their homes unless they have to and one person having to doesnt set the balance for all homes.

So for the average to be 80k you need to have people selling en-mase and if people paid 200k for a home there is no way 10 people are going to sell at a massive loss unless they are all forclosed on.

For that to happen they have had to all have lost the ability to pay for their home.

House prices are set at the margins though, aren't they?

CiaranC

bobbiw wrote: »

People will not sell their homes unless they have to and one person having to doesnt set the balance for all homes.

I dont think the property market works like you think it does.

bobbiw

ionapaul wrote: »

House prices are set at the margins though, aren't they?

House prices are really based on what someone is willing to pay for it.

There are a lot a factors that come into play.

Although the multiplier can be used to show affordability at a low level it isint the standard at what houses should be at in terms of price.

It seems to be an irish thing that people have this notion that they have a "right" to be able to afford a house, they really dont.

In 1988 you could get a 4 bedroom house in dundrum for less than 50k, did everyone own one, of course not, at the same time you could buy a 2 bed terraced house in crumlin for 30k.

It was still unaffordable for a lot of people.

Thats the way life is, home ownership just like owning a high end sports care is not a right.

But for it to get like that again we need a bigger mess than the country is in now.

It is possible as the goverment are not taking the right actions. You cant tax your way out of a recession and if anything they should have lowered taxes and borrowed instead.

In the next budget if they put taxes up to 70% for anyone earning over 40k we might see the type of scenario some of you are hoping for.

oceanclub

bobbiw wrote: »

I was not saying that the economic climate is petty or a little recession.

You actually used the words "little recession":

bobbiw wrote:

dont think for one second that this little recession is that because its not.

Either you have severe memory problems, or your trained monkey got to your boards.ie account. I suggest either seeing a doctor or getting a stronger cage.

Simple question: I posted a graph earlier showing house prices over the last 65 years. Do you think the first 55 is reality, or the last 10 is reality?

P.

bobbiw

oceanclub wrote: »

You actually used the words "little recession":



Either you have severe memory problems, or your trained monkey got to your boards.ie account. I suggest either seeing a doctor or getting a stronger cage.
P.

Im not sure what you are trying to say but in all seriousness I dont have to answer to yoy, not on a message board and certainly not in life so mind your manners.

oceanclub

bobbiw wrote: »

Im not sure what you are trying to say

I'm saying that appear to not be able to remember what you said merely a few posts ago. You said "little recession". Now you are denying you said "little recession". If, frankly, that's the level of debate you're capable of, why do you expect anyone to take you seriously?

Simple question: I posted a graph earlier showing house prices over the last 65 years. Do you think the first 55 is reality, or the last 10 is reality?

P.

Fr0g

Found it!



It tells it's own storey

I'm still looking for inflation adjusted wages.

oceanclub

Fr0g wrote: »

Found it!



It tells it's own storey

So at the peak, US houses were worth 175% of their real value.

In Ireland, it was 325%.

So a drop of 70% from peak - something people scoffed at - would merely get us back to historically normal property values. And that's not counting the fact that after a bubble, people go from irrational exhuberance to irrational despondency.

P.

Fr0g

It compares neatly with the generic bubble lifecycle

Bubble Lifecycle

Mugatu

Fr0g wrote: »

It compares neatly with the generic bubble lifecycle

Bubble Lifecycle

Can you explain who created these graphs?

If you just googled them then its pretty hard to be sure they are in any way accurate wouldn't you say?

Any luck with the wages graph in Ireland over that period? I'm guessing they inflated in a similar fashion.

Fr0g

Mugatu wrote: »

Can you explain who created these graphs?

If you just googled them then its pretty hard to be sure they are in any way accurate wouldn't you say?

Any luck with the wages graph in Ireland over that period? I'm guessing they inflated in a similar fashion.

Source: Jean-Paul Rodrigue, Hofstra University
http://people.hofstra.edu/Jean-paul_Rodrigue/blogs.html#Bubbles

I recommend you read the whole article.

The different phases in a bubble are backed up by 500 years of economic history

The other graph is taken from the Dept. Environment Heritage and Local Government figures

No luck with wages so far

Fr0g

Just a thought. It is possible that the huge increase in labour supply over the last 12 years may have moderated wage inflation. The graph for therefore may not look the previous two.

bobbbb

bobbiw wrote: »

I was not saying that the economic climate is petty or a little recession.

I was saying that for prices to drop to 80k for a house in dublin you need a much larger catastrophy.

People will not sell their homes unless they have to and one person having to doesnt set the balance for all homes.

So for the average to be 80k you need to have people selling en-mase and if people paid 200k for a home there is no way 10 people are going to sell at a massive loss unless they are all forclosed on.

For that to happen they have had to all have lost the ability to pay for their home.

Well when i can buy a house for 80k tell me quick.
Whats that, about €80 a week for the mortgage. Yes please. Bring it on. Myself and the missus will take 4 (More kids and they'll all be needing houses ). Though i might rent them out for about €350 a month, just to cover the mortgage until the kids want them.

And sure if a house in Dublin is that price, we'll have a few for half that price around the rest of the country for good measure. Never know where you might end up on a night out. And sure i might buy one near work too for when i dont feel like getting a taxi home.