Housing Bubble Bursting

ozmen

Treehouse72 wrote: »

"There's affordability for crappy shoeboxes that other people will want to buy, but which I wouldn't. But there's no affordability for the nice houses a discerning individual like myself would want to buy".

I think more what people are saying is that while there may be a huge oversupply of property for sale, most of it is undesirably located or unsuitable for human habitation and so can be discounted from the supply, leaving an arguable shortage of well located suitable property.

Certainly one of the reasons we are buying now rather than waiting for lower prices is that we are not confident of finding another house we really like in a location we like in the next year or two.

Treehouse72

Gurgle wrote: »

Any chance you can explain why?

Sure thing. I don't want to personalise this and apologise for calling another poster's comment "claptrap". I'm not into trolling or having a fight. But I'll quote a post from 20toGo a few pages back as it seems to sum up the outlook I am criticising.

20goto10 wrote: »

personally, from what I can see affordability has been addressed on the market. The problem I'm now seeing is supply. That is quality supply when you take out the shoe boxes etc and the non habitable ghost towns.

What used to be an acceptable standard is no longer acceptable.

I find it quite worrying that the same attitude still exists that caused the boom, only now it's turned upside down. People still think of a home as an investment. Being smart with your money is always good advice, that's why it's so hard to get the point across.

I'm sure you'll all get your shoe box in a commuter belt miles away from local amenities at a very nice price. I just hope you're happy to live in it.

So 20's contention is that there is affordability in the market. However, this "affordability" seemingly only relates to crappy shoeboxes that 20 says she/he wouldn't buy. Looking at that from the other direction, there is no affordability in the nice end of the market.

But "affordability" in this schema seems to amount to no more than the narrow technical matter of whether it could in theory be bought with existing salaries and credit availability. But for these houses to be actually affordable, someone would have to want to buy them. Who? Some other poor gobshyte who doesn't have as good taste as 20? Some greater fool willing to stump up money for properties just because they can (because the houses are technically "affordable" to them)?

My contention is that this is not "affordability" at all. I could afford a Mars bar if it cost €10...but would I buy it for that amount? No, because it's a 80c bar of chocolate. Might somebody pay €10 for it? Sure, after all €10 isn't a lot of money and is clearly "affordable". Is there affordability in €10 Mars bars? Yes. Is that meaningful? Not at all.

Moreover, it is compounding this misunderstanding to extrapolate from these types of "affordable" houses to a general comment that "affordability has been addressed on the market". Oh no it hasn't.

20's next sentence:

The problem I'm now seeing is supply.

Here, 20 is talking about the parts of the market that aren't crappy shoeboxes. Nice suburban Dublin houses in good/nice/ok/acceptable locations. That is the real market right here - with these houses, it is perfectly sensible to talk about "affordability" in the sense 20 means it.

In that context, 20 seems to be missing the relationship between supply and price. In saying there is a shortage in supply, what 20 actually means is that there is a shortage of supply at X price. Another way of saying this is that houses are too expensive. If prices dropped, then the supply of houses at that X price would increase as properties further up the ladder drop price and start costing closer to X.

If one accepts all this, then the debate becomes about whether prices will drop more. I won't go over that debate here - I've gone on quite long enough - but IMO there are still 30%+ drops to come, at which point 20's supply of houses in the X price bracket rocket up. If you want to find those houses now, go to Daft and look for properties 30% higher than your budget. There's the "missing" supply.


York Notes:
> The only houses for which discussion of "affordability" is meaningful are houses people want
> A shortage of supply is just another way of saying prices are too high
> If people agree with both those contentions, then the debate becomes a simple matter of whether prices will continue to fall or not. Matters of "affordability" and "supply" are contained within the body of that debate.

20goto10

I never said only shoeboxes are afforable, you said that. I have found a couple of houses worth buying but have been outbid. They're hard to come by and when they do they're hard to get.

You seem to be suggesting all houses of all types should be affordable and available to all people of all classes and all salaries.

Some people should only be able to afford a shoe box, you don't have a god given right to a mansion. There's nothing stable or natural or healthy about that.

20goto10

I might add it's interesting that the argument on here has changed from a simple supply and demand equation to something else entirely. We're now into a politics debate of a big house for all socialism argument.

Treehouse72

20goto10 wrote: »

I never said only shoeboxes are afforable, you said that. I have found a couple of houses worth buying but have been outbid.

I see. So you saw houses you liked but they ended up costing too much? And you were trying to disprove my point, is that right?

They're hard to come by and when they do they're hard to get.

Yes, that's called "being too expensive". Why is this so hard to understand?

You seem to be suggesting all houses of all types should be affordable and available to all people of all classes and all salaries.

And to think I apologised to you for calling your theories claptrap. I will not respond to this puerile nonsense while trying to have a serious discussion.

Some people should only be able to afford a shoe box, you don't have a god given right to a mansion. There's nothing stable or natural or healthy about that.

Fascinating rumination, but I have no idea what it has to do with the substantive issue.

20goto10 wrote: »

I might add it's interesting that the argument on here has changed from a simple supply and demand equation to something else entirely.

You are the one that does not understand supply and demand. You seem to think that because you perceive a shortage of supply that this has nothing to do with price. If people can't sell for €500,000 they will drop their price until it meets demand. If that level is €300,000, then we can see that the supply of houses at €300,000 has increased. This is why I say the real debate here is about whether prices will continue to fall. If they do, then the supply shortage you are seeing will be resolved. If they don't then the supply shortage is here to stay. Which is it?

We're now into a politics debate of a big house for all socialism argument.

A comment showing that you are not listening, not trying to understand and not interested in an open discussion.

20goto10

Sorry I'm typing on a phone so cannot quote specific points. Firstly I'd ask you to stop getting so personal please. Secondly, I do not agree that houses which are clearly outside of my social class should drop to meet my demand. I'm quite well off and consider many properties to be below my standards. It doesn't mean they don't meet other peoples standards. I can afford lots of houses. I can even afford houses I have found suitable but refuse to get into a bidding war. It doesn't make them overpriced, in fact my bids would always be below asking price. Next time around I might consider offering the asking price to secure the deal. It depends if I think it's worth the asking price.

I don't deny prices are still dropping. I'm saying I don't care.

Caoimhín

20goto10 wrote: »

I can afford lots of houses.

:eek:
Are you married yet

20goto10

Married with a kid :-) but I don't mean I can afford multiple houses, I mean there's lots of houses out there that I can afford :-)

Caoimhín

20goto10 wrote: »

Married with a kid :-) but I don't mean I can afford multiple houses, I mean there's lots of houses out there that I can afford :-)

I know, i know, just taking the pish

johnnyskeleton

Fr0g wrote: »

Then I suggest he uses an appropriate smiley.

I don't smiley. Besides, where is the "I've just burried my gold in the back garden and covered it over with cement smily?

ozmen

Treehouse72 wrote: »

Yes, that's called "being too expensive". Why is this so hard to understand?

And it's not possible that these high prices for well located desirable houses is as a result of a low supply and high demand?

We're not arguing that prices have bottomed out and will not drop further, we are however saying that if you have decided to buy now (for whatever reason) there is currently a shortage of supply in desirable property and as a result this property is expensive.

20goto10 never said that there was a shortage of supply at any specific price range. From my own experience we threw a search net to include houses more than 50% above what we could afford - to be sure that our dream house wasnt just one or two price drops away. We still had a limited number of properties to look at. I.e. the supply as a whole is limited, never mind those at a reasonable price.

MuffinsDa

Treehouse72 wrote: »

My contention is that this is not "affordability" at all. I could afford a Mars bar if it cost €10...but would I buy it for that amount? No, because it's a 80c bar of chocolate. Might somebody pay €10 for it? Sure, after all €10 isn't a lot of money and is clearly "affordable". Is there affordability in €10 Mars bars? Yes. Is that meaningful? Not at all.

Treehouse72 wrote: »

In that context, 20 seems to be missing the relationship between supply and price.

I don't agree with all 20 says, but you seem to be missing that same relationship too! If you HAD TO buy a Mars bar in Dalkey and there were only 10 bars and 20 people that did have the tenner to spend on them and also had to buy one, then you'd be lucky to get one at 10 euros, unless you were willing to go and get it in Sallynoggin for a 80c - but a lot of people aren't.

ozmen

MuffinsDa wrote: »

I don't agree with all 20 says, but you seem to be missing that same relationship too! If you HAD TO buy a Mars bar in Dalkey and there were only 10 bars and 20 people that did have the tenner to spend on them and also had to buy one, then you'd be lucky to get one at 10 euros, unless you were willing to go and get it in Sallynoggin for a 80c - but a lot of people aren't.

Haha, yes - exactly!

It's like when you buy popcorn at the Cinema.

I have to say though that I agree with Treehouse on this affordability analogy - I've often made the same argument over affordability, that I could afford to pay €10 for a pint of milk but that doesnt make it good value. I think its affordability versus value.

Although when I think about house prices today I'd prefer to think its more akin to paying 30-40% over the odds for milk in the local convenience store, avoiding the walk to the supermarket - rather than paying more than 10 times the price out of desperation.

Buying a Mars bar for €10 in Dalkey above does sound a bit like buying a house in 2006!

quozl

ozmen wrote:

Although when I think about house prices today I'd prefer to think its more akin to paying 30-40% over the odds for milk in the local convenience store, avoiding the walk to the supermarket - rather than paying more than 10 times the price out of desperation.

I don't think that analogy works really. Paying an extra 20 cent, a couple of times a week can be easily done because it has almost no effect on your life.

Paying an extra 200k in principle and interest over the course of 25 or 30 years, has a massive effect on your life.

ozmen

quozl wrote: »

I don't think that analogy works really. Paying an extra 20 cent, a couple of times a week can be easily done because it has almost no effect on your life.

Paying an extra 200k in principle and interest over the course of 25 or 30 years, has a massive effect on your life.

It all depends how quickly and by how much prices fall. If I knew that prices would definitely collapse by a further 50% on todays prices and do so in the next 18 months then I would wait (and so would everyone else).

In reality we dont know. It could take several years and the drop might only be a further 20-30%. In this case we would prefer to pay the extra to live in our own house for those few years. Watching prices crawl slowly downwards can be soul destroying.

Incidentally I never buy milk in a convenience store!

gurramok

Can one of you give an indication of an area with a shortage of 'desirable housing' for sale?

ozmen

gurramok wrote: »

Can one of you give an indication of an area with a shortage of 'desirable housing' for sale?

Search Area: Dundrum / Kilmacud / Stillorgan / Mount Merrion

Looking for a 4 bed semi-d house in an estate (preferably a cul de sac) with a decent south facing garden (50ft plus), and a garage, convenient to schools and public transport (preferably the luas)

We dont ask for much :rolleyes:

Treehouse72

ozmen wrote: »

It all depends how quickly and by how much prices fall. If I knew that prices would definitely collapse by a further 50% on todays prices and do so in the next 18 months then I would wait (and so would everyone else).

Ozmen, you've inadvertently corroborated my posts to 20toGo - what you are talking about above is whether house prices will fall further. I refer you back to my first response to 20toGo:

Treehouse72 wrote: »

York Notes:
> The only houses for which discussion of "affordability" is meaningful are houses people want
> A shortage of supply is just another way of saying prices are too high
> If people agree with both those contentions, then the debate becomes a simple matter of whether prices will continue to fall or not. Matters of "affordability" and "supply" are contained within the body of that debate.

In the area you are looking in - and I don't know what area is, but it doesn't matter - there are currently houses 30% above your budget. When you say there is "no supply" that missing suply is up in that more expensive bracket. So the debate is NOT about supply shortages at a given price level. It is ONLY about whether prices will drop further bringing more properties into your price range.


Ed: Notwithstanding that if I am looking for a house in Templeogue that has a view of the Hanging Gardens of Babylon then yes, there is a shortage of supply of those. But that's a different matter!

ozmen

Treehouse72 wrote: »

there are currently houses 30% above your budget. When you say there is "no supply" that missing suply is up in that more expensive bracket. So the debate is NOT about supply shortages at a given price level. It is ONLY about whether prices will drop further bringing more properties into your price range.

I am including those houses that I can't afford in the supply. Even including houses way out of my price range there is still a shortage of houses I consider desirable.

If house prices fell by 50% tomorrow I would get a nice house cheaper but I wouldnt have a much better selection of houses to choose from, in fact I think there is a good chance we would still buy the same house we are currently looking at.

Obviously there are a few houses asking multi-millions that I would love to own if I had the money but I'm not naive enough to think that they are going to fall into my budget, no matter how long I wait.

ozmen

The question we asked ourselves was - is waiting another 2 years (or more) in order to save another chunk off the price of a house worth the frustrations of renting for that period and the anxiety of watching prices fall slowly, while wondering if we'd ever find as nice a house again. We decided that it wasnt, that owning a house now and getting on with our lives is worth possibly paying a premium for. We can afford a nice house now without killing ourselves so we decided to bite the bullet.

20goto10

gurramok wrote: »

Can one of you give an indication of an area with a shortage of 'desirable housing' for sale?

For me, I need something for my family. I'm actually looking in the same general area, dundrum/Sandyford/Dublin 18. 3 bed of decent size (1300 sq ft min) and in particular decent size bedrooms. Box rooms are not counted as a bedroom in my book. nice garden is a plus but I would trade it for a nice extended kitchen.

gurramok

ozmen wrote: »

Search Area: Dundrum / Kilmacud / Stillorgan / Mount Merrion

Looking for a 4 bed semi-d house in an estate (preferably a cul de sac) with a decent south facing garden (50ft plus), and a garage, convenient to schools and public transport (preferably the luas)

We dont ask for much :rolleyes:

20goto10 wrote: »

For me, I need something for my family. I'm actually looking in the same general area, dundrum/Sandyford/Dublin 18. 3 bed of decent size (1300 sq ft min) and in particular decent size bedrooms. Box rooms are not counted as a bedroom in my book. nice garden is a plus but I would trade it for a nice extended kitchen.

Pretty expensive areas there(Mount Merrion :eek:)with the criteria ye are searching for.

Ye could end up bidding against each other

The average buyer wouldn't have a hope of affording any of those areas yet.

20goto10

well that's back to my point - you cannot apply the average to everyones situation. To get the average you must have people above the median and people below the median.

It's matematically impossible for everyone to be able to afford the average home. No matter what the price is.

MuffinsDa

gurramok wrote: »

The average buyer wouldn't have a hope of affording any of those areas yet.

Well, and they shouldn't!! There are always areas above and area below average.
And those areas aren't even the most desirable ones. Try Sandymount, Clontarf, Sandycove, Monkstown proper, Dalkey proper...

ozmen

20goto10 wrote: »

To get the average you must have people above the median and people below the median.

So the real question is what is the average house? Where are these average houses located? and who buys the average house - single or dual income?

Long term I would like to hope that its single income - I think its crazy that two people should have to work to pay a mortgage.

ozmen

If we take 40K as the average salary, and assume that in a sensible world the banks would lend 4 times your salary up to 80% LTV then that allows you to buy a house around the 200K mark.

Here are daft search results for Dublin 3 beds up to 200K. Are these average houses?

http://www.tinyurl.ie/051 first time using tinyURL - let me know if it works

gurramok

ozmen wrote: »

If we take 40K as the average salary, and assume that in a sensible world the banks would lend 4 times your salary up to 80% LTV then that allows you to buy a house around the 200K mark.

Here are daft search results for Dublin 3 beds up to 200K. Are these average houses?

http://www.tinyurl.ie/051 first time using tinyURL - let me know if it works

You're a bit generous on the average wage figure there in this glorious recession

No they are not average houses. Think you can see there, that someone on 40k would not want to live in some of those areas in the city. They'd want value for their hard earned wage instead of looking over their shoulder when they get home from work.

MuffinsDa wrote:

Well, and they shouldn't!! There are always areas above and area below average.
And those areas aren't even the most desirable ones. Try Sandymount, Clontarf, Sandycove, Monkstown proper, Dalkey proper...

Mount Merrion was mentioned, now that's the real hob-nob area

ozmen

gurramok wrote: »

No they are not average houses. Think you can see there, that someone on 40k would not want to live in some of those areas in the city.

True, perhaps a little high. I thought of that afterwards, there are still quite a few houses even if you knock the price down to ~150.

Yes, I agree some are not the nicest areas, some are ok though, clondalkin, clonsilla, blanchardstown - but there are good and bad parts in all these areas.

I have friends living in some of those areas who wouldn't appreciate it if I told them that they lived in below average houses

gurramok

ozmen wrote: »

True, perhaps a little high. I thought of that afterwards, there are still quite a few houses even if you knock the price down to ~150.

Yes, I agree some are not the nicest areas, some are ok though, clondalkin, clonsilla, blanchardstown - but there are good and bad parts in all these areas.

I have friends living in some of those areas who wouldn't appreciate it if I told them that they lived in below average houses

I used to live in one of those areas and couldn't wait to get out

Treehouse72

It is bugging me intensely that some people seem to be assuming the phrase "average buyer" is a value-laden term. This has lead to the lol accusation of a "socialist" agenda in this thread.

When one says an "average buyer" should be able to buy an "average house" in Merrion, that doesn't mean the average person on a median wage. Rather, it means an average buyer at a given income or house-price level. In this instance, an average buyer for Merrion. Clearly that person is a different beast to an "average" buyer for Tallaght.

Like the old days, "average buyers" in Tallaght should be binmen, taxi drivers, retail workers, and, heck, even the unemployed (after all, even they used to buy houses once upon a time). This should be the case whether there is a second income or not.

The average buyers for Merrion would be, essentially, old-school professionals, and perhaps some newer kinds of professionals like IT guys or whatnot.

When you match up "average salaries" for these respective areas, €250k houses in Tallaght and €850k houses in Merrion don't make sense. They are simply too damn expensive for those salary ranges to bear.