Housing Bubble Bursting

Rabidlamb

Unrealistic, no-one is going to read that long post, it's like the terms & conditions that came with my mortgage.

Seriously though, we will all be in for massive social upheaval if there's huge foreclosures like in the US.
They can't even manage to deport someone in this country without the villagers coming out with their pitchforks.
This is Ireland, lovely soft motherly Ireland.

People who had nothing to do with this crisis will end up paying & have already started to pay, it's a sad fact of life for those staying in the country.

Monty Burnz

Rabidlamb wrote: »

Seriously though, we will all be in for massive social upheaval if there's huge foreclosures like in the US.

There will be massive social upheaval too when people realise that paying your mortgage it totally optional.

norrie rugger

danbohan wrote: »

lets see , bank lends joe 300k , he cant pay , bank takes joes house , its worth 150k , bank loses 150k , joe needs house so his neighbour john the taxpayer has to provide him with one , john loses , the bank needs capital for its loss of 150k on joes house , again john the taxpayer must pay , john loses . john never owned a house , he rented and drove 10 year old car while his neighbors joe and mary bought new house ++ and nice new bmw to match , they looked down their noses on poor john , now he must house them and pay back the balance to the bank as well ,

this is fair ?. its total madness

Change John to Norrie Rugger and you have me:(
I feel so loved now, where as before I was "that fool not buying"

Rabidlamb

norrie rugger wrote: »

I feel so loved now, where as before I was "that fool not buying"

For those of you waiting to buy how far into the future are you looking.
I know you don't need Frank Fahey to tell you when we're at the bottom but when Morgan Kelly says go it'll probably set off the rebound.

Are you looking at 1 year or 5 years, just interested.

danbohan

norrie rugger wrote: »

Change John to Norrie Rugger and you have me:(
I feel so loved now, where as before I was "that fool not buying"

from ''loser'' to loved , it cant be all bad!

Unrealistic

Rabidlamb wrote: »

Unrealistic, no-one is going to read that long post, it's like the terms & conditions that came with my mortgage.

Maybe you should have read it as I was somewhat complimentary of you in it.

Maybe I'm unusual in having read every word on my mortgage agreement before signing it but I don't really understand how anyone could make a commitment to paying a six figure sum without doing so. Maybe the agreement itself is too legalistic to expect everyone to read it but there's no excuse for the other extreme of people signing up without first stopping to think about some simple questions that don't require expert knowledge.
- What happens if interest rates go up? Our parents' generation were paying down mortgages at 18%.
- What happens if prices drop? The crashes in the UK in the 90s and Japan more recently were something everyone knew about at some level.
- What happens if I lose my job?. 99% of people buying houses during the boom have some memory of the unemployment here in the 80s and early 90s.
- Do I really need to put my house further at risk to buy that shiny SUV or could I make do with my five year old hatchback for another couple of years?

Rabidlamb wrote: »

People who had nothing to do with this crisis will end up paying & have already started to pay, it's a sad fact of life for those staying in the country.

The people who had absolutely nothing to do with this crisis are few and far between but, yes, people are all ready paying for the sins of others. But that should be an incentive try to limit subsidies to the reckless rather than throwing your hands in the air and saying it's going to happen anyway.

Monty Burnz

Rabidlamb wrote: »

For those of you waiting to buy how far into the future are you looking.
I know you don't need Frank Fahey to tell you when we're at the bottom but when Morgan Kelly says go it'll probably set off the rebound.

Are you looking at 1 year or 5 years, just interested.

I'd expect falls to have moderated to the extent that they don't matter in about 5 years, barring some sort of deus ex machina. Of course if we default, all bets are off. We may see a more catastrophic collapse for a year or two, then stagnation, but a more rapid recovery when it does eventually happen.

Dades

What about the huge lumps of cash (stamp duty) the exchequer received from people who bought their houses in the years up to 2007?

I think that deserves a mention.

On the flip side, I think the problem here is that the relief is indiscriminate in terms of who qualifies. I qualify - but could live without it, as my LTV was good when I bought and therefore my (tracker) mortgage is not bananas.

The relief should really be for those who have lost their jobs, as they are the only ones who should be at risk of defaulting. If the relief is capped, it doesn't really matter that Sneachta bought a €1M house in Foxrock with a 100% mortgage and lost his job - he's still only getting the same (€166 p/m?)as Bob who has a 300K mortgage and lost his. (I assume the relief is capped!)

Treehouse72

Rabidlamb wrote: »

Good news on that front old bean, I put up a healthy deposit back in the day, I actually got a bit of a bargain truth be told. No NE yet.

So, the reason you aren't in NE is because of your large deposit? Bwahahahahahaha! Seriously old bean, just sit down and think about that for a moment and you'll see that, in fact, all it means is you paid your NE up front!! I knew you weren't that tuned into the subtleties of the matter so thanks for proving it to me in your first sentence.

Rabidlamb

Treehouse72 wrote: »

So, the reason you aren't in NE is because of your large deposit? Bwahahahahahaha! Seriously old bean, just sit down and think about that for a moment and you'll see that, in fact, all it means is you paid your NE up front!! I knew you weren't that tuned into the subtleties of the matter so thanks for proving it to me in your first sentence.

Sweet jebus, I'll be kind to you cause you're kind of funny with your economics 101 statements.
I believe the point you're trying to make is that I'll have overpaid for my house bought in 2005 by possibly 60% or more.
Then you see the foolishness of me paying that off over say 20 years.
Remember though that someone buying a home in the next 5 years will be subject to much higher interest rates due to the removal of trackers.

I believe we're looking at a two different strands of mortgages:
(1) People with larger principals who bought in 2003-2008 but with low tracker rate mortgages.
(2) People with small principles but more penal variable interest rates who will buy in the near future.

The eventual sums being repaid on both properties wont differ greatly & those who bought in 2003-2008 will have repaid 10 years earlier.

What do I win old bean ?.

Monty Burnz

Rabidlamb wrote: »

Sweet jebus, I'll be kind to you cause you're kind of funny with your economics 101 statements.

To be fair, it does seem a tiny bit suspicious that you're not in negative equity in spite of buying near the bubble peak (a very silly move, I think anyone would agree) and you are also on a tracker paying peanuts (at present at least), but sure only you know the truth of it so we'll take that as given.

Rabidlamb wrote: »

I believe the point you're trying to make is that I'll have overpaid for my house bought in 2005 by possibly 60% or more.

I think that's a very valid point.

Rabidlamb wrote: »

Then you see the foolishness of me paying that off over say 20 years.

It's also a tad suspicious that you were one of a tiny fraction of people getting 20 year mortgages at the peak of the bubble - 30 years and more were most common, but anyway, we'll also take that as given...

Rabidlamb wrote: »

Remember though that someone buying a home in the next 5 years will be subject to much higher interest rates due to the removal of trackers.

...but remember also that higher interest rates will force prices even lower as 'affordability' (a phenomenally stupid concept that was part responsible for the bubble) plummets (in addition to higher taxes and lower pay) - so interest rate increases will be swings and roundabouts. In fact, the ideal time to buy is at the top of the interest rate cycle...

Rabidlamb wrote: »

I believe we're looking at a two different strands of mortgages:
(1) People with larger principals who bought in 2003-2008 but with low tracker rate mortgages.

What percentage of people are not on trackers though? Would you mind sharing who your mortgage is with?

Rabidlamb wrote: »

(2) People with small principles but more penal variable interest rates who will buy in the near future.

The people who will be buying in the future - if they saved through the bubble - will have much larger deposits saved, and so will be paying higher interest rates on a far, far smaller principle.

Bullseye1

Dades wrote: »

What about the huge lumps of cash (stamp duty) the exchequer received from people who bought their houses in the years up to 2007?

I think that deserves a mention.

On the flip side, I think the problem here is that the relief is indiscriminate in terms of who qualifies. I qualify - but could live without it, as my LTV getting the same (€166 p/m?)as Bob who has a 300K mortgage and lost his. (I assume the relief is capped!)

Also remember that the local authorities got millions in levies from these developments. These millions were passed on by the developer to the eventual buyer.

Rabidlamb

Monty Burnz wrote: »

To be fair, it does seem a tiny bit suspicious that you're not in negative equity in spite of buying near the bubble peak (a very silly move, I think anyone would agree) and you are also on a tracker paying peanuts (at present at least), but sure only you know the truth of it so we'll take that as given.

What you're forgetting is I'm over 6 years into my mortgage & the principal is starting to be ate away.
Play with the sliders on here to get a real feel for how the principle starts to reduce abruptly after time.
http://www.drcalculator.com/mortgage/ie/
There's €137k left owing on my mortgage & houses in my estate have recently traded (not asking price) for €165k.
With the principal on my mortgage dropping by nearly €10k a year it's a great buffer against NE.

Monty Burnz wrote: »

It's also a tad suspicious that you were one of a tiny fraction of people getting 20 year mortgages at the peak of the bubble - 30 years and more were most common, but anyway, we'll also take that as given...

Not everyone paid €380k to live in Naas at the top of the bubble.
We went for the move down the country option & were lucky to get in before the bubble re-inflated in 2006.

Monty Burnz wrote: »

What percentage of people are not on trackers though? Would you mind sharing who your mortgage is with?

I know the majority are on trackers & heard the actual figures recently from Charlie Weston but can't remember.
I was with First Active before they were taken over by UB.

Monty Burnz wrote: »

The people who will be buying in the future - if they saved through the bubble - will have much larger deposits saved, and so will be paying higher interest rates on a far, far smaller principle.

If they can go in with €80k saved & buy a house for cash I salute them.
But if they need to get a 90% mortgage paying 7-8% interest they wont that much better off in the long run, once again play with the slider for some eye openers.

I realise I'm fortunate cause I got a good bargain during crazy times & spent the last 6 years repaying my mortgage at record low interest rates.
It's those 6 years that are critical in the understanding of why there's not more of us in NE.
Now one good blast of inflation at the end of the decade & we'll laugh how filling the car costs more than the mortgage.

Monty Burnz

Rabidlamb wrote: »

Now one good blast of inflation at the end of the decade & we'll laugh how filling the car costs more than the mortgage.

That's a real random factor there - do we get inflation or deflation? I can see the EU printing presses being cranked up to avoid the latter, but I wouldn't be counting on inflation either as the French and especially the Germans hate it.

Interesting times ahead!

K-9

A 20 year mortgage does make a massive difference, no doubt about that, though payments are obviously higher. It also means that if you do run into difficulty, lengthening the term isn't that bad, whereas somebody on 35 years................

K-9

K-9 wrote: »

A 20 year mortgage does make a massive difference, no doubt about that, though payments are obviously higher. It also means that if you do run into difficulty, lengthening the term isn't that bad, whereas somebody on 35 years................

Yes, nothing worse than retiring with several years left on the mortgage, especially if it's a large one!

In fact, it's a better a better plan to have a shorter term mortgage and use the years after it ends to save up for your retirement.

Rabidlamb

K-9 wrote: »

A 20 year mortgage does make a massive difference, no doubt about that, though payments are obviously higher. It also means that if you do run into difficulty, lengthening the term isn't that bad, whereas somebody on 35 years................

Deleted User wrote: »

Yes, nothing worse than retiring with several years left on the mortgage, especially if it's a large one!

In fact, it's a better a better plan to have a shorter term mortgage and use the years after it ends to save up for your retirement.

In our case the 20 year mortgage appealed cause of having kids & college fees in the future.
I remember reading that most people pay off their mortgages a few years early using savings or inheritance, inflation makes this far easier.
It may be some solace to those on 35 year terms thinking they'll be paying up to their retirements.

Victor

niallers1 wrote: »

Zamboni,

Are you by any chance a southern states, US citizen who votes for the Republican party.. ?

Lets keep it constructive, not personal.

cursai

http://gerrycrilly.ie/media/newspapers/external/How%20to%20Prepare%20for%20Ireland's%20Inevitable%20Default.%20Richard%20Douthwaite.%20Construct%20Ireland%20Issue%205%20Volume%205%20January%202011.pdf

Scanlas The 2nd

I paid 247 last October for a 3 bedroom built in 2004 in swords. How much do people here think I overpaid?

Treehouse72

Scanlas The 2nd wrote: »

I paid 247 last October for a 3 bedroom built in 2004 in swords. How much do people here think I overpaid?

Don't beat yourself up about it. €247k in absolute terms is not an enormous mortgage considering what some people have and should be manageable on an average income.

Caoimhín

Scanlas The 2nd wrote: »

I paid 247 last October for a 3 bedroom built in 2004 in swords. How much do people here think I overpaid?

If you dont plan on selling and can afford the mortgage payments, what does it matter what the notional value of the house is. If it is your home then think of it in those terms, not as an asset.

dogbear

Zamboni wrote: »

Joe is clearly a scourge to society.
Through his own financial mismanagment he has become a burden on the state.
If Joe had been prudent in his financial planning he may have had adequate resources to either a) retrain b) live comfortably until new employment was secured c) migrate to an area of better employment oppurtunities.

niallers1 wrote: »

Zamboni,

Are you by any chance a southern states, US citizen who votes for the Republican party.. ?

I don't see how being financially smart is a "Republican" thing. Some of the poorest parts of the U.S.A. is in the southern states. Perhaps the "scourge to society" remark is a bit extreme, but there really needs to be a re-think about money in Ireland. The value of money was lost during the boom and that was the worst part about it.

This brings up a good point, however: Why don't they teach managing your money at an early age? If that training was there, we would never have allowed the bank advertisements during the boom to fill our heads with grand ideas of a better, richer life by getting this house or that car and to take out a ridiculous loan to finance it all.

Caoimhín

dogbear wrote: »

Why don't they teach managing your money at an early age?.

I dont know about you, but my parents taught me how to save and manage my money when i was young.

professore

danbohan wrote: »

lets see , bank lends joe 300k , he cant pay , bank takes joes house , its worth 150k , bank loses 150k , joe needs house so his neighbour john the taxpayer has to provide him with one , john loses , the bank needs capital for its loss of 150k on joes house , again john the taxpayer must pay , john loses . john never owned a house , he rented and drove 10 year old car while his neighbors joe and mary bought new house ++ and nice new bmw to match , they looked down their noses on poor john , now he must house them and pay back the balance to the bank as well ,

this is fair ?. its total madness

John gets a heart attack worrying about Joe and dies. Joe still has a few pints every week and regales the pub with his tales of boom to bust. Life ain't fair unfortunately.

Theboinkmaster

Scanlas The 2nd wrote: »

I paid 247 last October for a 3 bedroom built in 2004 in swords. How much do people here think I overpaid?

Without the specifics I'd guess about €100k.

Spiritofthekop

Why are new houses put for sale on Daft.ie keep going up in price???

Im confused? i thought house prices were dropping??

Looking through the houses for sale in Dublin many of them have been up for over 1 year & are not selling cause of the ridiculous prices.

But some new houses have been put up and going on the National Price guide for 2011 in Dublin all of them are still overpriced by over €150,000/€200,000 in most cases??

Is Daft.ie not a good place to go house hunting??

Treehouse72

Spiritofthekop wrote: »

Why are new houses put for sale on Daft.ie keep going up in price???

Im confused? i thought house prices were dropping??

Looking through the houses for sale in Dublin many of them have been up for over 1 year & are not selling cause of the ridiculous prices.

But some new houses have been put up and going on the National Price guide for 2011 in Dublin all of them are still overpriced by over €150,000/€200,000 in most cases??

Is Daft.ie not a good place to go house hunting??

The whole market is in a holding pattern of denial, paralysis and confusion. Prices being asked are being plucked out of thin air with no reference to underlying fundamentals like lack of credit availability, unemployment, oversupply of vacant properties, falling disposable income, rental yields etc.

All of this will have to shake down in the next 2 years. Sit tight and wait till then to get an idea of what's really happening in the market. Although, in 2 years it's doubtful the crash will be finished, but there will be more clarity for sure.

McTigs

Spiritofthekop wrote: »

Why are new houses put for sale on Daft.ie keep going up in price???

Im confused? i thought house prices were dropping??

Looking through the houses for sale in Dublin many of them have been up for over 1 year & are not selling cause of the ridiculous prices.

But some new houses have been put up and going on the National Price guide for 2011 in Dublin all of them are still overpriced by over €150,000/€200,000 in most cases??

Is Daft.ie not a good place to go house hunting??

i reckon vendors are factoring an offer price of 30% below asking.... might as well throw a pie in the sky asking price on there, makes the deal look better to the buyer when their offer is accepted.

As treehouse said the whole market is so up in the air nobody really has a clue whats going on. There are so few transactions it's impossible to get an accurate picture even if the was a price register (what ever happened to that?)

Water finds it's own level eventually, in this case about another three years.

Diarmuid

Spiritofthekop wrote: »

Why are new houses put for sale on Daft.ie keep going up in price???

Im confused? i thought house prices were dropping??
?

Look at IrishPropertyWatch. Prices are dropping. I'm renting in one of the supposed desirable South Dublin areas. Based on the asking prices on IPW, since I rented the house 1 year ago, the 3-bed house has fallen €60k.