50% Drop speculation, hardly everywhere?

chris_ie

Ok, I've been reading these forums for quite a while and have been house hunting and holding off for the last 2 years or so. Its a good time to be a buyer in one way but bad in another, no matter when you buy people are going to say that things will get lower. Its quite frustrating. I believe that alot of people havent a clue but some have raised many valid points, backing up their arguments.

My question is that that majority of speculation I have seen is in regards to the likes of Dublin. What about other areas such as Letterkenny. Do people believe there is a bit to go yet up there? We seen a nice 4bed detached in a nice area, small estate, for 290k. I have spoken to a few people that reckon such a house may have cost around 200k to build. Will a house like this drop much more or is close to its true value.

hobochris

the right time to buy is when you've found a house you like and can afford.. If you really like the house and plan to stay there then don't worry about what it will be worth in the future.

chris_ie

hobochris wrote: »

the right time to buy is when you've found a house you like and can afford.. If you really like the house and plan to stay there then don't worry about what it will be worth in the future.

Yeah thats our thinking aswell. Just some peoples comments get into your head about price drops. Not knowing what could happen jobwise etc.. We were aiming for around 250k mark for quite a while. Still aiming for that.

stereo_steve

hobochris wrote: »

the right time to buy is when you've found a house you like and can afford.. If you really like the house and plan to stay there then don't worry about what it will be worth in the future.

Awful idea. Truly awful.

Chris, this is going to (probably) be the biggest financial decision of you life. Think carefully about it. Would it kill you to wait a year or so?

chris_ie

stereo_steve wrote: »

Awful idea. Truly awful.

Chris, this is going to (probably) be the biggest financial decision of you life. Think carefully about it. Would it kill you to wait a year or so?

It wouldnt kill us no. In the last 2+ years we've been looking we haven't seen many houses that we've both liked, that ticked all the boxes and was in a desirable location. This one is, but we wont pay the price its currently at. Its just a pain in a** at times! Seems like we're always waiting. We've said we arent in a rush. Seems a bit like if a house is 350 then people will say leave it and see,it'll come down to under 300. Then it does, and people say wait and see, it'll come down to 200 mark. Seems that people just like speculation! I get what your saying though, I do.

dclare

Chris, no one really knows what's going to happen with prices, but there are certainly some negative factors such as increasing unemployment, recession, higher taxes, excess stock etc which would logically push prices down (although I don't see them dropping anything like 50%).

Local factors are an issue too - what are the prospects for local companies / employment levels etc. If lots of local jobs are lost, it's only going to push prices one way.

2 things need to happen before house prices begin to recover (1) the banks need to open up their lending (2) confidence need to return to the market.

If you are thinking about buying, speak to a broker and find out how much you can borrow.

Getting finance is getting a lot tougher than it was even 12 months ago -get an indication of what you can borrow, so you don't waste your time looking at homes which may be out of your reach at the moment.

If you can't borrow enough now, still keep saving, because lending will losen up at some stage.

chris_ie

dclare wrote: »

Chris, no one really knows what's going to happen with prices, but there are certainly some negative factors such as increasing unemployment, recession, higher taxes, excess stock etc which would logically push prices down (although I don't see them dropping anything like 50%).

Local factors are an issue too - what are the prospects for local companies / employment levels etc. If lots of local jobs are lost, it's only going to push prices one way.

2 things need to happen before house prices begin to recover (1) the banks need to open up their lending (2) confidence need to return to the market.

If you are thinking about buying, speak to a broker and find out how much you can borrow.

Getting finance is getting a lot tougher than it was even 12 months ago -get an indication of what you can borrow, so you don't waste your time looking at homes which may be out of your reach at the moment.

If you can't borrow enough now, still keep saving, because lending will losen up at some stage.

We were speaking to a broker not so long ago. But we're going again soon to see what the latest is. We were told the last time that we were good candidates as we have enough deposit saved (based on current 92% lending) and neither of us have any debts. I still believe we would get our mortgage.

dclare

Fair enough, sounds like you are in a good position.

Lending criteria is changing almost by the day at the moment, so it probably makes sense to get an update from your broker.

The lenders who will probably be most lightly to offer finance and pretty good deals are AIB, Bank of Ireland / ICS Building Society, EBS / Haven Mortgages. At the moment, they account for 85% of all mortgage lending in Ireland.

faceman

IMO the right time to buy isnt when things hit the bottom, its just before it hits the bottom. HOwever how do you call the bottom? Quite simply you cant.

Ultimately an individual's circumstances will decide when to buy. If you are buying a house that you ultimately are going to remain in for the rest of your life or at least 10 to 20 years, then when you need to align you decision to buy, with your personal circumstances. If you are happy to wait, then wait. If the estate you are looking at has a history of very few houses for sale and infrequently, thats another factor etc etc. There are many variables.

Although if someone is looking at appartments, i wouldnt apply the same logic. There will always be an oversupply of them.

chris_ie

dclare wrote: »

Fair enough, sounds like you are in a good position.

Lending criteria is changing almost by the day at the moment, so it probably makes sense to get an update from your broker.

The lenders who will probably be most lightly to offer finance and pretty good deals are AIB, Bank of Ireland / ICS Building Society, EBS / Haven Mortgages. At the moment, they account for 85% of all mortgage lending in Ireland.

Yeah our position is quite good for now. Hopefully it will stay that way!

Thanks for the replies.

Nate--IRL--

faceman wrote: »

IMO the right time to buy isnt when things hit the bottom, its just before it hits the bottom. HOwever how do you call the bottom? Quite simply you cant.

How about buying after the bottom? That would make more sense to me tbh.

Nate

ntlbell

Nate--IRL-- wrote: »

How about buying after the bottom? That would make more sense to me tbh.

Nate

i think ideally a lot of people would like to catch it just as it starts to go back up.

but trying to identify that is also very hard.

but it boils down to what faceman was saying, if you find the right house in the right area and it's comfortably affordable based on various stress testing etc then it's the right time to buy regardless

faceman

Nate--IRL-- wrote: »

How about buying after the bottom? That would make more sense to me tbh.

Nate

when people starting buying again it brings back the risk of bidding wars etc.

AARRRGH

chris_ie wrote: »

What about other areas such as Letterkenny. Do people believe there is a bit to go yet up there? We seen a nice 4bed detached in a nice area, small estate, for 290k.

290k seems like an awful lot of money for a house in a county which is hemorrhaging jobs.

Do you mind me asking how much your salary is? And can you afford to pay this mortage on one salary with interest rates around 5 - 6%?

Nate--IRL--

faceman wrote: »

when people starting buying again it brings back the risk of bidding wars etc.

Very unlikely to be a repeat of the bubble years for some time methinks.

Nate

whizzbang

It might be worth taking a look at prices in other Euro denominated countries to try and reset you house price expectations. Take a look to see what you would get for 290k elsewhere. If you still think you are getting a good deal and can afford the rates going up to 5% or 8% then go for it.

jetski

Nate--IRL-- wrote: »

Very unlikely to be a repeat of the bubble years for some time methinks.

Nate

can you give us some insight, why do you say that?

The best time to buy before prices being to recover as you still have the bargaing power of declining prices, so if you can save 10% on a market that will drop only another 5% blah blah you get it.....

gurramok

jetski wrote: »

can you give us some insight, why do you say that?

The best time to buy before prices being to recover as you still have the bargaing power of declining prices, so if you can save 10% on a market that will drop only another 5% blah blah you get it.....

We had our frenzy, its over for a generation. Expect normal buying and selling in a stable market when that bottom hits.

Still, asking 290k in Letterkenny is outrageous as i believe unemployment in Donegal never went below double figures in the bubble years and is currently rising.

RATM

ntlbell wrote: »

i think ideally a lot of people would like to catch it just as it starts to go back up.

but trying to identify that is also very hard.

Good point. Exactly when is it that most economists/commentators would declare the bottom has been reached?
I'm thinking the housing market would have to show three consecutive months of growth in prices, just the same way the definition of a recession is three consecutive months of stagnation or deflation in the economy.
Would this be accurate or is there another measure someone knows of that signals the beginning of the end of a slump?

drunkmonkey

What does everyone think of the american model, rent x 14 years = house value..

the house chris is looking at has a rental value of approx 1200pm (i'm being generous)

It would give the house a value of €201600 which would seem better value but not seriously cheap either in a normal market...

i'd offer them that Chris, let them refuse if the wish, sit tight and save up some more money..values are only going one way at the moment...

irlrobins

RATM wrote: »

just the same way the definition of a recession is three consecutive months of stagnation or deflation in the economy.

It's actually defined as a fall in GDP in two successive quarters, or over 6 months.

6 months seems a long time in the property market, no?

chris_ie

Cheers for all the replies guys. We are in no rush really but its just awkward to see where things are going! How low prices will go etc. The house is valued at 290k. We were originally thinking of placing an offer at 250k which would give us a 230k mortgage. I'm on round 35k a year and my girlfriend is on pretty much same.

When we were looking about building before we came to the conclusion, with advice from others, that building a house could come to around 150-200k. Then we'd need the site on top of that, sites around here dont seem to have budged in price. Also we have some laws that prevent us building in some areas. So if you got a decent site for 50k then the house would end up costing a total of 200-250k. So here lies more confusion. This house we're looking at is close to town and both our work places and is in a nice area.

kmick

chris_ie wrote: »

The house is valued at 290k.

Who valued it at that the seller? Have you paid an independant valuer to come and have a look at the house. It will be the best 150-200 euro you will spend. Make sure to get someone non-local who does not know the builder. Ask him/her for worst case scenario price.

Then send the valuation (whch is likely to be 50-60k below the builder valuation) to the builder with an offer for that price. Say if it is 50 below at 240k offer that. Then go up in 1's to 250k. Put each offer on the table for 24 hours only as "you are also looking at another property which your gf likes but you prefer this one". Drop out at 250k and wait for the call. If it does not come you know the builder cant make a profit at 250k or does not need the cash right now.

spockety

chris_ie wrote: »

Cheers for all the replies guys. We are in no rush really but its just awkward to see where things are going! How low prices will go etc. The house is valued at 290k. We were originally thinking of placing an offer at 250k which would give us a 230k mortgage. I'm on round 35k a year and my girlfriend is on pretty much same.

Not to pry into your personal life etc., but this is slightly alarming. Have you thought about what happens if either one of you loses your job, or to be a bit more positive you have a baby (or two, or three) and one of you has to quit work to be a full time home maintainer?

Servicing a 230K mortgage on 35K a year while trying to raise a family could be incredibly difficult, to put it as mildly as I can.

the_syco

chris_ie wrote: »

The house is valued at 290k. We were originally thinking of placing an offer at 250k which would give us a 230k mortgage.

You get a mortgage for a house, because if you run out of money, they can evict you and put someone into the house (or so the theory goes).

chris_ie wrote: »

When we were looking about building before we came to the conclusion

I don't think you can get a mortgage on a plot of land, because if you run ouf money, if they evict you, they could have an unhabitable half-finished house on their hands

drunkmonkey

I think 250k is to strong an offer, prices are still way over valued. You have to ask yourself what would NAMA pay for a 300k property loan.

Chris as for the price of building your own home, builders charges have dropped and the price of land will follow. 250k should build a very nice house (maybe even with a pool:))

I still think the Mortgage value should be related to the rent in some way, In this case the mortage is 30 times the yearly rental value. That does not make sense.

chris_ie

spockety wrote: »

Not to pry into your personal life etc., but this is slightly alarming. Have you thought about what happens if either one of you loses your job, or to be a bit more positive you have a baby (or two, or three) and one of you has to quit work to be a full time home maintainer?

Servicing a 230K mortgage on 35K a year while trying to raise a family could be incredibly difficult, to put it as mildly as I can.

Yeah we've thought about that too. All these factors are the reasons why we still havent bought a house yet. Its difficult to know what to do.

ntlbell

chris_ie wrote: »

Yeah we've thought about that too. All these factors are the reasons why we still havent bought a house yet. Its difficult to know what to do.

it's not really difficult at all.

right now you can't afford a house for 250k

so sit back, wait,rent and buy when you CAN afford to.

it's pretty damn simple really.

ronkmonster

the_syco wrote: »

I don't think you can get a mortgage on a plot of land, because if you run ouf money, if they evict you, they could have an unhabitable half-finished house on their hands

You could get a mortgage on land but they only give it out in stages.
Certain amount of each part of house completed. So when the full mortgage amount has been paid out, a full house should be available if things go bad.

They may have changed practices in the last year though.

spockety

chris_ie wrote: »

Yeah we've thought about that too. All these factors are the reasons why we still havent bought a house yet. Its difficult to know what to do.

Well, if it has been one of the factors why you haven't bought a house so far, ask yourself why you would now dismiss it as a factor?

I think it's one of the biggest issues to be honest, and I would not dismiss it lightly. I can understand that there is a lot of emotion tied up in the decisions around house buying, and it is not unusual for people to say "ah sure, we'll cross that bridge when we come to it".

You need to be thinking in the here and now, would you be even thinking of taking on 230k of debt if there was just one of you working and earning 35k a year? Possibly with the arrival of new dependents in your family?

I would sit tight and watch the market collapse some more. It should get to a point where a man on an average wage like yourself should be able to afford an average house in an average area. Until that scenario exists the housing market in this country is still ill.

chris_ie

spockety wrote: »

Well, if it has been one of the factors why you haven't bought a house so far, ask yourself why you would now dismiss it as a factor?

I think it's one of the biggest issues to be honest, and I would not dismiss it lightly. I can understand that there is a lot of emotion tied up in the decisions around house buying, and it is not unusual for people to say "ah sure, we'll cross that bridge when we come to it".

You need to be thinking in the here and now, would you be even thinking of taking on 230k of debt if there was just one of you working and earning 35k a year? Possibly with the arrival of new dependents in your family?

I would sit tight and watch the market collapse some more. It should get to a point where a man on an average wage like yourself should be able to afford an average house in an average area. Until that scenario exists the housing market in this country is still ill.

I get what your saying. We have spoken about this in the last few days. We were thinking on an offer for the house but in the last few days kind of went off the idea a bit after seeing some more drops in the area, fair enough the houses that dropped were not as nice or in as desirable an area as this one but still. At the moment we're possibly going to keep an eye out for now and see what things are like towards the end of the year.