Glut of repossessed houses could depress prices ‘by up to 25%’

cookie1977

My point being it's all idle speculation. No one knows for sure.

RATM

cookie1977 wrote: »

Sorry but can we please stop with this nonsens. It is not 20% of mortgage holders. AIB have said that they "think/estimate" that 20%of those in ARREARS with aib are strategic defaulters.


http://www.thejournal.ie/david-duffy-says-that-aib-customers-are-strategically-defaulting-1019119-Aug2013/

Sorry my fault- I forgot to put in the in arrears bit. Not that the majority who is actually paying their mortgage would be strategically defaulting to begin with, most people would be in arrears before they start considering wheather or not they're going to strategically default, the arrears are the catalyst to them doing so.

Either way 20% of those in arrears being strategic defaulters is a huge proportion. I always thought it might be about 8-12% so I find the 20% figure that AIB estimate to be on the very high side, According to this article AIB has 140,000 people in arrears with another 30,000 in BTL arrears. So if their 20% figure is correct then AIB alone have somewhere in the region of 34,000 strategic defaulters and that is only one bank- how many does Boi/PTSB'Ulster bank have ?
http://www.independent.ie/business/personal-finance/property-mortgages/aib-crackdown-on-strategic-defaulters-29466902.html

As of right now there are 49,500 properties for sale nationally on Daft and AIB alone are sitting on 34,000 defaulters. No-one knows what percentage of those 34,000 will end up being repossessed but even if it was only 50% then that would mean 17,000 properties on the banks books which have to be disposed of at some stage.

Without doubt this is our dead cat bounce, the media are all talking up property and many people are biting. 2014 will put a stop to further rises as the news agenda will be full of repossessions and market sentiment gets hit yet again.

D3PO

Snakeblood wrote: »

. Some (very few) people are back paying stupid prices for houses now. .

I'd have to disagree.

The last 9 houses sold in my area this year were sold for a lot less than I paid in 2005 granted but the price you buy a house for and the price you pay for a house are very different animals for the most part (cash sales aside)

I paid 379k the last sale in my estate last month was for 240k. Yet I pay €1,132 a month for my mortgage and get €75 a month MIR till 2017 so net €1,057 a month

a 240k house purchase now with a 92% LTV with AIB is €1,042 a month. So it could be argued that people are again paying stupid prices for houses.

GetWithIt

^^
This

bbam

D3PO wrote: »

I'd have to disagree.

The last 9 houses sold in my area this year were sold for a lot less than I paid in 2005 granted but the price you buy a house for and the price you pay for a house are very different animals for the most part (cash sales aside)

I paid 379k the last sale in my estate last month was for 240k. Yet I pay €1,132 a month for my mortgage and get €75 a month MIR till 2017 so net €1,057 a month

a 240k house purchase now with a 92% LTV with AIB is €1,042 a month. So it could be argued that people are again paying stupid prices for houses.

Very interesting post.
I'd never looked at it that way.
That's over same term and everything?

D3PO

bbam wrote: »

Very interesting post.
I'd never looked at it that way.
That's over same term and everything?

yep same term. That's the point people look at the price of the house not the cost of the finance.

Snakeblood

D3PO wrote: »

I'd have to disagree.

The last 9 houses sold in my area this year were sold for a lot less than I paid in 2005 granted but the price you buy a house for and the price you pay for a house are very different animals for the most part (cash sales aside)

I paid 379k the last sale in my estate last month was for 240k. Yet I pay €1,132 a month for my mortgage and get €75 a month MIR till 2017 so net €1,057 a month

a 240k house purchase now with a 92% LTV with AIB is €1,042 a month. So it could be argued that people are again paying stupid prices for houses.

Sorry, the first sentence is saying you have to disagree with my saying some people are paying stupid prices, and the last sentence is saying that it could be argued that people are paying stupid prices now. I'm not really sure if we're talking at cross purposes or not.

If you're saying it's not stupid to buy a house now, I'd agree, depending on how much the house is and on personal circs. But I've seen bidding wars over houses lately, which in the current economic uncertainty, and the current property overhang, and by far the most sensible thing to do, personal circumstances aside, would seem to be wait, to see what happens with repossessions etc. Because prices certainly won't go up on the back of repossessions, but they may well go down.

beeno67

D3PO wrote: »

I'd have to disagree.

The last 9 houses sold in my area this year were sold for a lot less than I paid in 2005 granted but the price you buy a house for and the price you pay for a house are very different animals for the most part (cash sales aside)

I paid 379k the last sale in my estate last month was for 240k. Yet I pay €1,132 a month for my mortgage and get €75 a month MIR till 2017 so net €1,057 a month

a 240k house purchase now with a 92% LTV with AIB is €1,042 a month. So it could be argued that people are again paying stupid prices for houses.

Also to rent the same house (using average yields for Dublin) would cost approximately €1,200 a month.

D3PO

Snakeblood wrote: »

Sorry, the first sentence is saying you have to disagree with my saying some people are paying stupid prices, and the last sentence is saying that it could be argued that people are paying stupid prices now. I'm not really sure if we're talking at cross purposes or not.

If you're saying it's not stupid to buy a house now, I'd agree, depending on how much the house is and on personal circs. But I've seen bidding wars over houses lately, which in the current economic uncertainty, and the current property overhang, and by far the most sensible thing to do, personal circumstances aside, would seem to be wait, to see what happens with repossessions etc. Because prices certainly won't go up on the back of repossessions, but they may well go down.

sorry if I wasn't clear. I was referring to you saying few people are paying stupid money for houses now.

My point was based on the total cost of finance now over the term of a mortgage versus many that have good tracker rates those buying now are playing just as much and therefore are also paying stupid money.

So you could argue that many are paying stupid money for houses now (cash buyers excluded)

D3PO

beeno67 wrote: »

Also to rent the same house (using average yields for Dublin) would cost approximately €1,200 a month.

yield seems to be a bit lower in my area than average could rent for approx. €1,100 but its a fair point

Snakeblood

D3PO wrote: »

sorry if I wasn't clear. I was referring to you saying few people are paying stupid money for houses now.

My point was based on the total cost of finance now over the term of a mortgage versus many that have good tracker rates those buying now are playing just as much and therefore are also paying stupid money.

So you could argue that many are paying stupid money for houses now (cash buyers excluded)

Yeah, I was more thinking of bidding wars than of total cost. And if you buy now at what (I consider) to be a high price, you won't get a tracker, you'll get a variable and be at the mercy of your bank and the ECB, which seems like too risky a prospect.

roro2

RATM wrote: »

According to this article AIB has 140,000 people in arrears with another 30,000 in BTL arrears. So if their 20% figure is correct then AIB alone have somewhere in the region of 34,000 strategic defaulters and that is only one bank- how many does Boi/PTSB'Ulster bank have ?
http://www.independent.ie/business/personal-finance/property-mortgages/aib-crackdown-on-strategic-defaulters-29466902.html

That's the total across all banks, not just AIB.

cookie1977

Just for clarification purposes and to avoid more confusion on this thread. This is the most up to date stats on arrears from the central bank. It;s worth reading.

http://www.centralbank.ie/press-area/press-releases/Pages/MortgageArrearsandRepossessionsStatisticsQ12013.aspx

There were 95,554 (12.3 per cent) private residential mortgage accounts for principal dwelling houses (PDH) in arrears of over 90 days at end-March 2013 out of a total PDH mortgaged stock of 774,109

There were 29,369 (19.7 per cent) residential mortgage accounts for buy-to-let (BTL) properties in arrears of over 90 days at end-March 2013 out of a total BTL mortgaged stock of 149,395

Total in arrears of 90 days: 124923 (7.5%) out of a total stock of 1,658,243 (mortgaged and unmortgaged stock)

D3PO

cookie1977 wrote: »

Just for clarification purposes and to avoid more confusion on this thread. This is the most up to date stats on arrears from the central bank. It;s worth reading.

http://www.centralbank.ie/press-area/press-releases/Pages/MortgageArrearsandRepossessionsStatisticsQ12013.aspx





Total in arrears of 90 days: 124923 (13.5%) out of a total stock of 923504

Just to add stock in terms of these figures is mortgaged housing stock and not the total housing stock in the country.

For the purpose of this thread i.e the impact of repos on the market that's an important distinguishing feature.

cookie1977

D3PO wrote: »

Just to add stock in terms of these figures is mortgaged housing stock and not the total housing stock in the country.

For the purpose of this thread i.e the impact of repos on the market that's an important distinguishing feature.

Yes, correct. The total houses in ireland in 2011 were: 1,658,243

http://www.cso.ie/quicktables/GetQuickTables.aspx?FileName=CNA33.asp&TableName=Number+of+private+households+and+persons+in+private+households+in+each+Province+,+County+and+City&StatisticalProduct=DB_CN

Ray Palmer

D3PO wrote: »

I'd have to disagree.

The last 9 houses sold in my area this year were sold for a lot less than I paid in 2005 granted but the price you buy a house for and the price you pay for a house are very different animals for the most part (cash sales aside)

I paid 379k the last sale in my estate last month was for 240k. Yet I pay €1,132 a month for my mortgage and get €75 a month MIR till 2017 so net €1,057 a month

a 240k house purchase now with a 92% LTV with AIB is €1,042 a month. So it could be argued that people are again paying stupid prices for houses.

I have been saying this for a while now. If you do consider that rent prices were higher during the boom too (and returning to those level now) people who saying they saved money may very well be wrong. As time goes on and the ECB rate goes up the people who paid less for their house could easily pay a lot more for their house in the long run.

Add to that the age you were when you bought somebody buying in their late 30s or early 40s now will be a decade behind their contemporaries that were crazy buying in the boom. Just about to retire while their contemporaries will have an extra 10 years to add to their pensions at a favourable rate. That is a big difference to the quality of your life overall.

cookie1977

We've no idea what ECB rates will be going forward as many analysts at present predict further cuts or low rates until mid/late 2014.

Even when rates go up they'll go up very slowly indeed so as not to spook the market/growth. And during all this time many of those paying down their mortgages are eating into their capital so by the time rates rise their monthly mortgages rises may not be so painful.

I do think though that the country as a whole should move towards a more european style mortgage rate long reasonable fixed rates. Not the ECB tracker and short term fixed rates we have now (or used to have).

Ray Palmer

cookie1977 wrote: »

We've no idea what ECB rates will be going forward as many analysts at present predict further cuts or low rates until mid/late 2014.

.

Over the next 20-30 years you can be sure it will go up and those not on trackers will be paying more. Newer mortgages will probably be subsidising the loss making element of trackers for a long time too.

The RTE link didn't work BTW.

Frank Lee Midere

Ray Palmer wrote: »

I have been saying this for a while now. If you do consider that rent prices were higher during the boom too (and returning to those level now) people who saying they saved money may very well be wrong. As time goes on and the ECB rate goes up the people who paid less for their house could easily pay a lot more for their house in the long run.

Add to that the age you were when you bought somebody buying in their late 30s or early 40s now will be a decade behind their contemporaries that were crazy buying in the boom. Just about to retire while their contemporaries will have an extra 10 years to add to their pensions at a favourable rate. That is a big difference to the quality of your life overall.

Two mistakes here:

This assumes that the ECB and tracker rates will always diverge, which is nonsense of course. The reason they are diverging now is because the 50% or people on tracker rates are causing the banks to lose income with every ECB drop, so they push up the retail rates. When the ECB rates increase this logic fails and the trackers will converge on the retail rates, until in fact they reach the existing retail rates or the retail rates fall. In fact the retail rates may fall for non-trackers when the ECB rates increase, the opposite has happened now. If that doesn't happen it just takes one bank to enter the market to do it, and people will transfer their mortgages.

Also, the people who bought in the boom got their cheap tracker loans for 40 years. Over time thats a lot of cash.

cookie1977

Ray Palmer wrote: »

Over the next 20-30 years you can be sure it will go up and those not on trackers will be paying more. Newer mortgages will probably be subsidising the loss making element of trackers for a long time too.

The RTE link didn't work BTW.

Ah, yes of course over 20-30 years they will go up. But what you say is why I think people (and the banks) should be looking at long term fixed rates. Yes the monthly cost will be higher but it offers stability over the longer period. No highs to lows to highs that the current system offers. I presume long term the CB and the banks are looking at how they can completely reorganise how mortgages work for greater stability for everyone (I hope anyway). Link fixed.

Frank Lee Midere

Ray Palmer wrote: »

Over the next 20-30 years you can be sure it will go up and those not on trackers will be paying more. Newer mortgages will probably be subsidising the loss making element of trackers for a long time too.

The RTE link didn't work BTW.

No they won't. The rates will, of course, converge.

GetWithIt

Ray Palmer wrote: »

I have been saying this for a while now. If you do consider that rent prices were higher during the boom too (and returning to those level now) people who saying they saved money may very well be wrong. As time goes on and the ECB rate goes up the people who paid less for their house could easily pay a lot more for their house in the long run.

Add to that the age you were when you bought somebody buying in their late 30s or early 40s now will be a decade behind their contemporaries that were crazy buying in the boom. Just about to retire while their contemporaries will have an extra 10 years to add to their pensions at a favourable rate. That is a big difference to the quality of your life overall.

You're not quite comparing like with like. D3PO's example works best if compare the same type of person now with the same type of person in 2006 - a first time buyer with the minimum deposit.

It does not work well if you're comparing an actual person who choose not to buy in 2006 and is now looking to buy. For the simple reason that in the interim that person "should" have amassed the sort of deposit that negates the interest differential. The saving for that person is therefore a real saving versus having purchased 7 years previously.

cookie1977

Frank Lee Midere wrote: »

No they won't. The rates will, of course, converge.

You'd hope so but I'd imagine the banks will raise the std var. rates too for a while as the ecb rate goes up just to increase the profits. At least for a while then you're right, eventually they'll converge in the long term

OMD

Frank Lee Midere wrote: »

No they won't. The rates will, of course, converge.

How will they converge?

cookie1977

OMD wrote: »

How will they converge?

Ideally they'll raise tracker rates with the ecb rate and leave variable rates alone until the two meat each other...ideally.

Frank Lee Midere

OMD wrote: »

How will they converge?

If the ECB raises the rates, the banks will get more as the trackers have to pay more so they can get more competitive with their retail rates. If they don't somebody will enter the market who will.

In short if the ECB is at 5% retail will not be at 10% and trackers at 6%. There will come a time when the guy with the 450K is paying vastly more than the guy with the 260K mortgages. Scarily enough, this means Ireland has a generation of hurt.

OMD

GetWithIt wrote: »

You're not quite comparing like with like. D3PO's example works best if compare the same type of person now with the same type of person in 2006 - a first time buyer with the minimum deposit.

It does not work well if you're comparing an actual person who choose not to buy in 2006 and is now looking to buy. For the simple reason that in the interim that person "should" have amassed the sort of deposit that negates the interest differential. The saving for that person is therefore a real saving versus having purchased 7 years previously.

But the person who didn't buy in 2005 (as per the example) has been paying rent for the last 8 years. That rent is now more than the mortgage. How would they have amassed a deposit any more than the home owner would have amassed significant savings to say pay off part of mortgage early

DoesNotCompute

heyjude wrote: »

With the government pegging property tax rates to property values, it gives the government yet another reason/incentive to do whatever it can to stop anything that may cause property prices to fall further. As such, while they can proclaim that measures they take to stop mass repossessions, are being introduced to protect homeowners by keeping families in their homes, in reality, if it wasn't so already, they now have a sizeable vested interest in maintaining/increasing property values. Higher property values = higher property tax payments.

Well that's a nice conspiracy theory, and it sounds all good in theory. However, the property tax is based on the market valuation as at 1st May 2013, and is fixed until 2016.

So if the government is propping up market prices, it won't have any effect on property tax returns.

Frank Lee Midere

OMD wrote: »

But the person who didn't buy in 2005 (as per the example) has been paying rent for the last 8 years. That rent is now more than the mortgage. How would they have amassed a deposit any more than the home owner would have amassed significant savings to say pay off part of mortgage early

Rent fell for a while. In any case this benefit of buying in 2006 is illusionary. Things will get worse pretty soon.

OMD

Frank Lee Midere wrote: »

If the ECB raises the rates, the banks will get more as the trackers have to pay more so they can get more competitive with their retail rates. If they don't somebody will enter the market who will.

In short if the ECB is at 5% retail will not be at 10% and trackers at 6%.

But in this example the retail rate will never be 6% so the rates will never converge. More than likely if ECB is 5%, tracker will be 6% (or less in many cases) and retail rate will be 8.5% or 9%