Housing bubble starting to pop?

mossym

Shane&#8482 wrote:

I was in the states last week and what you get is certainly not comparable to what you get here, this is typical of what I seen. Notice the sq footage 2,512, location is good too (I stayed in that area, it's nice).

I also think half a million dollors is a lot of money, when I asked the Americans I was working with they agreed, I told them what you could get here for it and they just thought I was exaggerating, they just didn't believe me.

I went looking at a few places around the world, here are a few I found.
Mannhattan (that's in New York)
Germany
Germany (again)
Tuscany, Italy
France
London, England
Kent, England
Tallaght, Ireland
Crumlin, Ireland

Don't tell me our house prices are normal as all of those properties are priced at €381k, that's £256k and $480k on xe.com as I post.

you just picked a house in minnesota. That's like picking a house in Sligo and saying ti's indicative of the housing market over the whole country. Look at some of the big markets, they'll shock you. I lived in the bay area for 6 years, only came back in February. I wouldn't use that as a yardstick either, it's the opposite of minnesota.

Gurgle

Gurgle wrote:

While to predict doomsday based on nothing but wishfull thinking is ok.

Besides, why should I be the only one to justify my predictions?
Have you got anything to back up yours?

yes as listed previously:

http://www.boards.ie/vbulletin/showpost.php?p=52108176&postcount=822

thats not "wishful thinking"


now whether you believe they are factors for a crash is debatable
so why not debate

SkepticOne

Gurgle wrote:

So to predict that what has happened will continue to happen and then ease off requires justification.

Yes I would think so. What is the main argument in favour of this scenario? It seems unlikely in my opinion.

ongarite

Was just listening to the business show in Newstalk and they had 2 financial analyst on and they were talking about how you shouldn't fix your mortgage interest rate now as rates have reached the ceiling. Obviously they must be deaf as I thought the ECB had another 0.5% increase left in them yet.

They also talked about people re-mortgaging on the "equity" built up on the their houses. I thought it was utter madness. It would be the last thing I would do now as that so called "equity" doesn't really exist.

ionapaul

The ECB quite clearly indicated another 0.25% rise in December and used language to let all and sundry know that they would be happy to continue raising rates in 2007!

Most of the analysts on the radio, TV and in the newspapers are in the pockets of the vested interests to some degree and want to avoid spooking that endangered species, the vanishing Irish FTB

SkepticOne

ongarite wrote:

Was just listening to the business show in Newstalk and they had 2 financial analyst on and they were talking about how you shouldn't fix your mortgage interest rate now as rates have reached the ceiling. Obviously they must be deaf as I thought the ECB had another 0.5% increase left in them yet.

Although I would be very careful when dealing with financial analysts who, as pointed out, often represent vested interests, it might not be a good thing fixing if there's only really only going to be a .5% increase as the fixed interest rate available may factor in an increase higher than this.

TSBs tracker mortgage is at 4.1%. A .5% increase brings it up to 4.6% whereas the 5 year fixed rate is at 4.99%.

mentalson

Sponge Bob wrote:

a national rental market of say 600,000 bodies (not sure exactly how many rent ) QUOTE]

approx 40,000 properties registered with the PRTB. Taxes are for little people

miju

Gurgle wrote:

So to predict that what has happened will continue to happen and then ease off requires justification.

yes

Gurgle wrote:

While to predict doomsday based on nothing but wishfull thinking is ok.

no and it's not wishful thinking either , this country is quite simply ****ed when things get badly pear shaped

Gurgle wrote:

Besides, why should I be the only one to justify my predictions?
Have you got anything to back up yours?

well i've yet to see a bull with any decent / rational argument as to why things will be hunky dory, i have seen plenty of bears come up with plenty of reports / articles and actual links to house prices ALREADY dropping

i can of course repeat the same things if you wish

ongarite wrote:

Was just listening to the business show in Newstalk and they had 2 financial analyst on and they were talking about how you shouldn't fix your mortgage interest rate now as rates have reached the ceiling

well going by their indications that they wish to normalise rates it will be hitting at 4% minimum prob 6-7% at the VERY maximum

Gurgle

miju wrote:

actual links to house prices ALREADY dropping

Ok, lets look at that list:
19 examples of houses that were put on the market at one price, and each time the asking price was reduced.

15 of those 19 are at asking prices over 500k
Are these indicative of a market where the average price is 391k?

Of the other 4:
A 3-bed semi in Lucan - put in first at 400k, reduced to 390k. Yes thats a drop of 2.5% in the asking price.

A 4-bed semi in Mullingar (where hundreds of new houses have been built in the last few years), asking price reduced from 325k to 315k. Again, price is hardly falling through the floor with a 3.5% reduction.

3-bed semi in Huntstown reduced from 370k to 360k - Thats about 300 yards from sheepmore, isn't it? A nice street but certainly not a prime location.

And then theres a nice 4-bed detached property with large site for 380 k. Sounds like a bargain doesn't it - its in Laois!

There was a time these would all have been snapped up by investors with loads of available credit and the conviction that the market would rise by 20% per year forever.

The very fact that houses are taking longer to sell shows a slowdown in the market. You're a bit premature with the 'I told you so' though.

Sonnenblumen

Gurgle wrote:

Ok, lets look at that list:
19 examples of houses that were put on the market at one price, and each time the asking price was reduced.

15 of those 19 are at asking prices over 500k
Are these indicative of a market where the average price is 391k?

Of the other 4:
A 3-bed semi in Lucan - put in first at 400k, reduced to 390k. Yes thats a drop of 2.5% in the asking price.

A 4-bed semi in Mullingar (where hundreds of new houses have been built in the last few years), asking price reduced from 325k to 315k. Again, price is hardly falling through the floor with a 3.5% reduction.

3-bed semi in Huntstown reduced from 370k to 360k - Thats about 300 yards from sheepmore, isn't it? A nice street but certainly not a prime location.

And then theres a nice 4-bed detached property with large site for 380 k. Sounds like a bargain doesn't it - its in Laois!

There was a time these would all have been snapped up by investors with loads of available credit and the conviction that the market would rise by 20% per year forever.

The very fact that houses are taking longer to sell shows a slowdown in the market. You're a bit premature with the 'I told you so' though.

Hey Gurgle, nothing lasts forever. So help yourself to a lollipop on the way out.

miju

Gurgle wrote:

You're a bit premature with the 'I told you so' though.

dont get me wrong man i'm not trying to say "i told you so" (particularly when i personally am expecting a fall of 30-40%) i was just pointing to the fact that prices have begun to drop , 2.5% drop is still a drop and it may / may not be the start of a much larger slide (though i believe it is the start)

also while 2.5% looks small that still equates to about a €30,000 drop which is a full years salary for the average earner , cant be sniffed at either

antoinolachtnai

The property your refer to in Manhattan is a coop. As such it is not comparable at all to any property in Ireland. The financial structure is completely different.

Shane™

Gurgle wrote:

Ok, lets look at that list:
19 examples of houses that were put on the market at one price, and each time the asking price was reduced.

15 of those 19 are at asking prices over 500k
Are these indicative of a market where the average price is 391k?

Of the other 4:
A 3-bed semi in Lucan - put in first at 400k, reduced to 390k. Yes thats a drop of 2.5% in the asking price.

A 4-bed semi in Mullingar (where hundreds of new houses have been built in the last few years), asking price reduced from 325k to 315k. Again, price is hardly falling through the floor with a 3.5% reduction.

3-bed semi in Huntstown reduced from 370k to 360k - Thats about 300 yards from sheepmore, isn't it? A nice street but certainly not a prime location.

And then theres a nice 4-bed detached property with large site for 380 k. Sounds like a bargain doesn't it - its in Laois!

There was a time these would all have been snapped up by investors with loads of available credit and the conviction that the market would rise by 20% per year forever.

The very fact that houses are taking longer to sell shows a slowdown in the market. You're a bit premature with the 'I told you so' though.

It has to start somewhere.

It was not too long ago I was looking to buy, I stopped in April, and every place I looked at went up by 20k to 30k, they were priced that way, now they are not jumping up, in fact some are starting to go the opposite direction - sooner than I thought.

If you think about it prices have to remain stable for a while before people feel the need to reduce their asking price in order to get the sale, that's my opinion anyway.

Pines

Useful strategies in a slow market....

http://www.theonion.com/content/node/52979

Gurgle

Shane&#8482 wrote:

If you think about it prices have to remain stable for a while before people feel the need to reduce their asking price in order to get the sale, that's my opinion anyway.

The assumption is, as always, that most of the people with their houses on the market have to sell them.

There will be a certain amount of people in this position but I believe the majority are still people who plan to either trade up or cash in and move further from Dublin. In either of those cases, if they can't get the price they require they will just stay where they are.

D'Peoples Voice

Gurgle wrote:

The assumption is, as always, that most of the people with their houses on the market have to sell them.

True if they can afford to hold off and absorb a possible cut of thousands of euro in the sales price as prices continue to fall, they are fine.

Gurgle wrote:

There will be a certain amount of people in this position but I believe the majority are still people who plan to either trade up or cash in and move further from Dublin. In either of those cases, if they can't get the price they require they will just stay where they are.

A very small percentage of people will hold their nerve. After all we are takling about prices being 'sticky' at best at the minute, and given that next year we expect to see THOUSANDS more new properties hit the market, the question is who will buy them. Many people would sooner take the cut in price now and realize their profits.
We know from the planning permissions that housing supply is to continue, so the supply curve is shifting to the right at the same time as the demand curve is shifting to the left as affordability has taken a massive hit inn the last 12 months, there is only one inevitable outcome, a lower equilibrium price.
I don't deny there will be people holding out for the right price, but if everything around them is falling, who will buy their house. The theory of holding out only works if supply in the area is constant, but we know that in almost every area this is not the case, supply is increasing on a daily basis.

gurramok

Gurgle wrote:

Ok, lets look at that list:
19 examples of houses that were put on the market at one price, and each time the asking price was reduced.

15 of those 19 are at asking prices over 500k
Are these indicative of a market where the average price is 391k?

Try my posted drops on same thread, a good few 391 or under.
Here they are for your perusal:
http://www.askaboutmoney.com/showpost.php?p=292101&postcount=5770
http://www.askaboutmoney.com/showpost.php?p=292122&postcount=5775

I didn't have to look hard for them, the drops are everywhere.

soma

Gurgle wrote:

The assumption is, as always, that most of the people with their houses on the market have to sell them.

There will be a certain amount of people in this position but I believe the majority are still people who plan to either trade up or cash in and move further from Dublin. In either of those cases, if they can't get the price they require they will just stay where they are.

Prices are set at the margin. If you do not understand this, you do not understand markets.

dochasach

Shane&#8482 wrote:

...

I went looking at a few places around the world, here are a few I found.
Mannhattan (that's in New York)
Germany
Germany (again)
Tuscany, Italy
France
London, England
Kent, England
Tallaght, Ireland
Crumlin, Ireland

Don't tell me our house prices are normal as all of those properties are priced at €381k, that's £256k and $480k on xe.com as I post.

Here are a couple of my favorites:

A mountain chalet in Valais Switzerland (349,000 Euro):
http://www.viviun.com/AD-60288/


In Luasanne (on Lake Lemon/Genva) an apartment building. (less than 1.3 million euro)
http://www.viviun.com/AD-58857/

Now I've done it, the Dublin property blight insanity spreads to yet another country... cheap as chips Switzerland, sigh. The Soviet, U.S., U.K. Spanish, German and Portuguese empires have long collapsed but if you're Irish, the world is yours.

http://irishpropertybubble.blogspot.com

Gurgle

soma wrote:

Prices are set at the margin. If you do not understand this, you do not understand markets.

People who aren't getting offers at the money they need to move to where they want to go are not going to sell their house.

If you don't understand this, you don't understand people.

The housing market is not the IT bubble, its not the semiconductor industry, its not an automobile manufacturer, its not a printing press. Its not something the majority of investors can exit en-masse.

Someone selling their house is still planning to live somewhere. They're either planning to buy somewhere more expensive and increasing their mortgage or buying somewhere less expensive and reducing their cost of living.

If they aren't going to get the money they need for what they want to do, they are going to stay where they are.

Even the people waiting for a crash all have different ideas of what prices would have to drop to before they would/could buy. This itself will prevent a crash. I expect a slowdown as the amateur investors eventually cop on that there are other investments with better returns than the rental market, but there is no way the country will be left with significant negative equity.

Idleater

Gurgle wrote:

If you don't understand this, you don't understand people.

If they aren't going to get the money they need for what they want to do, they are going to stay where they are.

This is a very valid point.

Human nature (instinct and survival) always overrides economics.

L.

Sponge Bob

dochasach wrote:

In Lausanne (on Lake Lemon/Genva) an apartment building. (less than 1.3 million euro)
http://www.viviun.com/AD-58857/

But Switzerland is not a filthy rich , stable and skanger free zone like Dublin is . Of Course Dublin prices should be at a considerable premium to Lausanne. Its only right

Arithon

Gurgle wrote:

Someone selling their house is still planning to live somewhere. They're either planning to buy somewhere more expensive and increasing their mortgage or buying somewhere less expensive and reducing their cost of living.

If they aren't going to get the money they need for what they want to do, they are going to stay where they are.

I came across this page a few weeks ago: http://www.itulip.com/housingnotlikeequities.htm

The following quote from the page talks about a sudden slowdown in transactions during a downturn:

The reason is a reversal in the psychology of buyers that developed at the top of a speculative housing market. Buyers had been buying at prices they knew were too high but on the assumption that they'd be able to sell if they needed to. The thought was: "Ok, maybe it's overpriced, but at least I'll be able to sell it later for at least what I paid for it, but likely more." What happens on the way down is that houses go on the market and just about no one shows up to look. That's because buyers weren't buying earlier primarily because they needed a place to live, but because they thought the price would likely rise and that, in any case, they'd be able to get out when they wanted with all of their money or more. On the way down, neither condition is true. So buyers stay home, so to speak.

Can't buyers be enticed by declining prices, by bargain hunting, you ask? No. Once housing sale transactions suddenly fall from, say, several hundred a month in a large community to, say, one or two a month, this creates fear and loathing about prices. Long periods of time pass when there are no transactions at all. Think of it this way. What's the comparable on your 3000 square foot home in San Mateo when the last sale was, say, seven months ago? Is it 10% less than the last sale of a similar home on the area? 30% less? This happened in Japan, and prices nationally are still more than 60% below peak prices in 1992, where real estate prices continued to climb for several years after their stock market bubble popped. Sound familiar?

The discussion is centered on the US market, but there could be something in it for here too. Just like Gurgle's suggestion that the illiquidity will prevent a crash, this is also speculation - and "the proof of the pudding is in the eating".

bill_ashmount

Hailee Fat Mushroom wrote:

Meanwhile, there are quite plausible scenarios which would see 'significant' negative equity - take your pick out of chronic housing oversupply, major employers shifting to Eastern Europe, outbreak of bird flu, conflict in the Korean peninsula rattling the world economies... I'd never say "no way".

LMFAO
I've seen a lot of arguments on either side (Some good/Some bad) but the risk of bird flu affecting the market takes the biscuit. The one constant throughout human history is that there will always be death and disease. If you think people should wait until everything is 100% perfect then that will never happen.

conor_mc

bill_ashmount wrote:

LMFAO
I've seen a lot of arguments on either side (Some good/Some bad) but the risk of bird flu affecting the market takes the biscuit. The one constant throughout human history is that there will always be death and disease. If you think people should wait until everything is 100% perfect then that will never happen.

Really? Didn't foot-and-mouth coincide with a bit of a blip in the housing market in 2001? You could argue that the two were unrelated, but there's a possibility that the outbreak did cause uncertainty which affected sentiment, and therefore the market.

So does it really take the biscuit that a disease which affects humans rather than cattle could change the market? Nah, I'm just being silly now. People will always need that extra house for the pension, y'know!

EDIT: Cor blimey, the ISEQ dipped from about 6000 to 5000 in the second quarter of 2001, before climbing to 6300 or so by the start of September 2001.... I wonder why?

hi5

nereid wrote:

This is a very valid point.

Human nature (instinct and survival) always overrides economics.

L.

Nothing overrides the laws of economics,never has and never will,in fact instinct and survival are based on the laws of economics.The laws of economics have been there since the beginning of time,they've just been identified and documented by people for what they are.

This discussion is about the housing market,the market is made up of buyers and sellers,if either one is missing then you dont have a market.
If someone decides not to sell because the cant get the money they want then they are outside the market and the market simply moves to where there are buyers and sellers.

Similary first time buyers can not get priced out of a market,there may be a timeframe where a stand off exists between buyers and sellers but eventually the sellers (highly leveraged developers)cave in and reduce their prices,the buyers cannot cave in as they simply have'nt got the money.We're seeing this at the moment as increasing interest rates have taken from the amounts FTB can borrow,FTB propertie prices will have to fall to the max that can be borrowed which is less than previously.This is already happening.

hi5

nereid wrote:

This is a very valid point.

Human nature (instinct and survival) always overrides economics.

L.

Nothing overrides the laws of economics,never has and never will,in fact instinct and survival are based on the laws of economics.The laws of economics have been there since the beginning of time,they've just been identified and documented by people for what they are.

This discussion is about the housing market,the market is made up of buyers and sellers,if either one is missing then you dont have a market.
If someone decides not to sell because the cant get the money they want then they are outside the market and the market simply moves to where there are buyers and sellers.

Similary first time buyers can not get priced out of a market,there may be a timeframe where a stand off exists between buyers and sellers but eventually the sellers (highly leveraged developers)cave in and reduce their prices,the buyers cannot cave in as they simply have'nt got the money.We're seeing this at the moment as increasing interest rates have taken from the amounts FTB can borrow,FTB propertie prices will have to fall to the max that can be borrowed which is less than previously.This is already happening.

Sponge Bob

The slump will occur when all those investors who bought 'To Let' and never let at all....preferring to sit on their 'gains' on paper decide that there are no more gains to be had. Then, in my opinion, they will pretty much dump 100k units in a very very short space of time and there is nothing to stop them what with Daft considering the punters money is as good as any estate agents any day of the week.

In the past the estate agents , of whom there were far fewer than today please note , controlled the entry of property on the market and would not allow a localised glut as it was bad for business .

'Its those EMPTIES stoopid'

D'Peoples Voice

Its difficult to disagree with the sentiments in this post, that is house price on AVERAGE are falling everywhere.
http://www.askaboutmoney.com/showpost.php?p=292154&postcount=5780
At this point in the property market, people should think back to the Bacon reports commissioned by Bobby Molloy on behalf of the Depart of Environ.

Quote from page 66 of
http://www.environ.ie/DOEI/doeipub.nsf/0/3f3ff45854888bbb80256f0f003db97f/$FILE/baconreport.pdf#search=%22bacon%20report%22

In effect, gathering momentum in demand, based on price expectations appears to have become more important in the past few years....., for example, demand being brought forward in the expectation of avoiding house price inflation as well as purchases for the purposes primarily of capital growth in both the short and long term.

This means that a pronounced correction may be possible, but also implies that the price falls could easily overshoot a target level and fall below the mortgaged value of some properties. In other words, getting the supply response wrong might have very serious implications, in the sense that supply overshooting underlying demand growth could result in significant price reversal.
In any market increasing the quantity supplied (in this case, housing) will cause prices to ease... ... However, in addition when individuals buy a product (typically an asset such as housing) in anticipation of a capital gain the price they are willing to pay today will be related to the price last period and to the expectations of prices in future periods.
However, just as this exuberance can drive a market forward when prices are increasing the
reverse is also possible in a downturn. Individuals anxious to avoid making a capital loss sell for a lower price than they would otherwise do.

At least rental yields increase in a falling property market:D

soma

Gurgle wrote:

People who aren't getting offers at the money they need to move to where they want to go are not going to sell their house.

If you don't understand this, you don't understand people.

Who are these "people"?. In dicussion of a market there can be no discusion of 'people' without a context. Now put that variety people in different contexts, and then we have the different players in the situation. Then you can consider what they can/cant/may/may not do.

Gurgle wrote:

The housing market is not the IT bubble, its not the semiconductor industry, its not an automobile manufacturer, its not a printing press. Its not something the majority of investors can exit en-masse.

I find it hilarious that you are trying to present the illiquid nature of a housing market, as a reason why it will not suffer the same fate as other speculative asset bubbles! Experience has been that the bulk of speculators cannot escape the market, as the new lower prices are set at the margin by the lucky few to escape. Comps will take a battering when it comes time for the next EA to set the price.

Gurgle wrote:

Someone selling their house is still planning to live somewhere.

In a normal, rational market we can say that property transactions are roughly covered by two groups. Those moving homes, and landlords. But the players in a speculative mania are now not viewing these assets as 'homes' but as giant gambling chips. The 'someone' you mention above can a trader-upper, new-build contract flipper, existing property flipper/renovator, amateur builder, professional BTL, amateur BTL. In this scenario, rationality has long ago exited stage-left.

Gurgle wrote:

Even the people waiting for a crash all have different ideas of what prices would have to drop to before they would/could buy.

Personally I stay out by choice, I'm fortunate to be in a position where I can still afford Dublin prices as a single person, however I have no inclination to take part in what is simply the latest speculative mania.

As for what prices would need to drop by. I fully expect prices to fall over a period of 2-5 years by 50% in many Dublin suburbs. Falls outside Dublin/Cork (where the jobs/salaries are just not there) could be more severe.

I know the current mentality is to look at a figure like 50% and think 'no way'. If you fall into this category, then ask yourself who is closer to having a 'shortage' of land, the Irish or the Japanese..? And then swallow the cold hard fact that japanese property values fell by up to 80%.

Gurgle wrote:

I expect a slowdown as the amateur investors eventually cop on that there are other investments with better returns than the rental market

*LOL* and yet you expect no price declines during an exit, keep 'em coming gurgle, you're hilarious mate