Housing Bubble Bursting

Calina

Colonel Sanders wrote:

"a fall in interest rates could be the best chance of avoiding financial ruin for thousands of consumers who have over-borrowed in the past few years, IIB Homeloans economist Austin Hughes said yesterday."

In fairness those people have only themselves to blame.

Actually, I happen to think that while that is true to some extent, it is also a cop out. People have been encouraged to borrow ever increasing amounts of money. If the banks were any way serious about this, they would not have been easing lending criteria willy nilly for the past 4 years. So whilst it is true that people who overborrowed bear some responsibility for their predicament, it is also true that the banks were lending somewhat recklessly. Consumers who over-borrowed were facilitated by bank economists swearing blindly that we'd reached the top of interest rate rise cycles for the past year or so.

What I see here is a bank economist running for the exit, completely abdicating responsibility for banking collusion in this matter. Consumers cannot borrow more than banks will lend them. The banks lent ergo, they cannot walk away from co-responsibility in this respect.

iguana

bugler wrote:

PP is down again :-/

Sorry to keep taking this thread off-topic, but have you tried using the DNS servers Pa ElGrande linked to?

Glenbhoy

Calina wrote:

Actually, I happen to think that while that is true to some extent, it is also a cop out. People have been encouraged to borrow ever increasing amounts of money. If the banks were any way serious about this, they would not have been easing lending criteria willy nilly for the past 4 years. So whilst it is true that people who overborrowed bear some responsibility for their predicament, it is also true that the banks were lending somewhat recklessly. Consumers who over-borrowed were facilitated by bank economists swearing blindly that we'd reached the top of interest rate rise cycles for the past year or so.

What I see here is a bank economist running for the exit, completely abdicating responsibility for banking collusion in this matter. Consumers cannot borrow more than banks will lend them. The banks lent ergo, they cannot walk away from co-responsibility in this respect.

true, but people didn't help themselves by lying on their applications.

jmayo

Calina wrote:

Actually, I happen to think that while that is true to some extent, it is also a cop out. People have been encouraged to borrow ever increasing amounts of money. If the banks were any way serious about this, they would not have been easing lending criteria willy nilly for the past 4 years. So whilst it is true that people who overborrowed bear some responsibility for their predicament, it is also true that the banks were lending somewhat recklessly. Consumers who over-borrowed were facilitated by bank economists swearing blindly that we'd reached the top of interest rate rise cycles for the past year or so.

What I see here is a bank economist running for the exit, completely abdicating responsibility for banking collusion in this matter. Consumers cannot borrow more than banks will lend them. The banks lent ergo, they cannot walk away from co-responsibility in this respect.

Why in modern society do people always have to find someone else to blame for what they do.
Yes, the banks threw money at people willy nilly, but did those same people ever stop to think they were overstretching their repayment capabilities and that all they were going to end up with a shoebox in Gorey or the like ?

It is the same old thing as the people blaming the drink producers for alcholics or parents of fat kids in American suing MacDonalds because their kids are fat after eating bigmacs morning, noon and night.

Saying all that the Government, Mortgage Lenders, Estate Agents, Developers, builders all added to the hype and kept the gravy train going as long as possible.
The parties to blame are the people themselves who jumped at the high mortgages, re-mortgaged for new cars, holidays, etc and the government who did not try to cool the market or force more stringent policies regarding borrowing and deter investors from the market.
Of course the government were also reaping huge tax benefits from the overhyped market.

We could say the government were doing nothing since they wanted to increase employment, also wanted to improve the lot of the average citizen from having more money coming into the public coffers and they weren't just looking after their friends the developers/builders :rolleyes:

Now I just know the argument that people have to buy a home is going tocome flooding back but what I ask is do people have to remortgage to buy a holiday pad and new BMWs ?

Saying all that most of these bank economists are 24 carat plonkers.

Colonel Sanders

jmayo wrote:

Yes, the banks threw money at people willy nilly, but did those same people ever stop to think they were overstretching their repayment capabilities and that all they were going to end up with a shoebox in Gorey or the like ?

No they saw a gravy train and were prepared to get a seat on board at any cost. I have no sympathy for people who enter a market without any research or idea about fundamentals. If I bought shares in a company tomorrow and they lost value would I get any sympathy from anyone despite the fact that the performance of the ISEQ up to the sub prime crisis was also an apparent gravy train.

There has been both reckless lending as well as reckless borrowing but if someone who has overborrowed is looking for someone to blame look in the mirror.

Calina

I'd just like to clarify: I strongly believe in personal responsibility and I do believe that a lot of people lost the run of themselves in paying too much for property.

However, I think it's highly hypocritical of the representative of a company which exploited people's decisions to overborrow to criticise those people for overborrowing. The banks were interested in short term gains, the more loans they could write up the better.

They lent the money, they exploited people's wish to borrow it. If people overborrowed, banks did also overlent. They cannot now criticise people for it and they are not innocent of contributing to the position we now find ourselves in.

Whilst saying that I strongly oppose any bailing out of people who are stymied by decisions they made - but the same goes for banks. I saw some headline on one of the tabloids today forecasting property meltdown if the government didn't do something...

Currently I think there are two options to fix this mess: a) rampant inflation or b) property deflation.

Personally I think (b) is better for the economy as a whole, but then I'm not a bank economist.

Colonel Sanders

property meltdown if the government didn't do something...

The government has done nothing over the past 10 years apart from bending over for every property developer in this country.

Supercell

Colonel Sanders wrote:

The government has done nothing over the past 10 years apart from bending over for every property developer in this country.

No bending over needed, the present government to my mind is just the "Builders Party" by another name.

Nearly all the Irish politicians are up to their necks deep in the property business (in my opinion).

It's served their own needs to ignore the Bacon report, incentivise property speculation even when the market was already white hot (section xyz reliefs)..allow builders to buy their way out of their obligation to social housing (how many affordable or social houses do you know of in D4 or D6....Killiney etc etc etc).

I could go on and on...its just mind blowing to me how brazen they were about it and the fact that they just got voted in again makes me totally despair of whats coming down the road here.

What's worse is that my taxes are no doubt going to pay for last ditch measures aimed at preventing the precious housing market from returning to sensible levels...public money pissed down the drain..

Do-more

Did anyone hear Eddie Hobbs on the Ray D'arcy show on Today FM on Monday? Amongst other things he was telling people that they should sell now, rent a place and buy back in to a bigger, better place in 3 or 4 years time!

He also said that he had heard of an EA in a commuter town outside Dublin who is doing so little business at present that he was asking people he knew with investment properties to put up sale boards which would then be changed to "SOLD" after a few weeks in order to keep up the apperances!:rolleyes:

miju

Do-more wrote:

Did anyone hear Eddie Hobbs on the Ray D'arcy show on Today FM on Monday? Amongst other things he was telling people that they should sell now, rent a place and buy back in to a bigger, better place in 3 or 4 years time!

he was actually saying the exact same thing last week on newstalk last week as well

iguana

miju wrote:

he was actually saying the exact same thing last week on newstalk last week as well

I thought Eddie said this was not a crash but a "hard soft landing?" Surely for prices to drop enough to make doing that advisable would have to be a crash. As EA's, solicitors, moving costs and stamp duty would all have to be paid. Not to mention the pain in the ass all that upheaval would be.

Colonel Sanders

Longfield wrote:

I could go on and on...its just mind blowing to me how brazen they were about it and the fact that they just got voted in again makes me totally despair of whats coming down the road here.

I know it annoys me when people say 'I voted FF on the basis of the economy, sure aren't we doing OK'. You then ask them who they voted for in 1997 and they say FF..... anyway thats for a different forum.

I agree, a lot of the blame falls on the government, but as you say a party thats thick as thieves with the construction industry is hardly likely to do anything else.

I thought it would go up and up and up and up and up and up forever and we would be billionaires and trillionaires. Because there is a slight downturn in the market, I think we should march on the Dail and sack this Government. Noone could ever have seen that often a period of unprecedented boom is followed by a readjustment - it MUST be the Government's fault.

The_Conductor

Deleted User wrote:

I thought it would go up and up and up and up and up and up forever and we would be billionaires and trillionaires. Because there is a slight downturn in the market, I think we should march on the Dail and sack this Government. Noone could ever have seen that often a period of unprecedented boom is followed by a readjustment - it MUST be the Government's fault.

Unfortunately Conor, close on half the population don't have the intelligence to sit back and make thier own judgements on the economy and the housing market- they base their judgements on what they read in the Evening Herald and what Aunty Mary's best friend's brother- the guy who made millions in the property market, say through the grape vine. You can't underestimate the strength that a lot of people put in Bertie assuring people in February of last year that there was nothing as safe as buying houses....... The big problem is the government are seen to be cahoots with the building industry- to the extent that Brian Cowen is trying to have the annual tent at the Galway Races cancelled as its so symbolic an event at this stage.

Whether the government could or indeed should have done anything is not being questioned (although we all have our opinion on these matters)- its the parochial attitudes and the strength of totally unfounded faith placed in local politicians and in turn the government which is going to be what the public at large remember.

Never underestimate the stupidity of the public at large- but also never underestimate their goldfish memories- they'll have forgotten the whole lot long before the next election......

SkepticOne

The Government will be blamed. The depressing thing is that it will not be for allowing the bubble to inflate but for not doing enough to keep prices high.

Tom123

Stats at http://www.irishpropertywatch.com/ have been updated

Analysis - 12 September 2007
September 12th, 2007

Of the 982 properties that dropped their price on MyHome 14, 278 have dropped the price previously.

From the previous analysis 252 that were listed as for Sale are no longer listed on this report - 158 Removed, 80 Sale Agreed, 14 Withdrawn

34 properties that were Sale Agreed or were removed from MyHome have been re-listed as for sale.

Assuming no new properties are listed and properties continue to go Sale Agreed/Withdrawn at the current rate then there is currently 11 months supply on the market.

There are now 4,793 properties that are still for sale and have dropped the price at least once. Total Stating Value of listed properties is EUR 2.2bn. Final value of listed properties is EUR2bn. Total drop is 7.4%

Colonel Sanders

Deleted User wrote:

I thought it would go up and up and up and up and up and up forever and we would be billionaires and trillionaires. Because there is a slight downturn in the market, I think we should march on the Dail and sack this Government. Noone could ever have seen that often a period of unprecedented boom is followed by a readjustment - it MUST be the Government's fault.

I refer you to Longfield's post above, well summarised. as I said we could go on and on but thats for another forum.

Glenbhoy

SkepticOne wrote:

The Government will be blamed. The depressing thing is that it will not be for allowing the bubble to inflate but for not doing enough to keep prices high.

excellent point, unfortunately so true.

Colonel Sanders

http://www.rte.ie/business/2007/0913/eurozone.html

who was it that said ECB rates had peaked?

davej

Interesting account of the current state of the market from an EA:

http://www.daft.ie/discussions.daft?dcn[forum_id]=4&limit=10&dcn[discussion_id]=101868&dcn[root_discussion_id]=0&dcn[forum_id]=4

...To give you an idea, my office receives about 10 buyer enquiry calls a day, compare that to appx. 80 in Aug 2006.

davej

BendiBus

Colonel Sanders wrote:

http://www.rte.ie/business/2007/0913/eurozone.html

who was it that said ECB rates had peaked?

And even if the ECB were to keep rates on hold it doesn't mean mortgage rates will do likewise.

Halifax & Abbey in the UK have raised mortgage rates despite the BOE keeping rates on hold. Oh, and UK house prices have fallen too.

http://www.rte.ie/business/2007/0913/Britain.html

Colonel Sanders

BendiBus wrote:

And even if the ECB were to keep rates on hold it doesn't mean mortgage rates will do likewise.

fair point with the current credit squeeze in the financial mkts. Anyone know if any Irish Banks plan to do the same?

patrickolee

BendiBus wrote:

And even if the ECB were to keep rates on hold it doesn't mean mortgage rates will do likewise.

Halifax & Abbey in the UK have raised mortgage rates despite the BOE keeping rates on hold. Oh, and UK house prices have fallen too.

http://www.rte.ie/business/2007/0913/Britain.html

Depends on what type of mortgage a person has. A tracker is directly linked to the ECB, so they could not _not_ pass on cuts in rates.

Tom123

patrickolee wrote:

Depends on what type of mortgage a person has. A tracker is directly linked to the ECB, so they could not _not_ pass on cuts in rates.

That's true but new mortgages holders can expect the tracker spread to be higher than what was previously offered.

indiewindy

Tomorrow wont be a good day to hold shares in any property related company on the iseq or ftse,


One of the UK's largest mortgage lenders, the Northern Rock, is applying to the Bank of England for emergency financial support, the BBC has learned.


http://news.bbc.co.uk/1/hi/business/6994099.stm

iguana

Colonel Sanders wrote:

fair point with the current credit squeeze in the financial mkts. Anyone know if any Irish Banks plan to do the same?

In the Irish subprime market GE, Nua Homeloans, Start Mortgages and Stepstone have all increased their rates.

Tom123

iguana wrote:

In the Irish subprime market GE, Nua Homeloans, Start Mortgages and Stepstone have all increased their rates.

Very interesting, do you have any source for this.
Cheers

jimmycrackcorm

indiewindy wrote:

Tomorrow wont be a good day to hold shares in any property related company on the iseq or ftse,


One of the UK's largest mortgage lenders, the Northern Rock, is applying to the Bank of England for emergency financial support, the BBC has learned.


http://news.bbc.co.uk/1/hi/business/6994099.stm

That's nothing to do property, it simply means that Northern rock like other banks is finding it difficult to get get hold of money since the scares related to the sub-prime problems in the U.S. It's no reflection on Northern Rocks own mortgage business.

nesf

jimmycrackcorm wrote:

That's nothing to do property, it simply means that Northern rock like other banks is finding it difficult to get get hold of money since the scares related to the sub-prime problems in the U.S. It's no reflection on Northern Rocks own mortgage business.

What's interesting is that a low risk lender like Northern Rock is having trouble sourcing funds for its mortgages. It's not a sub-prime lender, its not having trouble with people defaulting, it's just having a lot of trouble getting people to put money forward for standard mortgages.

The problem is that the sub-prime fallout is causing investors to stay away from mortgage debt in general due to risk avoidance etc. As the article mentions, the other major low risk lenders are more diversified and can take the credit squeeze a bit better than a specialist mortgage bank like Northern Rock.

iguana

Tom123 wrote:

Very interesting, do you have any source for this.
Cheers

http://www.independent.ie/business/personal-finance/latest-news/ge-mortgages-latest-subprime-lender-to-hike-interest-rate-1075773.html