[Article] 170,000 to be in negative equity by end '09

gurramok

You can bet your bottom dollar that this affects young people more as they bought 'starter' homes\apts to get on the ladder.

They are stuck for years if they ever wanted to move.

http://www.independent.ie/national-news/financial-crisis/170000-staring-at-negative-equity-1497133.html

Indo wrote:

AROUND 170,000 people may fall into the negative equity trap by the end of next year if house prices continue to plummet, research shows.

It is expected that by the end of 2009 house prices may have dropped by as much as 30pc from their 2007 peak, according to Goodbody Stockbrokers.

Prices have dropped nationally by around 20pc so far, and Goodbody Stockbrokers chief economist, Dermot O'Leary, expects a further 10pc drop by the end of next year.

More than half who bought between 2005 and 2007 will fall into negative equity next year if property continues to lose its value, according to the research.

Peak

One in three first-time house buyers who purchased during the peak in property prices in 2006 used 100pc mortgages to get on the property ladder.

The_Conductor

Surely those whacked with negative equity should be offered the same loan facilities as FTBs and allowed partake in the Government backed mortgage scheme- given that they are in a far worse position than FTBs (albeit entirely of their own making.......)

170,000 is a hell of a lot of voters....... ?

Gurgle

Indo wrote:

Prices have dropped nationally by around 20pc so far,.

According to the PTSB index, they've gone down 13% since the peak in Jan-Feb '07.

Indo wrote:

and Goodbody Stockbrokers chief economist, Dermot O'Leary, expects a further 10pc drop by the end of next year.

Curried hat for me if that happens. :rolleyes:

More than half who bought between 2005 and 2007 will fall into negative equity next year if property continues to lose its value, according to the research.

Wow, thats a meaningful prediction.
If property keeps losing value, then everyone with a mortgage will eventually fall into negative equity.

fret_wimp

as long as you didnt buy for some quick profit and are holding onto the property for a number of years, why is this an issue. if your holding onto it for 5-10 years, prices will have gone up by then again anyway, putting these people back in the green. all this means is that they cant sell now without making a loss. wont be true forever though.

helimachoptor

fret_wimp wrote: »

as long as you didnt buy for some quick profit and are holding onto the property for a number of years, why is this an issue. if your holding onto it for 5-10 years, prices will have gone up by then again anyway, putting these people back in the green. all this means is that they cant sell now without making a loss. wont be true forever though.

Exactly, I bought a home last year not an asset to see on 6 months later.

I will be staying there for at least 5 years but more probably ten as it's a nice sized house and we've got 2 spare rooms for kids if they come along.

We'll probably move again, but I would prefer to pay as much off the current loan as possible before trading up instead of taking out a bigger mortgage and pay even more interest on that capital sum.

malpas

fret_wimp wrote: »

as long as you didnt buy for some quick profit and are holding onto the property for a number of years, why is this an issue. if your holding onto it for 5-10 years, prices will have gone up by then again anyway, putting these people back in the green. all this means is that they cant sell now without making a loss. wont be true forever though.

Agreed...negative equity is a big problem if you have to sell in a depressed market not if you will be staying in the property. In due course the market will pick up..although no one has a clue as to when. If you are concerned about mortgage repayments it is critical to talk sooner rather than later to your mortgage provider.

sheepshagger

What is the fixation with negative equity ?

You have to live somwhere, negative equity is only realised when you sell, are all of those 170,000 people going to sell before the end of 09. . .the answer is No.

The_Conductor

sheepshagger wrote: »

What is the fixation with negative equity ?

You have to live somwhere, negative equity is only realised when you sell, are all of those 170,000 people going to sell before the end of 09. . .the answer is No.

The problem is more that vast numbers of people bought totally unsuitable apartments and tiny houses, just to "get their foot on the property ladder", with the intention of trading up to more suitable properties in the short to medium term (keep in mind 10%+ property price rises per annum were almost considered conservative:(). Those hordes of people are the people who are well and truly screwed. They're stuck in unsuitable, unsaleable accommodation, if they do manage to sell- it'll ruin them financially- and as they have a roof over their head, regardless of how unsuitable said roof is- they are considered to be "sorted" by the government and everyone else..........

Caoimhín

sheepshagger wrote: »

What is the fixation with negative equity ?

You have to live somwhere, negative equity is only realised when you sell, are all of those 170,000 people going to sell before the end of 09. . .the answer is No.

Very true,

However there were thousands of young people conned into "getting onto the property ladder" b buying a shoebox apartment miles from their place of work and the community they grew up in.

They were conned into this by the people who made fortunes on this property bubble, estate agents, builders and banks. Negative equity doesnt really matter as long as the young couples plan on remaining childless and working every day of their lives to pay back the bank.

Pa ElGrande

HOUSE PRICE SHOCKS, NEGATIVE EQUITY AND HOUSEHOLD CONSUMPTION IN THE UK IN THE 1990s

Negative Equity and British Housing in the 1990s: Cause and Effect (pay)

baldieman

There's another group of people wha are in this mess.
These are the people who had finished paying their mortgages, were off the hook, dept free!! and then they got caught up it the second home or holiday home market. They remortgaged the home that was paid for to visit a house from time to time when they get time!!

Imposter

baldieman wrote: »

There's another group of people wha are in this mess.
These are the people who had finished paying their mortgages, were off the hook, dept free!! and then they got caught up it the second home or holiday home market. They remortgaged the home that was paid for to visit a house from time to time when they get time!!

Well actually there's another gropup that i'd feel more sorry for. Those that realised that prices were too high and didn't buy. Should they have had any savings tied up in the wonderful financial system well that'd be largely eroded now too again largely because of the actions of banks (and governments).

Oshare Bones

What happens when people can't afford to pay their mortgages any more though? These are the people who I believe will be hit worst.

Example: Working couple purchase house at height of boom, 100% IO mortgage @ €350,000. Both lose jobs, can't find work and can't afford to make repayments. Market value of said house is now €280,000. Do the bank just seize the house and cancel out the mortgage or are the couple liable for the., say €70,000 drop in value of the house?

Genuine question here, I believe this situation may become more common in the next 2 years.

Caoimhín

Oshare Bones wrote: »

Genuine question here, I believe this situation may become more common in the next 2 years.

The bank will seize the house through the courts, they will sell the house for what ever they can and the couple will owe the bank the balance.

The banks will pursue this debt for a long time (how long depends on the bank and the amount), that is, unless the couple declares bankruptcy which means, apart from the stigma, no credit for at least ten years.

IMO the bankruptcy laws in Ireland are in serious need of an overhaul, even peoples perceptions of bankruptcy are absurd in dear auld Ireland. In the US it is looked on as another chance to begin again rather than a mark of failure. An ex-employer of mine went bankrupt over 15 years ago and even though he now employs over 100 people in a successful business, he is still looked on with disdain by the banks and the revenue.

The_Conductor

Oshare Bones wrote: »

What happens when people can't afford to pay their mortgages any more though? These are the people who I believe will be hit worst.

Yesterday alone, over 100 repossessions were granted (though it is only week two of the new repossession season).

S.

ukdavros

A Good Discussion
As already said if you dont need to sell then its not a great problem.
What seems to happen a lot though is people bury thier heads in the sand hoping it will go away, but it wont.

They need to realise this and do everything they can to hold on to the property
They need to look at maybe renting it out and move back in with friends or family. Try and change to interest only.

Just giving up just puts you in a bigger mess

EnoughSaid

sheepshagger wrote: »

What is the fixation with negative equity ?

You have to live somwhere, negative equity is only realised when you sell, are all of those 170,000 people going to sell before the end of 09. . .the answer is No.

Negative equity is a very serious position to be in if the householder's job is at risk. If he looses his job and cannot afford to pay his mortgage he is at risk of having his house reposessed. If this happens he will have to pay back the difference between the loan and the eventual auction price that the house fetches back to the lender.

You have to remember that many jobs that seemed very secure before the recession will be lost during the recession and some people will not have a choice about how long they stay in their homes.

It also could take several years for the nominal house prices to get back to their peak.

SimpleSam06

Gurgle wrote: »

Curried hat for me if that happens. :rolleyes:

Well even if those figures are accurate, you can get 10% off for the asking right now, at a minimum.

Would you like some salt for that hat sir?

fret_wimp wrote: »

if your holding onto it for 5-10 years, prices will have gone up by then again anyway

To be honest I rather doubt it. Houses in places like Japan still haven't recovered after their collapse, what, 15 or 20 years ago? Not to mention given the dependency of house prices on easy credit, you'll find the lending environment will have undergone a fairly permanent change by the time the current economic crisis is over. They'll be a long, long time reaching their peaks again. This isn't going to be like the rollercoaster property markets in the UK.

Its a bit of a triple whammy really. You had huge banks leveraging bad debts to enormous amounts (one bank would give a loan of €1, package it up and sell it for 90 cent to another bank, who would package and sell it for 85 cent, etc, until that €1 is now loaned out to the value of €100 even though only €1 actually exists - I've heard figures like three times the world's GDP floating around), naked shorting in the market (where you don't even bother to borrow stocks to short them, just claim you can find them sooner or later, again literally making stocks out of nowhere, devaluing existing stocks - this is mostly what brought down those big US banks recently), and the literal edge of affordability being reached.

I fully expect the reintroduction of the Glass-Steagall act once again when Obama takes power, since his policies are very much modelled on the European style economies. Then those shenanigans will be literally impossible. Fun times ahead.

Gurgle

SimpleSam06 wrote: »

Would you like some salt for that hat sir?

Thank you, but I'll wait until some hint of evidence that I'm wrong.

SimpleSam06

Gurgle wrote: »

Thank you, but I'll wait until some hint of evidence that I'm wrong.

Good luck with that.

The_Conductor

Behave both of you.....