Irish Times Article

royaler83

http://www.irishtimes.com/newspaper/breaking/2011/0504/breaking32.html

I don't hear too many others shouting that the market has bottomed out

noxqs

S&P rated toxic assets at AAA. Whatever they say in the next decade won't have any merit.

Treehouse72

S&P:

"In terms of market fundamentals, the price contraction implies that affordability is back to its pre-2000 level, which suggests that unlike other markets, Ireland has pretty much fully corrected the excess of the previous housing bubble".

At least none of the bubble happened before 2000 then! Well, except for, you know, about half of it...

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http://www.statusireland.com/

As for "affordability", how on earth can a period of almost unlimited credit availability, which has now turned into almost unlimited credit scarcity, be in any way comparable? And even more basically, I don't think qualitative "analysis" (i.e. me looking at Daft!) suggests pre-2000 prices in any event.

S&P's prediction - based on I know not what - sounds like total bollox to me.

JD1763

Can't comment on prices. But I have been struck by the noticeable number of sale agreeds after popping up along my morning commute. I was also struck by the number of new for sale signs that seemed to then appear when one house on a road had 'sale agreed' stuck onto it. No actual 'solds' though.

noxqs

Compare this graph to the graph above about houseprices. Long way to go yet, we're at the "return to normal" stage. Every single bubble goes through a stage where people say "Look prices are stabilizing". Take house price in 1996, adjust for inflation till now, and take some away to account for oversupply/emigration = what prices should be at.

djmcr

JD1763 wrote: »

Can't comment on prices. But I have been struck by the noticeable number of sale agreeds after popping up along my morning commute. I was also struck by the number of new for sale signs that seemed to then appear when one house on a road had 'sale agreed' stuck onto it. No actual 'solds' though.

Easy to go sale agreed, problem occurs when applying for the mortgage and the banks are not giving approval.

doggy Bear

JD1763 wrote: »

Can't comment on prices. But I have been struck by the noticeable number of sale agreeds after popping up along my morning commute. I was also struck by the number of new for sale signs that seemed to then appear when one house on a road had 'sale agreed' stuck onto it. No actual 'solds' though.

It's true. There are loads of Sale Agreed signs. Buyers seem to be coming out of the woodwork all of the sudden. I know. I'm one of them. My girlfriend and I have been looking for the past year towards buying a house. We probably visited 40 houses during that time. Now we've found one in the Marino area of Dublin that we're quite happy with. That house was on the market no more than two weeks before we decided to snap it up, nearly 5 weeks ago now. The paperwork is STILL being processed by the solicitors at present. This part is SO SLOOOOOW. Frustratingly so. It usually takes two to three months from the time you put the booking deposit down (Sale Agreed sign goes up) to the time keys to the house are handed over (either SOLD sign goes up or the sign is removed completely).

Having been watching the property market closely for the past year and having gone through bidding wars on two houses (surprisingly), I think there is an interesting phenomenon happening: There are loads of buyers out there, much like myself, who have been waiting for prices to drop so that decent houses would fall in their "affordable" range. Two years ago, houses in the "affordable" range were shacks and small apartments. Now, quite decent 3-bed houses are in that range. So I think for those who didn't go crazy in the boom and bought at a sky-high price-tag, it's becoming a great time to buy, with interest rates still very low.

The article you mentioned I think is correct, for the most part.

I think that's why houses on the market are being snapped up by these "quiet" buyers... I foresee an even higher number of Sale Agreeds in the coming year.

Zamboni

doggy Bear wrote: »

So I think for those who didn't go crazy in the boom and bought at a sky-high price-tag, it's becoming a great time to buy, with interest rates still very low.

I don't know.
Renting, accumulating capital + interest whilst house prices remain in decline still seems like the smart option.
If there is a large tier of people dying to buy who have been holding off, we may see a spectacular dead cat bounce.
I think we are still in the bull trap.

spockety

doggy Bear wrote: »

Having been watching the property market closely for the past year and having gone through bidding wars on two houses (surprisingly), I think there is an interesting phenomenon happening: There are loads of buyers out there, much like myself, who have been waiting for prices to drop so that decent houses would fall in their "affordable" range. Two years ago, houses in the "affordable" range were shacks and small apartments. Now, quite decent 3-bed houses are in that range. So I think for those who didn't go crazy in the boom and bought at a sky-high price-tag, it's becoming a great time to buy, with interest rates still very low.

A great time to buy? Hrmm.

Maybe wait another 2 years, and those properties that were shacks and then became 3 bed houses become 3 or 4 beds in nicer areas, perhaps detached, etc., etc.

We have a long way to go. Ireland still has a few shocks to the system yet to come, people are still in denial about this.

Good luck with your new home, I genuinely hope it gives you many happy years, but please don't try to suggest that it is a great time to buy. In a historical and economic context it is a truly terrible time to buy.

doggy Bear

spockety wrote: »

A great time to buy? Hrmm.

Good luck with your new home, I genuinely hope it gives you many happy years, but please don't try to suggest that it is a great time to buy. In a historical and economic context it is a truly terrible time to buy.

Thanks. I'm confident our first home will indeed give us that.

And as for the historical and economic context, a job and a steady income are obvious prerequisites to buying a house. Making sure you can handle adversity in the future is dependent on your personal skills and the resources available to you. With unemployment hovering around 15% and a huge national debt to the IMF, it would be wise to be cautious. Having said that, there are a lot of buyers out there, including me, who would argue that you're wrong. 85% of the population is still employed. Prices for houses have dropped. Interest rates are slowly rising. I don't want to argue semantics here so I will say that it is "a good time to consider buying a home", if you are so positioned and inclined.

If you're not, then that's a topic for another conversation.

spockety

The fundamentals would appear to be.. sound.

Rabidlamb

That article could have been written by Donnie Cassidy or Frank Fahey.
People are finding it hard to get mortgage approval in excess of 3 times salary.
Provincial towns will see 3 beds semi's settle at 3x average wage plus 10%.
There'll still be a premium for the cities & better areas.

doggy Bear

Zamboni wrote: »

I don't know.
Renting, accumulating capital + interest whilst house prices remain in decline still seems like the smart option.
If there is a large tier of people dying to buy who have been holding off, we may see a spectacular dead cat bounce.
I think we are still in the bull trap.

You might be right. Banks not giving out mortgages is a problem. People not feeling confident to spend money is a problem. The 15% unemployment is a problem. But the only way out of a recession is to make money move. People buying, people selling. It produces momentum and feeds other sectors of society. It's also indicative of the confidence of that society. I'm no economist, but if people are confident enough to be buying houses in this climate, then there has to be something good about that. It must indicate some sort of "change" from the last couple of years. Then again, I have been known to be overly optimistic about these things.

BTW, I love dead cat bounce.

antiskeptic

doggy Bear wrote: »

It's true. There are loads of Sale Agreed signs. Buyers seem to be coming out of the woodwork all of the sudden. I know. I'm one of them. My girlfriend and I have been looking for the past year towards buying a house. We probably visited 40 houses during that time. Now we've found one in the Marino area of Dublin that we're quite happy with. That house was on the market no more than two weeks before we decided to snap it up, nearly 5 weeks ago now. The paperwork is STILL being processed by the solicitors at present. This part is SO SLOOOOOW. Frustratingly so. It usually takes two to three months from the time you put the booking deposit down (Sale Agreed sign goes up) to the time keys to the house are handed over (either SOLD sign goes up or the sign is removed completely).

Having been watching the property market closely for the past year and having gone through bidding wars on two houses (surprisingly), I think there is an interesting phenomenon happening: There are loads of buyers out there, much like myself, who have been waiting for prices to drop so that decent houses would fall in their "affordable" range. Two years ago, houses in the "affordable" range were shacks and small apartments. Now, quite decent 3-bed houses are in that range. So I think for those who didn't go crazy in the boom and bought at a sky-high price-tag, it's becoming a great time to buy, with interest rates still very low.

The article you mentioned I think is correct, for the most part.

I think that's why houses on the market are being snapped up by these "quiet" buyers... I foresee an even higher number of Sale Agreeds in the coming year.

What do you think of noxqs' post (two posts above yours)? Wouldn't people jumping off the fence now tie in with that false dawn before the true slide?

I bought in 1999 for £113k. The guy two doors down from me bought the same spec house two years earlier than me for £58k .. and the girl across the road bought the same spec house 2 years prior to the guy two doors down from me ... for £28k. A quadrupling of a house price in 4 years is bubble territory - even back in the mid-nineties.

According to noxqs' graph, we've a very long way to go yet.


(incidently: that £28k (euro 36k) house was valued at euro 400k at peak and is asking (but not getting) euro 230 now

antiskeptic

doggy Bear wrote: »

I don't want to argue semantics here so I will say that it is "a good time to consider buying a home", if you are so positioned and inclined.

There's a point in that I think.

What you are being told is:

a) prices are sure to drop
b) it makes sense to put up with the downsides of renting in order to
c) add a large sum of money (by way of savings) to your bank account


What you can tell folk back is:

a) prices are sure to drop
b) it makes sense to sell your house now and put up with the downsides of renting in order to..
c) add a large sum of money (by way of savings) to your bank account.


I wonder how many of us who say "you're mad to buy" currently have their houses up for sale?

spockety

doggy Bear wrote: »

You might be right. Banks not giving out mortgages is a problem. People not feeling confident to spend money is a problem. The 15% unemployment is a problem. But the only way out of a recession is to make money move. People buying, people selling. It produces momentum and feeds other sectors of society. It's also indicative of the confidence of that society. I'm no economist, but if people are confident enough to be buying houses in this climate, then there has to be something good about that. It must indicate some sort of "change" from the last couple of years. Then again, I have been known to be overly optimistic about these things.

BTW, I love dead cat bounce.

But people haven't stopped buying at any point since this crash began in 2007. In fact all along the way we have been hearing that it's a great time to buy as prices are "down 10%/20%/30%/40%/50% from peak". They will be saying it at 60% and 70%.

There have always been buyers, there will always be buyers, and there will always be people who will try and tell us that the most fundamental economic factor in all of this is "confidence". There is nothing new in the sales that are happening now. Things have always been selling.

All along the way, the people who are buying tell us that it's a great time to buy. Other people are buying so it must be a great time, right? It's groupthink and psychological protection from a bad decision, like a lemming wandering off a cliff.

As I said in my first post in this thread, those 3 bed semis that once were 1 bed shoeboxes in terms of price could very easily become 4 bed detached in nicer areas for the same price. If you're happy to jump off at the 3-bed stop then fire ahead, but when there's a 4 bed stop in a nicer area coming down the line don't try and make people believe it's the best stop to get off right now.

Treehouse72

doggy Bear wrote: »

But the only way out of a recession is to make money move. People buying, people selling. It produces momentum and feeds other sectors of society. It's also indicative of the confidence of that society.

No, you are very, very wrong here Doggy in my opinion. What you are describing above is how sentiment moves the market. You are not describing how economic fundamentals effect the market nor are you correctly identifying the forces that set "true" (or fair/neutral) price levels.

"Momentum" and "confidence" are what caused the bubble in the first place. How do we know that? Because we know for a fact that that growth was not due to economic fundamentals. After all, if it were due to fundamentals, then we wouldn't have had a crash at all: those fundamentals would have continued to underpin prices. Stands to reason. The very moment the true economic situation in Ireland was revealed, prices started plummeting. This shows that the only thing keeping prices up were the things you mention: momentum, confidence and sentiment. The moment they disappeared, so did the market.

So what does this history tell us about now? It tells us that your diagnosis - that a little bit of momentum is all that's needed to turn things around - is a faulty analysis. It is those other things you mention - fundamentals like employment, credit availability, demographics - that matter. Sentiment, momentum or condifence merely amplify those fundamentals...and nowadays that amplification is to the downside.

Your comment about "People buying, people selling" is another example of this faulty logic. If we consider the bubble again, we thought (well, not all of us!) that buying and selling houses was itself a sign of economic health. But since then it's become clear that you cannot create wealth or have economic progress by buying and selling the same pool of houses over and over again. Indeed, it is a form of wealth destruction, not wealth creation, since fees, taxes and charges are removed in every transaction. That is economic activity, but it is not productive or wealth creative. "Activity" in and of itself cannot have any true effect on value and nor can it restore to health a fundamentally sick property market.

doggy Bear

Treehouse72 wrote: »

It is those other things you mention - fundamentals like employment, credit availability, demographics - that matter. Sentiment, momentum or condifence merely amplify those fundamentals...and nowadays that amplification is to the downside.

Hi Treehouse72.

I wasn't saying that house buyers are going to save this economy! It's the gov't that has to do the spending. It has to stimulate the economy. It has a responsibility to invest in industries that will create jobs. It has a responsibility to make available credit to people and small, fledgling companies.

And I respectfully disagree about the confidence issue. Confidence has a lot to do with everything. You wouldn't invest in a company unless you were confident it was creating products that people will buy. Companies and shops go out of business if people didn't buy their product. People don't buy things if they didn't feel confident of keeping their jobs or finding another. And they certainly wouldn't feel confident buying a house unless there was some indication that, at least in the near future, the economy will worsen.

I suppose what I was getting at was economic stimulation, much like Obama's plan, which is doing some good in the States. I don't know if you believe in Keynesian economics, but I think it works.

antiskeptic

doggy Bear wrote: »

Hi Treehouse72. I wasn't saying that house buyers are going to save this economy! It's the gov't that has to do the spending. It has to stimulate the economy. It has a responsibility to invest in industries that will create jobs. It has a responsibility to make available credit to people and small, fledgling companies.

In other words ... change some of the basic fundamentals Treehouse72 was talking about.

"It is those other things you mention - fundamentals like employment, credit availability, demographics - that matter. Sentiment, momentum or condifence merely amplify those fundamentals...and nowadays that amplification is to the downside."

And I respectfully disagree about the confidence issue. Confidence has a lot to do with everything. You wouldn't invest in a company unless you were confident it was creating products that people will buy. Companies and shops go out of business if people didn't buy their product. People don't buy things if they didn't feel confident of keeping their jobs or finding another. And they certainly wouldn't feel confident buying a house unless there was some indication that, at least in the near future, the economy will worsen.

Treehouse isn't saying confidence/lack of confidence isn't important. He's saying that confidence is a follower of fundamentals. The fundamentals drive the direction of confidence (bubble blowing excluded). And that currently, the fundamentals are driving confidence in a negative direction.

iguana

Reading that article I couldn't help but have a terrible pun come to mind.:o

Take it's claims of a sluggish housing market over the next few years with quite a large grain of salt. And we all know what salt does to slugs. Which is actually what the housing market will do.

Sorry.

antiskeptic

iguana wrote: »

Reading that article I couldn't help but have a terrible pun come to mind.:o

Take it's claims of a sluggish housing market over the next few years with quite a large grain of salt. And we all know what salt does to slugs. Which is actually what the housing market will do.

What do you mean 'grain of salt'. Are you suggesting that the housing market will travel at anything other than a snails pace for the next few years?

iguana

antiskeptic wrote: »

What do you mean 'grain of salt'. Are you suggesting that the housing market will travel at anything other than a snails pace for the next few years?

It's a worse pun than I feared.

The article is suggesting that house prices won't fall much more but will carry on sluggishly. I'm suggesting that the only way the housing market will resemble sluggish behaviour over the next few years is if you take the article with a grain of salt, as slugs shrivel up and die when salt is poured on them.

The pun is that a "grain of salt" suggests my disbelief of the article, while their choice of analogy the "slug" is a creature that does what I actually believe the market will do when combined with salt.

antiskeptic

antiskeptic wrote:

What do you mean 'grain of salt'. Are you suggesting that the housing market will travel at anything other than a snails pace for the next few years?

Boom Boom..