Daft.ie website- snapshot from 2005

Going Forward

johnnyskeleton wrote: »

Here's a thread from thepropertypin about Lehman Brothers collapsing - two months before they actually did:

http://www.thepropertypin.com/viewtopic.php?f=19&t=10455

Here is a thread with excerpts from Morgan Kelly's various writings, predicting 70% falls of gains from peak, banking collapse and the length of time it woud take etc:

http://www.thepropertypin.com/viewtopic.php?f=19&t=60874

These are just two examples of many that predicted exactly what was going to happen. More generally, many people could predict in broad terms what might happen.

Whether any one individual did or did not predict what might or would happen is a moveable feast, and I'm sure many people (including myself) did not anticipate the scale of what happened. But it is simply incorrect to say that no one could foresee the collapse.

The "dealing with a collapse" scenario was as much, if not more of a problem:
With the knowledge they had, just who was going to apply the brakes effectively without bringing down the whole house of cards? No country was either able or willing to as far as I can see.

bennyineire

4 bed detached house 2 miles from Abbeyleix for 650K , yikes !!!!!!

DeanAustin

FlashD wrote: »

You're wrong, it will.

If the market value of a house is 100k and you are paying a mortgage of 200k (negative equity 100k) ....then it will take longer.

Jeez....

How will a 200k mortgage take longer to pay if the house is in negative equity and worth 100k or if it isn't in negative equity and worth 200k?

mike65

Abnormal interest rates for a generation was at the root of so much of this.

padd b1975

FlashD wrote: »

You're wrong, it will.

If the market value of a house is 100k and you are paying a mortgage of 200k (negative equity 100k) ....then it will take longer.

Jeez....

Negative equity only comes into play if you decide to sell the property.

It has zero impact on cost of finance.

Ush1

DeanAustin wrote: »

How will a 200k mortgage take longer to pay if the house is in negative equity and worth 100k or if it isn't in negative equity and worth 200k?

It's not going to take longer but you'll be paying it for longer obviously than if you had of gotten the house for cheaper and your repayments will be more while peoples salaries may be going down.

So to say negative equity only matters if you're selling the house is false.

DeanAustin

Ush1 wrote: »

It's not going to take longer but you'll be paying it for longer obviously than if you had of gotten the house for cheaper and your repayments will be more while peoples salaries may be going down.

So to say negative equity only matters if you're selling the house is false.

Agreed but the original point from the poster still stands if I understood it correctly. You buy a house for 200k that you intend to live in until you die then it doesn't matter if it increases in value to 500k value or drops to 100k.

Obviously, if you bought it cheaper then that's better for you, but you're not really affected by negative equity in this instance.

Fred Swanson

This post has been deleted.

FlashD

padd b1975 wrote: »

Negative equity only comes into play if you decide to sell the property.

It has zero impact on cost of finance.

Negative equity is always in play, you have your mortgage amount, you know the current market value of the property, subtract the two....bingo!

Plus = good times, in profit.

Minus = negative equity, i'm paying more for something than its worth.

desertcircus

It makes it harder to switch providers and effectively ties you to whatever your bank offers.

Incidentally, I really dislike the approach of "if you're planning to live there long term, no worries". If your circumstances change unexpectedly, negative equity is a millstone. And if you bought in 2007 for 300k and your neighbour bought in 2011 for 150, you're going to pay somewhere in the region of a quarter of a million euro more over the life of the mortgage. Signing at the peak cost some people ten thousand quid a year for the next three decades, and it's disingenuous in the extreme to say it only matters if you're trying to sell.

.jacksparrow.

FlashD wrote: »

Negative equity is always in play, you have your mortgage amount, you know the current market value of the property, subtract the two....bingo!

Plus = good times, in profit.

Minus = negative equity, i'm paying more for something than its worth.

You're changing your original point.

Simple fact is whatever you borrow you have to pay back, no more or no less if your house value increases or decreases.

DeanAustin

desertcircus wrote: »

It makes it harder to switch providers and effectively ties you to whatever your bank offers.

Incidentally, I really dislike the approach of "if you're planning to live there long term, no worries". If your circumstances change unexpectedly, negative equity is a millstone. And if you bought in 2007 for 300k and your neighbour bought in 2011 for 150, you're going to pay somewhere in the region of a quarter of a million euro more over the life of the mortgage. Signing at the peak cost some people ten thousand quid a year for the next three decades, and it's disingenuous in the extreme to say it only matters if you're trying to sell.

The original point was made in an "all things being equal" context though (or at least that's how I read it). The example you've described in your post carries weight but it's more to do with just buying at the wrong price. You aren't affected by negative equity, you just bought at the wrong time (similar to if you bought a telly at full price and your neighbour buys it on sale a few weeks later).

Admittedly, you'd be kicking yourself but the cost of finance hasn't changed and, all things being equal, you aren't any worse off than when you bought the house despite the value dropping.

FlashD

desertcircus wrote: »

It makes it harder to switch providers and effectively ties you to whatever your bank offers.

Incidentally, I really dislike the approach of "if you're planning to live there long term, no worries". If your circumstances change unexpectedly, negative equity is a millstone. And if you bought in 2007 for 300k and your neighbour bought in 2011 for 150, you're going to pay somewhere in the region of a quarter of a million euro more over the life of the mortgage. Signing at the peak cost some people ten thousand quid a year for the next three decades, and it's disingenuous in the extreme to say it only matters if you're trying to sell.

For sure, you can't say that negative equity doesn't effect people, it does. It is only natural to want to know the current market value of your investments (lets be honest, a home is an investment).

Knowing that you are paying way more than the current market value can have a deep psychological effect on people. As you say almost similar to a millstone.

jester77

Fred Swanson wrote: »

This post has been deleted.

Those must be the ones that came with a heliport instead of a garage.

.jacksparrow.

FlashD wrote: »

For sure, you can't say that negative equity doesn't effect people, it does. It is only natural to want to know the current market value of your investments (lets be honest, a home is an investment).

Knowing that you are paying way more than the current market value can have a deep psychological effect on people. As you say almost similar to a millstone.

A home is an investment??

A home is not an investment, a home is somewhere to live and raise your kids.

If you view it as an investment, then I have no pity on anyone who cries negative equity.

FlashD

.jacksparrow. wrote: »

You're changing your original point.

Simple fact is whatever you borrow you have to pay back, no more or no less if your house value increases or decreases.

I'm not going to explain negative equity to you again, check elsewhere.

Are you an auctioneer?

I know they have been on previous threads trying to push the market leading people to believe that negative equity is ok, just pay out a whopping big sum for your house and sure don't worry about it after that. Cute lads have your pockets lined at the ordinary irish homeowners expense over the past decade.

.jacksparrow.

FlashD wrote: »

I'm not going to explain negative equity to you again, check elsewhere.

Are you an auctioneer?

I know they have been on previous threads trying to push the market leading people to believe that negative equity is ok, just pay out a whopping big sum for your house and sure don't worry about it after that. Cute lads have your pockets lined at the ordinary irish homeowners expense over the past decade.

Em you said if you're in negative equity you have to pay more money back.

Is this statement correct?

FlashD

.jacksparrow. wrote: »

A home is an investment??

A home is not an investment, a home is somewhere to live and raise your kids.

If you view it as an investment, then I have no pity on anyone who cries negative equity.

A home is an investment, it's an investment in the future of your family, land, bricks and mortar cost money. Enough with the 'wishy washy' thinking.....good luck!

Hannibal Smith

johnnyskeleton wrote: »

Here's a thread from thepropertypin about Lehman Brothers collapsing - two months before they actually did:

http://www.thepropertypin.com/viewtopic.php?f=19&t=10455

Here is a thread with excerpts from Morgan Kelly's various writings, predicting 70% falls of gains from peak, banking collapse and the length of time it woud take etc:

http://www.thepropertypin.com/viewtopic.php?f=19&t=60874

These are just two examples of many that predicted exactly what was going to happen. More generally, many people could predict in broad terms what might happen.

Whether any one individual did or did not predict what might or would happen is a moveable feast, and I'm sure many people (including myself) did not anticipate the scale of what happened. But it is simply incorrect to say that no one could foresee the collapse.

Two months before it happened is not 2005. Which is what this thread is about.

I said earlier we were being fed 2 parallels of information. ..one that the economy will not last...the other that it will and the nay sayers were wrong. But the only actual evidence we could see was property prices increasing. But of course why let a chance to judge others pass you by!

donegal__road

goes to show you, if you pay the newspapers enough, you can print almost whatever you want.

padd b1975

All things considered this snapshot means SFA.

I remember when I worked as a plumber, I would sometimes find old newspapers from the '70s and '80s under carpets or down the back of the hotpress.

Now the property section of those papers would really make you weep, not to mention the wages being offered in the Situations Vacant column.

UCDVet

Amalia Green Soul wrote: »

Trouble is with the 'hindsight' argument is that you could use it about any foolish decision. Plenty of us could see it at the time.

1) You really thought house prices in Cavan were going to be 750K for any length of time? You couldn't see that this was a bubble and not sustainable? In an underpopulated country with huge amounts of new house/apartment construction? A country whose economy had suddenly skyrocketed beyond all recognition in a very short time? No alarm bells?

2) See point number one. Dublin is not London and Mullingar certainly isn't London. Why would anyone have thought prices in Ireland would keep going up and up? Why would that have happened? It happens in London because it's a hugely overcrowded city which has had a very good economy for years, thousands of homegrown companies, foreign investors buying to let...and even in London, prices will have to come down eventually. To imagine that your 3 bed semi in Cavan will ever be worth millions of euro is just delusional, honestly.

3) Well, you had another option, didn't you? Not to buy that glass of Coke. If nobody bought 3 euro glasses of Coke, the price would come down. You could have gone to the supermarket and bought a bottle of it or you could have just gone without. If Coke went up to 10 euro a glass, would you still buy it because that's what it costs, even though the cost is not in line with anything else and certainly not in line with your salary? Would you start borrowing money from other people so you could afford your daily glass of Coke?

No....you really can't use it about any foolish decision. It only makes sense when your decision made sense, at the time, with the given information.

If you go back and look, you can find plenty of people who predicted the housing market crash and the current recession. The problem is, if you look, you can find *more* people not predicting it, and you can find countless recessions that were predicted and *never happened*.

It's not reasonable to expect large numbers of 'regular people' to out-perform the leading experts in a given field. The overwhelming consensus was that you were a fool *not* to buy a house.

It's very easy to argue, now, that the prices of 2008 were unsustainable. That's like, after the match, explaining why the winning team was 'obviously' going to win. If you want to demonstrate your ability to read the housing market; tell us exactly where the Irish housing market will bottom out, or where it will be in 12 or 24 months....and I'm NOT trying to imply that you can't. I will say that *most* people who look at the fools who trusted the best information available, *do not* possess that ability.

This is like people who 'stupidly' trusted their doctor's medical advice and used leeches because, hey, they weren't doctors and the doctors all agreed it was a good idea. There is simply too much information for any individual person to be an expert in everything. The best we can do is make reasonably informed decisions.

I won't directly address your 1 & 2 points - first because I don't actually know anything about Cavan, I've never purchased a property in Ireland, and because I think the prices in Dublin, even in the 90s, were absolutely, unbelievably high.

As for your point #3 - I agree and I mention that *not buying a house* was an option. But, unlike Coke, people do need a place to live. If rent is increasing each year, and house prices are increasing each year, and you need a place to live - there is a strong motivation to 'lock-in' the price by purchasing a home as soon as possible. If I need Coke to live, and the price of Coke was rising steadily, I *would* certainly consider purchasing a lifetime supply at a fixed rate now. Using your house-price argument, because the cost of Coke in Dublin is astronomically high compared to the cost of Coke in the United States (as an example) and astronomically high compared to the actual cost required to produce Coke, that would suggest there is a 'Coke Price Bubble' in Dublin, right? Or is three euro sustainable?

dj jarvis

Amalia Green Soul wrote: »

You seriously didn't see that there was something wrong with paying half a million euro for a house in Cavan or Mullingar? Something fishy about house prices doubling or trebling in just a few years?

Seriously?

I'm not jeering, I feel very sorry for people who bought during the boom, but I do wonder WTF they were thinking.

they were thinking they needed somewhere to live - no social housing available ,
renting was dearer than buying lets not forget,

so in conclusion - should they have all stayed in the box room in their mammys or lived in tents.

as someone said already , hindsight is a great thing ,
can not compare knowing what you know now to the info available at the time, there was FULL employment with good prospects and pay.

people need houses - people had good jobs , not such a crazy leap when you put the ducks in line and look at in context

dj jarvis

FlashD wrote: »

Negative equity is always in play, you have your mortgage amount, you know the current market value of the property, subtract the two....bingo!

Plus = good times, in profit.

Minus = negative equity, i'm paying more for something than its worth.

but that does not make your payment bigger , it stays static , if the price of the house goes up , you still pay the same repayments , works on the way down

negative equity means nothing if its a family home and you can make the re payments - then nothing has changed

the house will just be worth lees when you finish paying for it

cournioni

FlashD wrote: »

A home is an investment, it's an investment in the future of your family, land, bricks and mortar cost money. Enough with the 'wishy washy' thinking.....good luck!

Why don't you stop with the wishy washy thinking and just come out with what you really meant. Equity only matters if you are looking to sell on your property, not home, property.

What jacksparrow was saying was correct, people bought properties as investments in the past with views to sell on for a profit. They believed that the price would grow and grow. It didn't and now we have people up in arms blaming everybody else but themselves for being stuck in an investment property.

They played the game and lost. Sorry to break it to you.

Defiler Of The Coffin

Hannibal Smith wrote: »

No you did not forsee what was going to happen. No one could forsee what was going to happen with Leman Brothers, how quickly it would crumble and how it would effect the rest of us. That is total arrogant nonsense

I do recall Shane Ross saying in his Sindo column that "the property market is on stilts, get out now" at least two years before the actual crash happened. So you can't say that the warning signs weren't there. The Irish property market and economy as a whole was still in serious trouble regardless if Lehman Bros collapsed, it may have hastened the demise but it was still inevitable.

ash23

Not everyone is affected by negative equity because they bought as an investment. Life changes, family sizes grow, couples separate, jobs are lost and taxes are increased.

I bought in 2006. It wasn't an investment property. We were a young couple and we bought a family home with the intention of never having to move. We separated and are still saddled with the house because we can't afford to sell and neither of us can afford to get the mortgage on our own.
That's life.

But I really hate hearing people a few years younger than me pretend that they knew all about the property boom and were "wise" not to buy. In fact, most were just too young to be considering buying.
For those of us who were trying to set up our lives at the time of the boom, we were being bombarded with the panic around the prices increasing. Jeeze, I worked in a junior level of a financial institution and it was a no brainer that buying a house was better than paying twice a mortgage in rent. Because rents were also sky high at the time so the alternative was to stay living at home.
Banks were offering way over the odds of what was being asked for. Parents and those we looked to for advice were caught up in it too and the expression "rent is dead money" was bandied about like the new national motto.
The government were also throwing money at people. My daughter was smaller at the time and every year child benefit went up, a grand a year was given for childcare, wages were plentiful and most of those "in the know" were encouraging it.
As a young couple we sought advice from professionals and nobody ever told us not to go for it. If I went to a hospital and 6 doctors told me I should take an antibiotic, I'd take it. These people had degrees and years of experience. Why wouldn't we have believed them?

I was watching celebrity apprentice the other night and there on my screen, as an advisor, was that guy from the program "I'm an adult get me out of here". He'd take a young person who lived at home and encourage them to take a 100% mortgage on a one bed studio, miles from their family and friends for an extortionate amount. That's what "advisors" were doing in 2006/2007.

If I'd been born 5 years earlier or 5 years later, I'd be either minted or have never bought. But life is what it is. For the most part, people didn't escape because they had some inside knowledge or wisdom.....they were just not in a place to buy at the time.

DeanAustin

Defiler Of The Coffin wrote: »

I do recall Shane Ross saying in his Sindo column that "the property market is on stilts, get out now" at least two years before the actual crash happened. So you can't say that the warning signs weren't there. The Irish property market and economy as a whole was still in serious trouble regardless if Lehman Bros collapsed, it may have hastened the demise but it was still inevitable.

It wasn't inevitable at the time though and for every Shane Ross there was dozens more saying that there wouldn't be a crash.

People made decisions with the information available to them at the time. To buy a house in an environment where:

1. House prices hadn't declined in the lifetime of most buyers if at all in the history of the country.
2. House prices were going up rapidly.
3. Rents were high.
3. The banks were throwing money at people (100% mortgages).
4. The tracker mortgage was on offer.
5. There is a culture of having to own your own house in this country.
6. The economy was booming.

It wasn't a decision completely devoid of common sense and I feel for people who are in trouble with their family homes now. I have less sympathy for people who bought property to make a profit - as someone said, they gambled and lost and if you gamble, you have to be prepared to lose.

UCDVet

cournioni wrote: »

Why don't you stop with the wishy washy thinking and just come out with what you really meant. Equity only matters if you are looking to sell on your property, not home, property.

What jacksparrow was saying was correct, people bought homes as investments in the past with views to sell on for a profit. They believed that the price would grow and grow. It didn't and now we have people up in arms blaming everybody else but themselves for being stuck in an investment property.

They played the game and lost. Sorry to break it to you.

Equity also has an impact on your ability to obtain credit.
Equity also has an impact on your ability to relocate.

Now, throw in a recession with lots of people earning less, being taxed more, and losing their jobs - and having a negative equity can be a serious problem.

I purchased a house in 2007, fully expecting to live in it for 10+ years. But, unlike so many in this thread, I cannot see into the future. In 2007 I would have never, in a million years, predicted that I would be living in Ireland. I also wouldn't have predicted my employer shutting down the company; nor could I have predicted my wife's future medical problems.

In order to get a new job, I needed to move. There were lots of jobs, in lots of cities, but not where I was. I sold in 2010 and was lucky, I made a nice profit, but it was just that, luck. Had my house been in a different city, I could have just as easily lost 100k rather than making 25k.

Calling people who bought a home hoping for it's value to increase greedy is like calling people who put money into a pension hoping for it's value to increase greedy, or calling people who go to college hoping for a better job greedy.

Menas

We bought in mid 2008 and have just come out of negative equity. But we did put a large deposit down thanks to the proceeds of another property we sold.
The house next door to us is rented out for €200 less than our mortgage per month and that house needs a lot of work. So I have to think that our house, if rented, would pay the mortgage (before tax etc).

So I suppose we are lucky, but the point is that I am glad I bought when I did. Feck those who think we over paid.
We are on a tracker and we will have our mortgage paid off in 15 years and then will have no mortgage or rent to pay for the rest of our lives. And that is the key to us. Not having mortgage or rent to pay from our mid 50s onwards will help to our plans for an early retirement.