Housing bubble starting to pop?

Longfield wrote:

Some of the section 23 properties were incentived to be built in areas where none would ordinarily be built.

I think this is a very important comment. Like most tax incentives, Section 23 encourages people to do what they wouldn't do depending on the basic economics. However, it is a very broad brush. In some areas, the resulting construction could be the spark that revives a neglected area. However, in other areas it could result in overbuilding and push future housing price drops.

One area I can think of is Kenmare. I'm AMAZED at the amount of Section 23 construction going on. This is an area that had pretty healthy tourism, holiday home, and retirement (many from the UK) growth before Section 23. The new construction going on now plus the planned "new town" by the river is changing the character of the area. It's becoming more like Kilarney. Not knocking Killarney per se, but maybe only one "tourism center" city per region is really needed.

Now what happens when people try to cash in on their Section 23 investment? Will it lead to an even greater drop in prices than would otherwise happen? If so, it may be a benefit for me since that's when I may see myself getting into the market.

Sounds like the lending frenzy that has started to severely affect the market here in the U.S.

As housing prices climb away from the affordability of "standard" mortages many companies became creative. This included financing up to 100% of the value of the home, sometimes with a complicated double mortgage with 80% in one mortgage and 20% in the other.

Other loans with negative amortization, meaning your monthy payments are less than the interest, meaning the amount of money you owe in the loan increases instead of decreases. Assumption was you either sold the house at a profit, or refinanced futher down the road since your house would then have more value.

Other mortgages where there is a teaser fixed rate for 1-5 years, then goes to market adjustable rates. Some folks are seeing nearly a doubling of their payment once the teaser runs out.

Then there's the "no documentation" loans where you just state your income. Don't have to prove it. This sounds very similar to the article noted where they calculate renting a room as income whether you do it or not. Also loaning at 55% of income is asking for trouble.

All this stuff ends up working only in a fast rising market. The market goes down and you can't refinance even if rates go down since the loan amount can end up higher than the value of the house.

This is especially the case in the "sub-prime" market where folks with worse credit ratings pay higher interest rates. My girlfriend's daughter worked for brokers for these types of loans. She's been laid off twice as each company went under.

Predictably, with a softening real estate market here in the U.S. forclosures are rapidly ramping up, further depressing the market. I see the same thing happening in Ireland as people get to the point where they can't support their mortgages.

Used to be in the U.S., the majority of mortgages had fixed interest rates which held payments steady. Adjustables have become an increasing share of the market. In Europe with even more ajustable rate mortages, the recent rate hikes could really trigger a rapid decline.

Sponge Bob wrote:

I feel I rrrrrrrrrrrreally must post this national empty homes figure from last years census again

The big problem is that we have far too many empty properties which have appreciated in price despite 'doing nothing' .




Now they must be liquidated. They are no longer going up in price.

If I see that graph one more time, I'll have no option but to print it out in full 3D, take the longest spike off it and....