Buying in a falling market

Theboinkmaster · 26-08-2008 6:45pm

Joseph Kuhr wrote: »

Save yourself a headache and don't bother reading this thread. The Acommodation and Property troll brigade have struck again. You'll find nothing discussed here other than the usual egotistical drivel spouted by people with alterior motives, some of which have been exposed - they've never even bought property before.

In fact, I can save you a whole lot of trouble. You needn't bother reading any of the threads on here, let me sum up boards.ie Accommodation and Property for you in one paragraph:

"anyone who buys a house now is a complete moron because prices need to drop so that I can continue with my self indulgent lifestyle and buy a 3 bedroom semi-d slap bang beside the city centre without having to get up off my lazy arse and work for it"

For those of you looking for proper advice other than "don't buy", have a look at this and this.

Some good advice on how to get the best deal in a falling market and why for some now could be the time to buy.

Completely disagree - seems you are extremely biased and have a vested interest in talking up the market. You obviously bought at the top of the market and are now in negative equity, hoping a few posts on here will revive the market?! Or do you work for a property developer, bank or estate agent?

The market is crashing.

The crash is a good thing and long overdue.

If you bought a 2 bed south dub apartment for €550k in 2006 it will probably fall by about €200k over the next 2 years, get over it.

Ireland is not immune from basic economics - prices will fall back in line with salaries which means hundreds of thousands of €€€ drops, then should only rise with inflation

It's good for our economy that is happens ASAP

ps what's alterior

:D

punchestown · 26-08-2008 9:55pm

Theboinkmaster wrote: »

Completely disagree - seems you are extremely biased and have a vested interest in talking up the market. You obviously bought at the top of the market and are now in negative equity, hoping a few posts on here will revive the market?! Or do you work for a property developer, bank or estate agent?

Joseph has already confirmed on a seperate thread that he is a vested interest. He claimed to have his own house and a seperate second property for investment for his kids. To my eyes he has more snouts in the trough than that. Sadly for him the trough is now empty and shows no sign of being refilled. He has clearly bought at the top of the tree(how many properties is anybodys guess) and he has been left hanging. I asked him on a seperate thread to refrain from his blatant ramping and to report back in 12 months time and we can see the lay of the land then. I would advise people to avoid getting caught up with his petty arguments and misguided comment and let the market play out its due course.

astrofool · 26-08-2008 10:10pm

All I can see here is both sides making petty snipes at each other, without much debate going on (the last few posts anyway).

The one thing we do know is that virtually no one on here will actually call the market correctly.

punchestown · 26-08-2008 10:28pm

astrofool wrote: »

All I can see here is both sides making petty snipes at each other, without much debate going on (the last few posts anyway).

The one thing we do know is that virtually no one on here will actually call the market correctly.

Only time will tell who was closest to the mark! We are going round in circles, throwing figures at each other, second guessing how the crash will play out. (we are in crash mode now, arent we? or are we still under the impression that its a soft landing?) I am happy to come back in a years time and say well done to the person(s) who called it right and if I was so wrong to apologise for my poor foresight. I would rather that than come back here daily refuting the posts of Joseph Kueller and his cronies (the vested interests) and going over the tired old ground day in day out.

Firetrap · 26-08-2008 11:41pm

I also know that the number of people reading this thread on boards isn't going to change the property market out there

gurramok · 26-08-2008 11:57pm

Bears have called the market here correctly since it went downward style in 2006, this is a fact for any bull to search on boards..hint hint

SimpleSam06 · 27-08-2008 9:28am

Joseph Kuhr wrote: »

LOL classic . you've more posts than me therefore your opinion supercedes mine. I've been around here a long time SimpleSam06 under various guises and yes I've been on here dicussing things even before the crash....not that it matters.

Joseph Kuhr wrote: »

I've got nothing to prove gurramok. Like I said, this post count snobbery is a bit pathetic.

You said property discussions on boards lacked detail. I responded by pointing out that there had been tens of thousands of posts spread over myriad talmudic discussions for many years, chewing over and debating every aspect of property in Ireland in excruciating detail, backed up by facts and figures enough to write definitive peer-reviewable volumes on the topic. I also pointed out that you weren't around then, as evidenced by your comment, which as usual, evaded the facts left right and centre. Its got nothing to do with postcount.

Joseph Kuhr wrote: »

The generalised broad sweep that nobody should buy in a declining market is simply bad advice.

And you have yet to provide a single solid reason why this might be the case, other than you have something to sell and no one wants to buy it.

Joseph Kuhr wrote: »

I may be alone in my opinion here on boards but out there in the real world its a different story:

Wow, a newspaper article trying to push property. Never seen that before.

Joseph Kuhr wrote: »

Bravo....round of applause....slowly but surely sinking in. And this thread is for them.

No, this thread is for you to start your very own real estate agency. Good luck with that.

punchestown wrote:

I would rather that than come back here daily refuting the posts of Joseph Kueller and his cronies (the vested interests) and going over the tired old ground day in day out.

Ah cmon, all we need is Pa El Grande and Sizzler to step back in and its 2006 all over again! Ah the memories...

The_Conductor · 27-08-2008 10:08am

SimpleSam06- Joseph will not be responding to you on this thread. He is taking a sabatical from this forum for personal abuse.

Regards,

SMcCarrick

astrofool · 27-08-2008 11:44am

gurramok wrote: »

Bears have called the market here correctly since it went downward style in 2006, this is a fact for any bull to search on boards..hint hint

But bears had also been wrong for the previous 5 years.

When it comes to property, I'd argue that everyone is a vested interest, unless you're happy living on a park bench.

You're either in a home of your own, are looking to buy a home, renting a home or looking to rent a home. The market going up and down is going to effect everyone. And thats without talking about people who have invested in property, long or short term.

SimpleSam06 · 27-08-2008 12:04pm

astrofool wrote: »

But bears had also been wrong for the previous 5 years.

No, they were right. That most people ignored their advice and landed us in the greatest financial collapse ever seen by the state is not the fault of the bears.

astrofool wrote: »

When it comes to property, I'd argue that everyone is a vested interest, unless you're happy living on a park bench.

Yes, but there is a difference between those interested in maintaining an increasingly toxic environment to the benefit of a few, with disastrous consequences for the economy and the entire country, in the name of greed, and those arguing on the side of a house as a home, decent, good value living conditions for everyone, and a situation where you don't need to work the rest of your natural life just to put a roof over your head, to the benefit of all.

That is why "vested interest" is such a dirty word around here, as it has come to represent the former.

Dizzyblonde · 27-08-2008 12:59pm

I have to say I'm appalled by the air of gloating that permeates this thread from time to time and I pity anyone with a mortgage and finacial worries who reads it.

astrofool · 27-08-2008 1:34pm

SimpleSam06 wrote: »

No, they were right. That most people ignored their advice and landed us in the greatest financial collapse ever seen by the state is not the fault of the bears.

People had been saying that prices would collapse imminently for years before they actually did, they were wrong.

For example, I can say: House prices will rise.

And given a long enough time frame, I will be right, so then all bulls are now correct.

SimpleSam06 wrote: »

Yes, but there is a difference between those interested in maintaining an increasingly toxic environment to the benefit of a few, with disastrous consequences for the economy and the entire country, in the name of greed, and those arguing on the side of a house as a home, decent, good value living conditions for everyone, and a situation where you don't need to work the rest of your natural life just to put a roof over your head, to the benefit of all.

That is why "vested interest" is such a dirty word around here, as it has come to represent the former

Owning your own home will never be easy, never has, never will, if prices keep dropping, then higher interest rates will make it hard, or high unemployment and low job security, or any number of factors. The advantage at the moment is that there is a large supply of homes, but, a lot of these are completely unsuitable (too small, too long commutes), so as the supply of "decent" housing (large enough in good locations) drops, then the prices will begin to reflect that, it doesn't matter that there might be 50000 apartments for sale in Louth at a good price.

Given the age group on boards.ie, a large majority here will be FTB's waiting for prices to drop far enoug (if they want to buy), so have an interest in prices dropping, the debate here reflects that. Were the forum frequented by an older age group, then we would probably see more people on the lines of Joseph Kuhr.

The_Conductor · 27-08-2008 2:46pm

Dizzyblonde wrote: »

I have to say I'm appalled by the air of gloating that permeates this thread from time to time and I pity anyone with a mortgage and finacial worries who reads it.

In all fairness- most of us have startling mortgages, along with a bewildering array of other financial commitments. Personally I don't believe there is a right or a wrong time to buy property- I do however believe that you have to be buying for the right reasons, and that buying property period, is not the be-all and end-all.

Yes- some people have been less than sensetive to other people's situations when posting in this and other threads- and there have also been a number of quite personal attacks by some posters against some others, purely as a result of opinions expressed. That behaviour is unwarranted, and unwelcome.

If you do come across problematic, abusive, harrassment or otherwise unrelevant posts to the forum- please use the report post function and moderators will take appropriate action.

Regards,

SMcCarrick

SimpleSam06 · 27-08-2008 3:50pm

astrofool wrote: »

People had been saying that prices would collapse imminently for years before they actually did, they were wrong.

Actually, what people were saying was that property prices were drastically overvalued, which was true then, and true now. Some made predictions of when the bubble would pop, some were right, some were wrong, but the reasoning behind the overvaluation arguments was very sound.

astrofool wrote: »

Owning your own home will never be easy, never has, never will,

As with everything, there are degrees of definition. As prices drop it becomes progressively easier, if not exactly easy, to purchase a home without having to labour for decades to appease the banks.

astrofool wrote: »

if prices keep dropping, then higher interest rates will make it hard, or high unemployment and low job security, or any number of factors.

That makes no sense at all. Prices are dropping because of higher interest rates and tighter lending criteria, not the other way around, unemployment isn't tied to housing at all unless you work in or adjacent to the industry, and as prices drop and larger deposits build up, people end up owing less to the banks for a shorter period of time.

You don't get priced out of the market on the way down, much as those who are desperate to sell would like us to believe otherwise.

astrofool wrote: »

The advantage at the moment is that there is a large supply of homes, but, a lot of these are completely unsuitable (too small, too long commutes), so as the supply of "decent" housing (large enough in good locations) drops, then the prices will begin to reflect that, it doesn't matter that there might be 50000 apartments for sale in Louth at a good price.

You wouldn't happen to have a breakdown of what you would call "decent" housing there by county would you? Because if you don't, and you don't, stating that there are 50,000 unsaleable apartments in Louth or anywhere is misleading, to give it the most charitable name possible.

astrofool wrote: »

Given the age group on boards.ie, a large majority here will be FTB's waiting for prices to drop far enoug (if they want to buy), so have an interest in prices dropping, the debate here reflects that.

Heh. Thats a pat answer that paints the whole site with a broad brush. The age of posters is immaterial, facts are facts and the recent spate of posters trying to foment a bull run on Irish property does not change those facts.

astrofool wrote: »

Were the forum frequented by an older age group, then we would probably see more people on the lines of Joseph Kuhr.

You have no idea what age this Kuhr is, you have no idea what age I am. And once again, age does not have any bearing on the strongly facts-based discussions that take place around here. Unless you are trying to say that older people are more routinely incorrect, or something.

astrofool · 27-08-2008 4:22pm

SimpleSam06 wrote: »

Actually, what people were saying was that property prices were drastically overvalued, which was true then, and true now. Some made predictions of when the bubble would pop, some were right, some were wrong, but the reasoning behind the overvaluation arguments was very sound.

The same over/under valuation arguments occur every time there is a market change, I could say that property is affordable because people were able to buy property at all (even if it was a 1 bed apartment very far from work), if I wait long enough, I will be right.

Going back through the housing bubble thread, and even going 5-6 years back, you will find very few people getting much of it right other than that property prices will drop and that they are overvalued, and that's without getting into what the intrinsic value of a property is.

SimpleSam06 wrote: »

As with everything, there are degrees of definition. As prices drop it becomes progressively easier, if not exactly easy, to purchase a home without having to labour for decades to appease the banks.

You sound like banks are a bad thing? Without them, you will have to work for 17 years (assuming a 30-35 year mortgage), and save the whole amount to buy a property (and that is not including the current cost of rent).

Banks earn interest, mortgages are usually the longest term and lowest interest % payments that people ever make, and will pay a lot more interest on motor or credit card finance.

Mortgages have always been over decades, luckily, inflation tends to take most of the sting out of it after the first decade or so.

SimpleSam06 wrote: »

That makes no sense at all. Prices are dropping because of higher interest rates and tighter lending criteria, not the other way around, unemployment isn't tied to housing at all unless you work in or adjacent to the industry, and as prices drop and larger deposits build up, people end up owing less to the banks for a shorter period of time.

You don't get priced out of the market on the way down, much as those who are desperate to sell would like us to believe otherwise.

A lot of people can't buy properties now because they do not have the required deposit, or can't borrow as high a multiple of their wage as before, they've been priced out of the market.

High unemployment can lead to tighter lending criteria (less job security), if unemployment is rising, then house values can also fall (less demand), again tightening lending conditions.

SimpleSam06 wrote: »

You wouldn't happen to have a breakdown of what you would call "decent" housing there by county would you? Because if you don't, and you don't, stating that there are 50,000 unsaleable apartments in Louth or anywhere is misleading, to give it the most charitable name possible.

What's your argument here? That I picked 50,000 out of the air as an outlandish example (which I did), or that the decreasing supply of houses that people want may not be linked to supply figures, due to the fact that there are a lot of unsaleable houses (ghost estates as it were).

SimpleSam06 wrote: »

Heh. Thats a pat answer that paints the whole site with a broad brush. The age of posters is immaterial, facts are facts and the recent spate of posters trying to foment a bull run on Irish property does not change those facts.

You have no idea what age this Kuhr is, you have no idea what age I am. And once again, age does not have any bearing on the strongly facts-based discussions that take place around here. Unless you are trying to say that older people are more routinely incorrect, or something.

I find it ludicrous that you think that people come to boards.ie to create a bull run on the market, one of the first arguments from a bear is usually that markets can't be talked either way (followed by people getting caught up in a discussion on doom & gloom merchants).

The age of posters is of course material, older people will generally have houses, younger people won't, their opinions will be different.

Younger people will have recently come from education and more often will try and apply economic theory to the current market, older people will use their experience of living through previous market dips, leading to different opinions.

Younger people will generally be more liberal in their political views, older people more conservative, leading to different opinions.

You act as if the facts out there only leading to 1 conclusion, when

a) the facts are incomplete
b) even with perfect knowledge of today, predicting the future is completely impossible

Again, we are encouraged to debate on these forums, and the first person in months to come on here, with a bull mentality, gets berated as a vested interest, and told he is wrong about everything, I think it's sad that we can't accept other people's viewpoint, after all, without it, we have nothing to guage our own views on (other than the imperfect figures pedalled by multiple different interests from each side).

SimpleSam06 · 27-08-2008 5:19pm

astrofool wrote: »

The same over/under valuation arguments occur every time there is a market change, I could say that property is affordable because people were able to buy property at all (even if it was a 1 bed apartment very far from work), if I wait long enough, I will be right.

Ah, but you are the only one talking about affordability. I was talking about value.

astrofool wrote: »

Going back through the housing bubble thread, and even going 5-6 years back, you will find very few people getting much of it right other than that property prices will drop and that they are overvalued

And that is the operative word. There were militant legions howling that property was not in any way overvalued, and that it would continue going up before it plateaued. Those are the only ones who could be said to have been completely, demonstrably wrong.

astrofool wrote: »

You sound like banks are a bad thing? Without them, you will have to work for 17 years (assuming a 30-35 year mortgage), and save the whole amount to buy a property (and that is not including the current cost of rent).

Well first of all you have no idea what would happen if banks weren't involved, since we have never had such a situation, and second of all, the price of property depends very much on the available capital. If fluid capital vanished due to the banks dropping out of the equation, property prices would most likely drop severely as well. Something is only worth what the market will pay for it.

astrofool wrote: »

Banks earn interest, mortgages are usually the longest term and lowest interest % payments that people ever make, and will pay a lot more interest on motor or credit card finance.

What, they deserve thanks for their charitable interest rates? Most of the oncoming mess can be laid at the feet of the banks, whether you believe it or not.

astrofool wrote: »

A lot of people can't buy properties now because they do not have the required deposit, or can't borrow as high a multiple of their wage as before, they've been priced out of the market.

Or another way to put it, prices are dropping to a level they can afford, in terms of loans from the banks. This is what is happening at the moment.

astrofool wrote: »

High unemployment can lead to tighter lending criteria (less job security), if unemployment is rising, then house values can also fall (less demand), again tightening lending conditions.

Where are you pulling your prediction for massive unemployment from? The worst case scenario I've seen predicts a 3% rise over the next few years, which could well be offset by economic migrants leaving.

astrofool wrote: »

What's your argument here? That I picked 50,000 out of the air as an outlandish example (which I did), or that the decreasing supply of houses that people want may not be linked to supply figures, due to the fact that there are a lot of unsaleable houses (ghost estates as it were).

Okay to put it another way, what percentage of housing would you classify as "unsaleable" and why?

astrofool wrote: »

I find it ludicrous that you think that people come to boards.ie to create a bull run on the market, one of the first arguments from a bear is usually that markets can't be talked either way (followed by people getting caught up in a discussion on doom & gloom merchants).

What are you talking about? There have been gigantic discussions on the effect of sentiment on the market both here and over at AAM, before the owners went berserk and barred all talk of property going down.

astrofool wrote: »

The age of posters is of course material, older people will generally have houses, younger people won't, their opinions will be different.

We aren't talking about opinions, we are talking about facts. Why do have difficulty seperating those two?

astrofool wrote: »

Younger people will have recently come from education and more often will try and apply economic theory to the current market,

Heh. Tell me, why would a person who recently graduated from anything but economics try to apply economic theory to the market? Thats why many come here, to learn about the market. Its hardly fair to let them get suckered in by overextended specuvestors, now is it? That sort of "chuckling up your sleeve at the bigger fool" is a thing of the past.

astrofool wrote: »

Younger people will generally be more liberal in their political views, older people more conservative, leading to different opinions.

Why are we talking about politics now, I thought this was a property discussion.

astrofool wrote: »

You act as if the facts out there only leading to 1 conclusion, when

a) the facts are incomplete
b) even with perfect knowledge of today, predicting the future is completely impossible

Yes, so the fact that scientists don't have all the facts means they should just lay down their instruments and go to the beach? Or maybe they should rather work with the information they have and draw informed conclusions about the likely results of their work? Nobody has the full picture about anything, yet here we are. There are certainly sufficient facts available to support the idea that Irish property was and is overvalued.

astrofool wrote: »

Again, we are encouraged to debate on these forums, and the first person in months to come on here, with a bull mentality, gets berated as a vested interest,

You might want to have a quick read back over my post about vested interests.

astrofool wrote: »

and told he is wrong about everything,

He was.

astrofool wrote: »

I think it's sad that we can't accept other people's viewpoint, after all, without it, we have nothing to guage our own views on (other than the imperfect figures pedalled by multiple different interests from each side).

That particular viewpoint leads to the ruination of lives and futures, for one person trying to offload some agreements he shouldn't have made onto those less experienced. As such this viewpoint is toxic in the extreme, and will be vigorously contested in all cases.

Some opinions are less equal than others. But then again, most people already know that.

SimpleSam06 · 27-08-2008 6:42pm

Warren Buffet wrote:

A public-opinion poll is no substitute for thought.

If past history was all there was to the game, the richest people would be librarians.

In the business world, the rearview mirror is always clearer than the windshield.

It's far better to buy a wonderful [home] at a fair price than a fair [home] at a wonderful price.

Let blockheads read what blockheads wrote.

Price is what you pay. Value is what you get.

Funnily enough, all that applies very well to the bullish sentiments being expressed by certain posters recently.

On another note, buh-bye now.

Plankmonkey · 27-08-2008 8:08pm

Dizzyblonde wrote: »

I have to say I'm appalled by the air of gloating that permeates this thread from time to time and I pity anyone with a mortgage and finacial worries who reads it.

Indeed. People may think they're being smart but at the end of the day our whole economy is in the doldrums, not just property. I really don't see what there is to gloat about. The notion that the property boom was fueled by greedy investors squeezing every penny out of the peasants, although probably true in some cases, is not a fair reflection. The way I see it, the banks were throwing money at people and financially backing their bad decisions. No just in property, in all aspects of the economy. People trusted them. If you could get the backing of the bank then you're onto something good, right? The irony is any greedy investors got out when the going was good, leaving the innocent home buyer to bear the brunt. In my mind people should be directing their anger at the banks and ultimately the government for allowing this to happen. I'm not saying they could have predicted a credit crunch but alarm bells should have sounded when you could get a 100% mortgage on a 40 year term. The UK learnt from their mistake on that one....why didn't we learn from their mistake too?

The_Conductor · 27-08-2008 8:22pm

Plankmonkey wrote: »

alarm bells should have sounded when you could get a 100% mortgage on a 40 year term

IIB and ACC even offered 110% mortgages briefly......

I agree with you entirely. I would put more blame at the government's door though- than the banks. Banks simply chase money- Government policy was to hype the industry, irrespective of its fundamentals. The 3 Bacon Reports and the Buchanan report spelt out what had to be done- they were ignored. As long ago as 1995 the Social Housing schemes were reviewed and found to be seriously wanting- but nothing was done. The final Bacon report in 2000- was amazingly apt in its findings- yet it was hung on the shelf too. You have to ask yourself- whose interests were being served by government action/inaction? They certainly were not acting in the best interests of the average punter walking down the street........ Its no accident that the tent at the Galway Races has been dismantled.........

Imposter · 28-08-2008 4:45am

Plankmonkey wrote: »

The way I see it, the banks were throwing money at people and financially backing their bad decisions. No just in property, in all aspects of the economy. People trusted them. If you could get the backing of the bank then you're onto something good, right?

I would agree if you said the banks were wreckless in their lending but to blame the banks is to miss the point imo. Anyone that takes out a loan, especially one to fund a house or to expand a business should do so in the full knowledge of what they are doing. To blame the banks for 'giving me money because I asked for it' is to shift blame from the individual who wanted the money to the banks.

I currently don't live in Ireland so in a way it doesn't really affect me what happens (other than it affecting family members), but I would hate to see the government step in and protect people and banks from their own bad decisions. Doing so would penalise anybody who has stayed away from the market because they thought it was overvalued or a bad idea to get into. Even if those affected are the majority they should not be protected.

SimpleSam06 · 28-08-2008 7:24am

Plankmonkey wrote: »

The irony is any greedy investors got out when the going was good, leaving the innocent home buyer to bear the brunt.

Actually I would say a lot of greedy investors got burnt, and are in the process of being burned right now, including some fairly prominent ones.

Plankmonkey wrote: »

I'm not saying they could have predicted a credit crunch

Many banks did sell most of their properties in 2006, at the peak of the boom - they knew something was in the air. Either they knew it wouldn't get any better, or they were unable to realise capital from any other source.

Imposter wrote: »

To blame the banks for 'giving me money because I asked for it' is to shift blame from the individual who wanted the money to the banks.

There is a crime called "predatory lending" for a reason. Banks have a priveleged position among businesses, and along with that comes the trust that they will act responsibly. If they cannot do so, their priveleges must be revisited.

johnnyskeleton · 28-08-2008 11:30pm

smccarrick wrote: »

SimpleSam06- Joseph will not be responding to you on this thread. He is taking a sabatical from this forum for personal abuse.

Regards,

SMcCarrick

Unlike the mods in other fora (who announce their bannings with pride), SMC moves silently through the threads, always ready to pounce, and when he does pounce, you never hear a sound.

SkepticOne · 28-08-2008 11:38pm

Imposter wrote: »

I currently don't live in Ireland so in a way it doesn't really affect me what happens (other than it affecting family members), but I would hate to see the government step in and protect people and banks from their own bad decisions. Doing so would penalise anybody who has stayed away from the market because they thought it was overvalued or a bad idea to get into.

Unless they have their savings in an Irish bank which collapses. I think the government will be pretty much forced to intervene in that case.

johnnyskeleton · 28-08-2008 11:45pm

astrofool wrote: »

People had been saying that prices would collapse imminently for years before they actually did, they were wrong.

For example, I can say: House prices will rise.

And given a long enough time frame, I will be right, so then all bulls are now correct.

I find this argument somewhat unfair. The more bearish folk looked at property and said the price is too high, it should be less. Notwithstanding that, prices continued to rise, so that the bearish folk said that the prices are even higher, and it should be much less and so on. Eventually, the larger economy realised that prices were, in fact, too high. Now, if the larger economy had realised this in 2004 the effects of the crash would not have been quite as bad, so the fact that prices didn't drop then but are dropping now does not mean that what bears said in 2004 was incorrect, it just means that the economy has set itself up for a higher fall.

Put another way, if I see a friend of mine in the pub at 11p.m. and he's drunk and I say "listen mate, you're too drunk, go home before you embarrass yourself" and instead of listening to me he continues to drink until 2a.m. when he falls into a gutter with his pants around his ankles and a very angry girlfriend, does that mean that I was wrong to tell him he was too drunk at 11p.m., because the consequences of his drunkenness were only apparent at 2a.m.? Or is it fair to say that I called it correctly? In this scenario, I think I would only be wrong if he had a great night discussing politics and got up fresh faced the next day to go for a run.

Applying this to the property scenario, the bears would only have been wrong if prices kept going up and up and up, with occasional soft landings, plateaus, and rises in line with inflation. This is what the argument of most bullish types was a few years ago, and now that it has proved incorrect, the bulls are saying "well of course, a stopped clock etc etc".

I would also say that very few bears think that prices won't return to rising in the medium-long future. I might even suggest that the typical view would be that prices will level out and start to rise again in about 5 years time. If they were to say that prices are going to continually drop then they are wrong, and if bulls say that prices will eventually start to rise again, then I think they are correct.

But in the short term prices are going to continue to fall, and I also think it's going to be a long time before they rise back up to the peak of 2006.

SimpleSam06 · 29-08-2008 8:52am

johnnyskeleton wrote: »

I would also say that very few bears think that prices won't return to rising in the medium-long future. I might even suggest that the typical view would be that prices will level out and start to rise again in about 5 years time.

I'm not so sure about this, at least in terms of prices rising at a useful rate to cause capital appreciation worth anything again. What led to the boom was a fairly unusual set of circumstances, which I seriously doubt we'll see replicated within our lifetimes again, after the dust from this shambles has settled.

What will probably happen is prices will rise at or around inflation after they reach what could be called "true value".

Plankmonkey · 29-08-2008 11:54am

SimpleSam06 wrote: »

I'm not so sure about this, at least in terms of prices rising at a useful rate to cause capital appreciation worth anything again. What led to the boom was a fairly unusual set of circumstances, which I seriously doubt we'll see replicated within our lifetimes again, after the dust from this shambles has settled.

What will probably happen is prices will rise at or around inflation after they reach what could be called "true value".

Surely there will be a bounce once confidence has returned to the economy and people rush in (once the media have announced that prices have bottomed out). I'm not suggesting there will be a return to the crazy days, but there's bound to be an initial surge, especially as once the ball is back in the sellers court, there's going to be a lot of hurt and bitter vendors out there. You're likely to see a very unfavourable market for buyers.

I think there is also an assumption that prices are plummeting because they were overpriced. People could afford houses, even 2 or 3 for some people. So how were they over priced? every generation can say houses were expensive when they bought them. Wait 10-15 years and inflation reduces your payments to peanuts. I'm not denying that they are now over priced, because lending terms have tightened and there is an oversupply. The key here is forget about the housing market, and keep an eye on the global financial situation. A new US president for 2009, prices must be near the bottom there too, so positve news coming from the US will have a knock on (just as negative news had a knock on). Bad news from the banking sector is getting scarcer and scarcer too. These are the factors people should be considering, not whether prices have dropped to 2001 or 2002 levels or any other level for that matter. Its not 2001, its 2008.

The_Conductor · 29-08-2008 11:58am

Plankmonkey wrote: »

Surely there will be a bounce once confidence has returned to the economy and people rush in (once the media have announced that prices have bottomed out). I'm not suggesting there will be a return to the crazy days, but there's bound to be an initial surge, especially as once the ball is back in the sellers court, there's going to be a lot of hurt and bitter vendors out there. You're likely to see a very unfavourable market for buyers.

I don't think so.
The issue which will most probably stop this from happening is the lack of availability of 100% mortgages. People have not had to save their 20-30% deposits for the past 10 years and have very little savings built up- so they are unable to enter the market at will, in the way they might have done 2-3 years ago.
The issue is as much availability of finance, as it is affordability.

Plankmonkey · 29-08-2008 12:16pm

smccarrick wrote: »

I don't think so.
The issue which will most probably stop this from happening is the lack of availability of 100% mortgages. People have not had to save their 20-30% deposits for the past 10 years and have very little savings built up- so they are unable to enter the market at will, in the way they might have done 2-3 years ago.

The lack of 100% mortgages is because banks are reluctant to borrow. They will only lend what they have on deposit. What are the indications that this is permanent? Considering a return to stability in the financial markets and stability in the housing sector (albeit flat).

The_Conductor · 29-08-2008 12:23pm

Plankmonkey wrote: »

The lack of 100% mortgages is because banks are reluctant to borrow. They will only lend what they have on deposit. What are the indications that this is permanent? Considering a return to stability in the financial markets and stability in the housing sector (albeit flat).

Banks are not reluctant to borrow- they are reluctant to lend (even among each other). The ECB as a lender of last resort, has made billions available to Eurozone banks- liquidity is not an issue. Banks are not limited to the amount they have on deposit- thats simply not how the banking industry works. A return of stability to the financial sector, which most people would also understand to mean a return to prudent lending practices, would mean lending multiples returning to historic levels, and mortages to a max of 80-85% of a properties price being the norm, rather than the exception.

Oafley Jones · 29-08-2008 12:37pm

Plankmonkey wrote: »

I think there is also an assumption that prices are plummeting because they were overpriced. People could afford houses, even 2 or 3 for some people. So how were they over priced? every generation can say houses were expensive when they bought them. Wait 10-15 years and inflation reduces your payments to peanuts. I'm not denying that they are now over priced, because lending terms have tightened and there is an oversupply.

Houses were/are still massively overvalued. You ask how people could afford houses? I put it to you that alot of people couldn't. People are leveraged up to their eyeballs on easy credit. As regard inflation reducing payments to peanuts, that's not going to happen. Inflation reduces your purchasing power as well and you can forget about higher salaries to counter it. Also, high inflation will result in higher rates from the ECB and we have already seen the impact of that.

Plankmonkey · 29-08-2008 12:55pm

smccarrick wrote:

A return of stability to the financial sector, which most people would also understand to mean a return to prudent lending practices, would mean lending multiples returning to historic levels, and mortages to a max of 80-85% of a properties price being the norm, rather than the exception.

Yes and I totally agree this is a very good thing. 85% may have been the norm then, but I think 90% is a more realistic modern level (the gap in starting salaries and mid to upper career salaries is huge, allowing people to gain back ground which was not possible historically when 85% was the norm) and even then it should be taken with the intention of paying in lump sums as much as possible. But considering prices will drop to a level that allows most people to buy with an 85% mortgage, a realistic (historic) level still requires people to save a deposit for a couple of years. I don't buy into the idea that prices must drop so that a 15-20% deposit is ony 5K or so.

Oafley Jones wrote: »

Houses were/are still massively overvalued. You ask how people could afford houses? I put it to you that alot of people couldn't. People are leveraged up to their eyeballs on easy credit.

People never could afford houses. Its always been tough for FTBs. Every generation will tell you the same thing, things were really tough in our day. Anything else is abnormal, I'm suggesting that for houses to be easily affordable (i.e less and less credit) is abnormal and therefore will not be a permanent situation.

Oafley Jones wrote: »

As regard inflation reducing payments to peanuts, that's not going to happen. Inflation reduces your purchasing power as well and you can forget about higher salaries to counter it. Also, high inflation will result in higher rates from the ECB and we have already seen the impact of that.

I find it hard to believe you can actually argue against this point. People who bought a house in the 80's would have paid say 40K. Now I'm just making these figures up to get my point across so bear with me. So lets say their mortgage repayments were £300. A back breaking amount of money in its day. Add 10-15 years to that and its plain sailing. Ask your parents and grandparents, its the way it has always worked and I don't see that changing.

punchestown · 29-08-2008 1:02pm

trolling, surely?

Plankmonkey · 29-08-2008 1:26pm

punchestown wrote: »

trolling, surely?

An Internet troll, or simply troll in Internet slang, is someone who posts controversial and irrelevant or off-topic messages in an online community, such as an online discussion forum or chat room, with the intention of provoking other users into an emotional response[1] or to generally disrupt normal on-topic discussion.[2]

Seems you're the troll. I remember now why I gave up boards all that time ago.

Oafley Jones · 29-08-2008 2:20pm

Plankmonkey wrote: »

People never could afford houses. Its always been tough for FTBs. Every generation will tell you the same thing, things were really tough in our day. Anything else is abnormal, I'm suggesting that for houses to be easily affordable (i.e less and less credit) is abnormal and therefore will not be a permanent situation..

When my parents bought their house, the average cost was 3 times the average salary. Today it's 7-8 times. Also it was common to get a 20 year mortgage with only one income. Today you need a duel income with a mortgage of 30 years upwards.

Plankmonkey wrote: »

I find it hard to believe you can actually argue against this point. People who bought a house in the 80's would have paid say 40K. Now I'm just making these figures up to get my point across so bear with me. So lets say their mortgage repayments were £300. A back breaking amount of money in its day. Add 10-15 years to that and its plain sailing. Ask your parents and grandparents, its the way it has always worked and I don't see that changing.

To argue that you can simply inflate your way out of mortgage debt in todays climate demonstrates a fundamental lack of understanding of even the most basic economics.

martian1980 · 29-08-2008 2:22pm

Plankmonkey wrote: »

Surely there will be a bounce once confidence has returned to the economy and people rush in (once the media have announced that prices have bottomed out). I'm not suggesting there will be a return to the crazy days, but there's bound to be an initial surge, especially as once the ball is back in the sellers court, there's going to be a lot of hurt and bitter vendors out there. You're likely to see a very unfavourable market for buyers.

I think there is also an assumption that prices are plummeting because they were overpriced. People could afford houses, even 2 or 3 for some people. So how were they over priced? every generation can say houses were expensive when they bought them. Wait 10-15 years and inflation reduces your payments to peanuts. I'm not denying that they are now over priced, because lending terms have tightened and there is an oversupply. The key here is forget about the housing market, and keep an eye on the global financial situation. A new US president for 2009, prices must be near the bottom there too, so positve news coming from the US will have a knock on (just as negative news had a knock on). Bad news from the banking sector is getting scarcer and scarcer too. These are the factors people should be considering, not whether prices have dropped to 2001 or 2002 levels or any other level for that matter. Its not 2001, its 2008.

If you take a look at the multiples of people's salaries that they borrow for housing in other countries and then look at the multiples of peoples salaries borrowed in Ireland over the last few yeats, you'll understand why some might say they were overpriced. People are incredibly exposed to interest rate fluctuations as a result

raido9 · 29-08-2008 3:06pm

Oafley Jones wrote: »

To argue that you can simply inflate your way out of mortgage debt in todays climate demonstrates a fundamental lack of understanding of even the most basic economics.

Could you enlighten us with a fundamental lack of understanding of even the most basic economics, and explain where Plankmonkey's assumptions are wrong?

Plankmonkey · 29-08-2008 3:06pm

martian1980 wrote: »

If you take a look at the multiples of people's salaries that they borrow for housing in other countries and then look at the multiples of peoples salaries borrowed in Ireland over the last few yeats, you'll understand why some might say they were overpriced. People are incredibly exposed to interest rate fluctuations as a result

Don't get me wrong, I'm not denying they're overpriced. I'm saying I take a different view on why they are overpriced.

My salary and the OH's salary have far out paced our repayments and the interest hikes. It was bloody tough to start with, but got easier as time went by.

A 30 year mortgage does not actually mean 30 years because you can pay off more as it becomes more affordable to you. If you don't then I guess you would be considered poor by todays standards or maybe you just prefer to spend the money on other things. I don't see where the argument that things were so much easier back in the day comes from. People are picking out figures and taking them out of context.

Edit: not to mention most couples come into a lot of money other than their salaries. Inheritence being the most common example.

Oafley Jones · 29-08-2008 3:35pm

raido9 wrote: »

Could you enlighten us with a fundamental lack of understanding of even the most basic economics, and explain where Plankmonkey's assumptions are wrong?

Already done.

Plankmonkey · 29-08-2008 4:00pm

Oafley Jones wrote: »

Already done.

People got paid a lot less in the 80's and 90's. So increases in salary were more moderate than todays.

In the height of the boom we had never sold so many houses. People were buying property in their droves - it was by no means unaffordable.

Whats changed is that there has been a drastic decrease in lending criteria. Too many houses for sale and not enough credit - its called the credit crunch and its the reason why now houses are too expensive. Things are too expensive when people can't afford to buy them.

Oafley Jones · 29-08-2008 4:22pm

Plankmonkey wrote: »

People got paid a lot less in the 80's and 90's. So increases in salary were more moderate than todays.

In the height of the boom we had never sold so many houses. People were buying property in their droves - it was by no means unaffordable.

Whats changed is that there has been a drastic decrease in lending criteria. Too many houses for sale and not enough credit - its called the credit crunch and its the reason why now houses are too expensive. Things are too expensive when people can't afford to buy them.

:eek:
Please tell me this is a wind-up?

Plankmonkey · 29-08-2008 4:35pm

Oafley Jones wrote: »

:eek:
Please tell me this is a wind-up?

What the credit crunch has nothing to do with it? If the banks were to start loosening their lending criteria again houses would not become affordable to more people? Please explain to me what I am missing here. Are you suggesting the credit crunch is simply a coincidence and something to be ignored? :eek: :eek:

Are you suggesting that the world markets could return to normality yet prices would still continue to decrease in Ireland because we have something else going on that different to the rest of the world? We're a special case?

Oafley Jones · 29-08-2008 4:42pm

Plankmonkey wrote: »

What the credit crunch has nothing to do with it? If the banks were to start loosening their lending criteria again houses would not become affordable to more people? Please explain to me what I am missing here. Are you suggesting the credit crunch is simply a coincidence and something to be ignored? :eek: :eek: Are you suggesting that the world markets could return to normality yet prices would still continue to decrease in Ireland because we have something else going on that different to the rest of the world? We're a special case?

You should read McWilliams book The Generation Game. I'm not his biggest fan -his eagerness to use crass generalisations and coin awful labels for them etc- but you'd pick up some ideas from it.

martian1980 · 29-08-2008 4:44pm

Plankmonkey wrote: »

What the credit crunch has nothing to do with it? If the banks were to start loosening their lending criteria again houses would not become affordable to more people? Please explain to me what I am missing here. Are you suggesting the credit crunch is simply a coincidence and something to be ignored? :eek: :eek: Are you suggesting that the world markets could return to normality yet prices would still continue to decrease in Ireland because we have something else going on that different to the rest of the world? We're a special case?

In the ten years from1996 to 2006, Irish residential mortgage debt rose by 522 per cent per capita; in the US, the same debt rose by 103 per cent. This should tell you that we're a pretty special case

Firetrap · 29-08-2008 4:54pm

Sentiment.

gurramok · 29-08-2008 5:32pm

Plankmonkey wrote: »

Don't get me wrong, I'm not denying they're overpriced. I'm saying I take a different view on why they are overpriced.

My salary and the OH's salary have far out paced our repayments and the interest hikes. It was bloody tough to start with, but got easier as time went by.

A 30 year mortgage does not actually mean 30 years because you can pay off more as it becomes more affordable to you. If you don't then I guess you would be considered poor by todays standards or maybe you just prefer to spend the money on other things. I don't see where the argument that things were so much easier back in the day comes from. People are picking out figures and taking them out of context.

Edit: not to mention most couples come into a lot of money other than their salaries. Inheritence being the most common example.

Your missing something on inflation. We're in ECB now, target 2% inflation unlike our parents time so trying to inflate your way out of a jumbo mortgage these days won't work.

2006 was the year houses stopped selling en masse in this country with 100% mortgages still available, a full year before the credit crunch hit, explain that one sir.

Plankmonkey · 29-08-2008 6:00pm

gurramok wrote: »

Your missing something on inflation. We're in ECB now, target 2% inflation unlike our parents time so trying to inflate your way out of a jumbo mortgage these days won't work.

Inflation is way above the target 2%. Wages far outdo inflation in this country. And I'm not just talking about the yearly increases. People move jobs a lot more than they used to and with that come massive pay hikes. A lot of industries also give out bonuses on top of salaries.

To say our banks were giving out mortgages to people who could not afford them is to say we had our own subprime market fiasco here in Ireland. We did have sub prime lenders but it was small.

By and large, people who were given a mortgage could afford the repayments and still can. I'd argue that most defaulters are the unfortunate thousands now out of work. Mass unemployment correlates to an increase in defaulters. On top of that, banks will give you no leeway at all during the credit crunch.

gurramok wrote: »

2006 was the year houses stopped selling en masse in this country with 100% mortgages still available, a full year before the credit crunch hit, explain that one sir.

Good point. From what I remember the start of interest rate hikes started it. People stayed away and along came the credit crunch and those who only intended on waiting now find they need a deposit. But yes, based on that you could say we were in for a correction anyway. What would have happened were it not for the credit crunch? Probably no point arguing that one as no one can say.

gurramok · 29-08-2008 6:34pm

Plankmonkey wrote: »

Inflation is way above the target 2%. Wages far outdo inflation in this country. And I'm not just talking about the yearly increases. People move jobs a lot more than they used to and with that come massive pay hikes. A lot of industries also give out bonuses on top of salaries.

Yes, in Ireland inc, its been hovering around 3-5% pa since the boom started and around 1-2% in the 90s.

I'm not sure when you took out your mortgage, but inflation here was in double figures in the late 70s/early 80s hence my reference where people were able to afford mortgages taken out back then(for now) due to high inflation.

These massive pay hikes have not really materialised in the last maybe 4 yrs, they were usually 5% pa for alot.

I can't see how peoples wages will continue to rise at that pace given we're entering recession, a whole different ball game.

House prices rose 270% in the bubble, wages did not, i think for wages it was circa 33% hence prices did and do not reflect proper values (someone may correct me on that wages rise stat.)

Plankmonkey wrote: »

To say our banks were giving out mortgages to people who could not afford them is to say we had our own subprime market fiasco here in Ireland. We did have sub prime lenders but it was small.

Yes, thats where the crux is, how do we define whats 'safe' lending as to opposed to wreckless lending.

We didn't have ninja mortgages as widespread as the US but those 100% and giveaway topups that were handed out were alarming.

Plankmonkey wrote: »

By and large, people who were given a mortgage could afford the repayments and still can. I'd argue that most defaulters are the unfortunate thousands now out of work. Mass unemployment correlates to an increase in defaulters. On top of that, banks will give you no leeway at all during the credit crunch.

I'd agree to a certain degree. I know people who fork out 40-50% of their net income on a mortgage. It ain't right and i would not call that affordable.

Others have defaulted through:
-interest only mortgages switching to full mortgages when honey moon period was up
-3yr and 5yr fixed mortgages taken out pre '06 on 2% ECB + retail offers which have now doubled payments for consumers

The mass unemployment has not happened yet in the states. People defaulted en masse due to honeymoon interest rate periods been reset to 'normal' rates.
So i wouldn't put mass unemployment as a vital factor. People will still have jobs, its what they earn to afford mortgages that counts.

Plankmonkey wrote: »

Good point. From what I remember the start of interest rate hikes started it. People stayed away and along came the credit crunch and those who only intended on waiting now find they need a deposit. But yes, based on that you could say we were in for a correction anyway. What would have happened were it not for the credit crunch? Probably no point arguing that one as no one can say.

This is where we bears disagree as to reasons why people stayed away. I say they stayed away because of high prices. A 100% mortgage over 40yrs could not even help buyers afford so they along with sentiment stayed away.
Then a yr later the credit crunch hit us so a double whammy for buyers.

If the credit crunch did not happen, prices would still have fallen because its a classic bubble.
Prices fell between mid '06 and mid'07 and our own bubble would of deflated anyway yr on yr.

SimpleSam06 · 29-08-2008 7:11pm

Plankmonkey wrote: »

Surely there will be a bounce once confidence has returned to the economy and people rush in (once the media have announced that prices have bottomed out). I'm not suggesting there will be a return to the crazy days, but there's bound to be an initial surge,

Actually a lot of property discussions mention what is known as a "dead cat bounce", where exactly what you describe takes place. It does not signal the bottom of the market however, just a bump in the slope downwards.

Plankmonkey wrote: »

especially as once the ball is back in the sellers court, there's going to be a lot of hurt and bitter vendors out there. You're likely to see a very unfavourable market for buyers.

To be honest anyone that is taking broad market conditions personally is going to have their ass handed to them one way or the other, so I wouldn't worry about "hurt" sellers.

Plankmonkey wrote: »

I think there is also an assumption that prices are plummeting because they were overpriced. People could afford houses, even 2 or 3 for some people. So how were they over priced?

No, here you are conflating affordability with value, two different things. I could afford a box of matches at €50 per box, so could a lot of people, but that wouldn't be good value. The market bottom will be reached when affordability and value draw together.

Plankmonkey wrote: »

every generation can say houses were expensive when they bought them.

There are degrees of ease, however. While it might never be easy per se, it will certainly get easier.

Plankmonkey wrote: »

Wait 10-15 years and inflation reduces your payments to peanuts. I'm not denying that they are now over priced, because lending terms have tightened and there is an oversupply.

As other posters have mentioned, the aim for the ECB is 2% inflation. The ECB is strongly influenced by the German economy, and rightly so given its importance to Europe, and the Germans are terrified of inflation. Our own inflation is nowhere near what it was in the past, also.

Plankmonkey wrote: »

The key here is forget about the housing market, and keep an eye on the global financial situation. A new US president for 2009, prices must be near the bottom there too, so positve news coming from the US will have a knock on (just as negative news had a knock on). Bad news from the banking sector is getting scarcer and scarcer too. These are the factors people should be considering, not whether prices have dropped to 2001 or 2002 levels or any other level for that matter. Its not 2001, its 2008.

You are dead on correct in the latter part of the statement, in that lending levels are key to the price of property, but I find your sunny outlook on future financial conditions to be a little optimistic. There are a lot of rumblings coming down the wire about the Alt-A and Prime mortgage default levels in the US, which threaten to knock the subprime crisis into a cocked hat. No amount of government thumbs in the leaky dams will slow that down if it cracks.

Also there is the long term effect of the current financial crisis to consider, as others have mentioned the banks no longer trust one another. It takes a long time for the effects of these problems to be properly felt, for example the great depression happened years after the Wall Street crash.

There are going to be some badly burned fingers by the time the smoke has cleared, and it will be a long, long time before banks put themselves in this position again, or are allowed to by government regulation.

ZYX · 30-08-2008 9:54am

gurramok wrote: »

House prices rose 270% in the bubble, wages did not, i think for wages it was circa 33% hence prices did and do not reflect proper values (someone may correct me on that wages rise stat.)

I don't know the exact figure but wages rising 33% does not make sense. If we take it that the boom lasted from 1995 - 2005 that means you are saying wages rose 3% a year. As I say I don't know the exact figure but surely it was higher than that. After all during this period we went from a low/medium pay economy (in Western terms) to one of the highest paid in the world. Also in the time tax rates were seriously reduced, thereby increasing tax home income

SimpleSam06 · 30-08-2008 3:27pm

ZYX wrote: »

I don't know the exact figure but wages rising 33% does not make sense.

He's referring to the average industrial wage in the private sector 2001 to 2006, a period typically referred to as the "boom". If you look at the average wages from the CSO, 1998 to 2006,, you will see that it jumps (for industrial workers) from €428.82 a week to €624.45. Other sectors are similar to this, excluding the public sector which had earnings growth closer to 65% from '01 to '06.

House prices on the other hand for the same period went from €87,000 in 1996 to over €300,000 in 2006, a better than 300% spike in prices.

Buying in a falling market

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