But we were also reassured by those good people at the EBS who told us that 75% of FTB's expect house prices to rise over the next 5 years. Thank god for some real perspective......
More negative sentiment on the 9 o'clock news - an article about repayments rising by 50% during the tightening cycle. They also mentioned growth of 5% but that it is driven by consumer spending and house price increases.
IMO supply will keep coming.
Whose been posting the most here?
congratulations whathome!
stupid 12th place...
I've only made approx. 42 posts but this has me down as 102??
how were you counting? I'm not sure how this works!
Another thing that bothers me is the that the interviewer rarely if ever tries
to grill these panelists about their statements, and usually takes their words as gospel.
Living the "dream" eh? 2-bed flat in D15, traffic, tight belt and a property management company's bit%h. What a waste of youth.
That's been the experience in the U.S. market too. When you buy expensive land to develop, it becomes even more expensive if you let it sit idle depreciating in value. Far better to develop, slash the margins on the homes you are selling and try and recoup your money. Given the leeway developers have to cut prices, it absolutely kills people trying to sell their own 2nd hand homes, who may not be able to offer such discounts.
IMO, this will be even worse here, where developers already have the stamp duty laws working in their favour.
Newtalk reporting all morning that the ESRI is claiming that there will be no ECB rate rises in 2007,can't find any links on the newswires though.
Let the ripping to shreads commence people !
Sept. 29 (Bloomberg) -- European two-year government notes headed for a second monthly drop as European Central Bank policy makers indicated the ECB will keep lifting interest rates into 2007 to combat inflation in the euro-region.
Newtalk reporting all morning that the ESRI is claiming that there will be no ECB rate rises in 2007,can't find any links on the newswires though.
Let the ripping to shreads commence people !
Stage One – Displacement
Every financial crisis starts with a disturbance. It might be the invention of a new technology, such as the internet. It could be a shift in economic policy. For example, interest rates might be reduced unexpectedly. Whatever it is, the world changes for one sector of the economy. People see the sector differently.
Stage Two – Prices start to increase
Following the displacement, prices in the displaced sector start to rise. Initially, the price increase is barely noticed. Usually, these higher prices reflect some underlying improvement in fundamentals. As the price increases gain momentum, people start to notice.
Stage three – Easy Credit
Increasing prices are not enough for a bubble. Every financial crisis needs rocket fuel and there is only one thing that this rocket burns - cheap credit. Without it, there can be no speculation. Without it, the consequences of the displacement peter out and the sector returns to normal.When a bubble starts, the market is invaded by outsiders. Without cheap credit, the outsiders can’t join in.
Cheap credit is the entrance ticket for outsiders. For example, gas prices have risen sharply in recent years. However, banks aren’t giving out loans so that people can store gas in their garages in the hope that the price will double in three months. The banks, however, are prepared to give loans to people with poor credit to hold condos in the hope that they can be quickly flipped.
The rise in easy credit is also often associated with financial innovation. Often, a new type of financial instrument is developed that miss-prices risk. Indeed, easy credit and financial innovation is a dangerous cocktail. The South-Sea Bubble started life as new-fangled legal innovation called the limited liability joint stock company. In 1929, stock prices were propelled into the stratosphere with the help of margin calls. Housing prices today accelerated as interest-only mortgages emerged as a viable means for financing overpriced real estate purchases.
Stage Four – Over-trading
As the effects of easy credit kicks in, the market starts to overtrade. Overtrading stimulates volumes and shortages emerge. Prices start to accelerate, and easy profits are made. More outsiders are attracted, and prices run out of control. Accelerating prices attract the foolish, greedy and the desperate to enter the market. As a fire needs more fuel, a bubble needs more outsiders.
Stage five – Euphoria
The bubble now enters its most tragic stage. Some wise voices will stand up and say that the bubble can no longer continue. They put together convincing arguments based upon long run fundamentals and sound economic logic. However, these arguments evaporate in the heat of the one over-riding fact – the price is still rising. The wise are shouted down by charlatans, who justify insane prices by the euphoric claim that the world is different and this new world means higher prices.
Of course, the “new world” claim is true; the world is different every day, but that doesn’t mean that prices run out of control. The charlatan wins the day and unjustified optimism takes over. At this point, the charlatans bolster their optimism with the cruelest of all lies; when prices finally reach their new long run level, there will be a “soft landing”. The idea of a gentle deceleration of prices calms the nerves.The outsiders are trapped in knowing denial. They know that prices can’t keep rising forever, but they rarely act on that knowledge. Everything is safe so long as they quit one day before the bubble bursts.Those that did not enter the market are stuck in a terrible dilemma. They can not enter but neither can they stay out. They know that they have missed the beginning of the bubble. They are bombarded daily with stories of easy riches and friends making massive profits. The strong stay out and reconcile themselves to the missed opportunity. The weak enter the fire and are damned.
Stage Six - Insider profit taking
Everyone wants to believe in a new brighter future but a bubble takes that desire and turns it upside down. A bubble demands that everyone believes in a brighter future, and so long as this euphoria continues, the bubble is sustained.However, as madness takes hold of the outsiders, the insiders remember the old world. They lose their faith and start to panic. They understand their market, and they know that it has all gone too far. Insiders start to cash out. Typically, the insiders try to sneak away unnoticed, and sometimes they get away with it. Other times, the outsiders see them as they leave. Whether the outsiders see them leave or not, insider profit taking signals the beginning of the end.
Stage seven - Revulsion
Sometimes, panic of the insiders infects the outsiders. Other times, it is the end of cheap credit or some unanticipated piece of news. But whatever may be, euphoria is replaced with revulsion. The building is on fire and everyone starts to run for the door. Outsiders start to sell, but there are no buyers. Panic sets in; prices start to tumble downwards, credit dries up, and losses start to accumulate.
Here is the paradox of all bubbles – everyone knows how the fatal combination of easy credit, overtrading and euphoria will affect prices. Minsky didn’t need to write down a thing about the madness of speculation. America’s investors have a lifetime of experience. Within the space of five years, America moved from the tech stock bubble into the real estate bubble.Today’s housing prices are grossly overvalued. Everyone knows that prices will collapse. It might be tomorrow, or it might be two years from now. One thing, however is certain, the longer it takes for the bubble to burst, the more painful it will be.
It's been many pages since we last looked at this.
I reckon we are solidly in Stage 7, stragglers still in Stage 6.
Matt Cooper's property piece has just finished.
The piece was very short and Orna really didn't have very much to say, she seemed quite unprepared for any of the questions Matt asked. The Waterford auctioneer was very bullish on property in that area, a real spin doctor. He rekoned there is great demand for new property in Waterford and surounding counties due to delay in planning. Ian Lawlor reckoned there was still investments opportunities if/where the sums add up. He reckoned there may be more opportunities to come if Orna's piece holds up.
It really wasn't a great piece at all. Very wishy washy with not facts or anything.
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