Current public sentiment towards the housing market?

[SHARP]

So the thread question is about public sentiment towards the housing market, so here is an account of my view:


Okay, my thoughts have now started to take over my wife and my life and its becoming a daily obsession:
Constant discussions about: Property/Financial Position/What should we do:

Everyday while I sit down for breakfast and lunch at work and when I arrive home for Dinner, the same topics come up:

“The whole country has gone property crazy”
“There is a crash coming”
“John and Mary have bought/build a new house for 400-500k and have took out a 35 year mortgage and they only earn …..”
“What should we do – should we sell our house for a profit and buy/build new one with 3,000sq ft, full kitted out etc.”
“We should stop the negativity and spend, spend, spend “like everyone else seems to be doing””
“How can they afford THAT house”


Basically myself and my wife are 28 years old with a 11month old baby. We are living very comfortably in a lovely 4 bedroom detached house on a site just outside a big town We have a small mortgage of 140k and have 20 years left to pay. Our house is standard (1,800sq foot) and we love it.

We have been feeling the pressure to sell the house and buy the big house and get the big mortgage that goes along with it, but we see the black clouds ahead and are prepared to stay put and “batten down the hatches”

About 6 couples around us have either spent 400-500k on huge 3,000sq foot homes or are building houses of similar size. They are also fully kitting out this home in order for them to be show homes and all this on 35,40 year mortgages. I know of at least 4 of these couples that earn less than I do and have more debts and no SSIA/VHI provisions. They are basically putting all the eggs in one basket by taking out the biggest loan they can get and getting the biggest house they can get (while not thinking of how they will manage the running costs (lighting, heating etc).

Public sentiment is that house prices will continue to grow and grow and “our house will be worth 800-1m in 2 years time”. People seem to think that this will run and run and jobs and money will be aplenty for years to come. I am consider mad or a “dooms dayer” for saying that I wish the best of luck and hope everything works out for them “of course it will work out – sure the house has already increased in value”

I asked 5 people the following question and I think it gives a good overview of how people think:

If you won 300-400k on the lotto, would you pay off the mortgage:

• God NO, sure you always need a mortgage, its great for the tax benefits. It’s the most tax efficient thing you can do. I will always have a mortgage ?????
• NO. I would buy a bigger house. I could sell my house and with the extra 400k, I could buy a huge mansion for that.
• No, sure that wouldn’t pay off my mortgage anyway and I would prefer to spend it while Im young
• Yes, I would love to, but its not enough to get the mortgage cleared as I have already re-mortgaged twice in the last years. Would spend it on a nice holiday and new cars for my and my husband. I always wanted a little sports car, so I would buy one of those.
• Yes, It’s the biggest drain on my finances, cant wait to pay it off. 33 years left at the moment and I will be 63 by the time I pay it off. Would pay it off straighaway!

So only 1 out of the 5 would actually pay off their mortgages if they got the chance??
THAT is a reflection of Irish people today

Maybe there is a huge amount of envy, even jealously from myself and my wife about the others around us that are taking out the big mortgages and buying the big houses, but I think people have lost the run of themselves and are not prepared for the downturn that is obviously coming ….and soon.

Just some snippets of people I know:

38year old couple couldn’t hold out any longer, sold everything they could in order to qualify for a 420k mortgage and now have the big house with the 35 year mortgage. Will pay off mortgage when they are: 73????

My mother and father think they are of “upper class nature now” after their house was valued at 500k. My father refers to them as being “half millionaires”???

A 30 year old couple in serious debt (4 various loans) in 2004, no savings or SSIA and renting a small house with no children. 5 Banks refused them a mortgage
…….2 years later: 2 kids and a 300k mortgage and 3,000 sq foot house (modern Ireland Ieh)

2 shop assistants on low money sell their average house (after missing 3 mortgage payments in 12 months)in order to buy a 2,500 sq foot house with a lake view. Wife wants BMW or will leave the husband because her friend has one. Wife wants the BMW, and wants to stop working. She wants to be a “kept woman” If she doesn’t get the life she thinks she “deserves”, she will leave.

30’s couple with house in Dublin Suburbs. Wife loses job in June, both purchase an Apartment in Bulgaria for 130,000 a month later. Same couple have not yet been to Bulgaria, but tell me that “it has already increased by 20%”

This is modern Ireland and public sentiment regarding the property market – it all up, up and up!

 

[phoenix_n]

249 North Circular Road, Phibsborough, Dublin 7, North Dublin City - Terraced House

Region €2,200,000 - Annual rental income in the region of €111,000.

That is not a bad yield, wonder why its being sold?

I guess better stock is coming onto the market. Older units rents will fall when you can rent a new 2 bed unit for under a grand in the northside.

Besides u can get near the 90K mark in deposit interest (is that correct?) with no risk.

 

[room305]

You all seem to be salivating at the thought of a property crash. Its palpable.

I presume none of you are home owners or else you bought more than 5 years ago.

whathome & calina I assure you the fear of "looking silly" is the last thing on the minds of people with families who have signed up their earnings for the next 35 years to a house which, if you are right, wont be worth what they paid for it.

There is a very distasteful element being brought into the debate. Can we stick to the topic which is how we think the market is going to go.

I concur. Things are getting a little distasteful with some posters practically whooping from the sidelines at the prospect of crash. This is quite short-termist in outlook. The prospect of cheaper housing pales into insignificance when compared to the devastation that will result from a housing crash. As I have mentioned before, what use is it to you if you see your dream home selling for a song, when you don't have a job to pay for it?

However, if the young couples buying houses now weren't aware of the risk they took on when they took out a 35 year mortgage then more fool them.

The market is going to crash eventually of course but I've yet to be persuaded that we are seeing it now. The lack of access to decent statistics and data in Ireland is pitiful.

 

[Calina]

You all seem to be salivating at the thought of a property crash. Its palpable.

Actually, this is where you are wrong, and where you are completely missing the points which I have consistently raised.

Property in Ireland is hugely too expensive for many, many people. A lot of people are already overstretched even before we hit midpoint on interest rate rises.

Unfortunately, for me, the wider issue is not the prospect of a property crash, but the impact it has on the wider economy, and frankly, the longer we go without a correction, the bigger that impact will be. Now, I could be overly cynical or fatalistic here, but frankly, I can't see a property crash having a positive impact on the economy as a whole.

You can sit where you are assuming that I just want a property crash just for personal satisfaction, but I am over 30 years old, and unlike a lot of people who seem to be buying property on 100% mortgages touching 50% of their disposable income, I remember when this country had 18% unemployment and 50,000 people a year left the country rather than 80000 peopel a year coming in.

If you think I'm salivating, then you're wrong, and you're naive. I am absolutely terrified at the prospect but unlike a lot of people who say it'll never happen, I see quite a lot of writing on the wall.

The citation is correct. If you are a FTB, you are not going to want to hear of people getting better deals than you because no matter how far off your trade up is planned for, if property falls, you cannot do it. If you can't handle the fact that others of us seen in that an ominous sign, then I'm sorry.

As to how much sympathy I have, I think collectively housebuyers walked themselves into paying too much for their houses. My sympathy for them will be somewhat limited. On the other hand, people who are directly impacted by a property crash who didn't actually contribute to the bubble, such as tenants who find their homes being dumped by overexposed investor-speculators, or people losing jobs as a result of the wider ramifications, that's where my sympathy will lie.

 

[whathome]

I concur. Things are getting a little distasteful with some posters practically whooping from the sidelines at the prospect of crash. This is quite short-termist in outlook. The prospect of cheaper housing pales into insignificance when compared to the devastation that will result from a housing crash. As I have mentioned before, what use is it to you if you see your dream home selling for a song, when you don't have a job to pay for it?

However, if the young couples buying houses now weren't aware of the risk they took on when they took out a 35 year mortgage then more fool them.

The market is going to crash eventually of course but I've yet to be persuaded that we are seeing it now. The lack of access to decent statistics and data in Ireland is pitiful.

Agreed - there should be no whooping from the sidelines as prices fall. Gloating about people in negative equity is distasteful but I don't think anyone here is doing that. New buyers getting a better deal is a good thing however and even recent buyers shouldn't resent that. If they're sufficiently stress tested and happy in their property for the long term, there is no problem. In my view, prices will fall for a long time so picking up a bargain quickly will be out of the question.

 

[room305]

So the thread question is about public sentiment towards the housing market, so here is an account of my view:

Interesting post Sharp, pretty much sums up my assessment of current sentiment.

Do not btw feel under any pressure to sell and buy somewhere different. You are happy where you are so keep paying off as much of your mortgage as you can. Start behaving as though the country was already in a recession and you will do well. The end days of cheap credit will be upon us sooner rather than later.

Cash will be king again.

Oh yeah, welcome to the bear cave.

 

[walk2dewater]

So the thread question is about public sentiment towards the housing market, so here is an account of my view:


Okay, my thoughts have now started to take over my wife and my life and its becoming a daily obsession:
Constant discussions about: Property/Financial Position/What should we do:

Everyday while I sit down for breakfast and lunch at work and when I arrive home for Dinner, the same topics come up:

“The whole country has gone property crazy”
“There is a crash coming”
“John and Mary have bought/build a new house for 400-500k and have took out a 35 year mortgage and they only earn …..”
“What should we do – should we sell our house for a profit and buy/build new one with 3,000sq ft, full kitted out etc.”
“We should stop the negativity and spend, spend, spend “like everyone else seems to be doing””
“How can they afford THAT house”


Basically myself and my wife are 28 years old with a 11month old baby. We are living very comfortably in a lovely 4 bedroom detached house on a site just outside a big town We have a small mortgage of 140k and have 20 years left to pay. Our house is standard (1,800sq foot) and we love it.

We have been feeling the pressure to sell the house and buy the big house and get the big mortgage that goes along with it, but we see the black clouds ahead and are prepared to stay put and “batten down the hatches”

About 6 couples around us have either spent 400-500k on huge 3,000sq foot homes or are building houses of similar size. They are also fully kitting out this home in order for them to be show homes and all this on 35,40 year mortgages. I know of at least 4 of these couples that earn less than I do and have more debts and no SSIA/VHI provisions. They are basically putting all the eggs in one basket by taking out the biggest loan they can get and getting the biggest house they can get (while not thinking of how they will manage the running costs (lighting, heating etc).

Public sentiment is that house prices will continue to grow and grow and “our house will be worth 800-1m in 2 years time”. People seem to think that this will run and run and jobs and money will be aplenty for years to come. I am consider mad or a “dooms dayer” for saying that I wish the best of luck and hope everything works out for them “of course it will work out – sure the house has already increased in value”

I asked 5 people the following question and I think it gives a good overview of how people think:

If you won 300-400k on the lotto, would you pay off the mortgage:

• God NO, sure you always need a mortgage, its great for the tax benefits. It’s the most tax efficient thing you can do. I will always have a mortgage ?????
• NO. I would buy a bigger house. I could sell my house and with the extra 400k, I could buy a huge mansion for that.
• No, sure that wouldn’t pay off my mortgage anyway and I would prefer to spend it while Im young
• Yes, I would love to, but its not enough to get the mortgage cleared as I have already re-mortgaged twice in the last years. Would spend it on a nice holiday and new cars for my and my husband. I always wanted a little sports car, so I would buy one of those.
• Yes, It’s the biggest drain on my finances, cant wait to pay it off. 33 years left at the moment and I will be 63 by the time I pay it off. Would pay it off straighaway!

So only 1 out of the 5 would actually pay off their mortgages if they got the chance??
THAT is a reflection of Irish people today

Maybe there is a huge amount of envy, even jealously from myself and my wife about the others around us that are taking out the big mortgages and buying the big houses, but I think people have lost the run of themselves and are not prepared for the downturn that is obviously coming ….and soon.

Just some snippets of people I know:

38year old couple couldn’t hold out any longer, sold everything they could in order to qualify for a 420k mortgage and now have the big house with the 35 year mortgage. Will pay off mortgage when they are: 73????

My mother and father think they are of “upper class nature now” after their house was valued at 500k. My father refers to them as being “half millionaires”???

A 30 year old couple in serious debt (4 various loans) in 2004, no savings or SSIA and renting a small house with no children. 5 Banks refused them a mortgage
…….2 years later: 2 kids and a 300k mortgage and 3,000 sq foot house (modern Ireland Ieh)

2 shop assistants on low money sell their average house (after missing 3 mortgage payments in 12 months)in order to buy a 2,500 sq foot house with a lake view. Wife wants BMW or will leave the husband because her friend has one. Wife wants the BMW, and wants to stop working. She wants to be a “kept woman” If she doesn’t get the life she thinks she “deserves”, she will leave.

30’s couple with house in Dublin Suburbs. Wife loses job in June, both purchase an Apartment in Bulgaria for 130,000 a month later. Same couple have not yet been to Bulgaria, but tell me that “it has already increased by 20%”

This is modern Ireland and public sentiment regarding the property market – it all up, up and up!

yep.

 

[CelloPoint]

This is known as the Winners Curse.

http://en.wikipedia.org/wiki/Winner's_curse

Fascinating link! Thanks!

 

[homeowner]

Actually, this is where you are wrong, and where you are completely missing the points which I have consistently raised.

I have read all your posts. You made the comment about looking silly which in my view is extremely childish and distasteful given your obvious understanding of what the implications of a crash are.

If you think I'm salivating, then you're wrong, and you're naive. I am absolutely terrified at the prospect but unlike a lot of people who say it'll never happen, I see quite a lot of writing on the wall.

I am definitely not naive, I recognise schadenfreude when I see it.

The citation is correct. If you are a FTB, you are not going to want to hear of people getting better deals than you because no matter how far off your trade up is planned for, if property falls, you cannot do it. If you can't handle the fact that others of us seen in that an ominous sign, then I'm sorry.

I am not a ftb, i am in my 30s and have a house which has a very low mortgage ...I am in no danger if there is a crash nor will I profit if it the boom continues as I dont intend on selling.

As to how much sympathy I have, I think collectively housebuyers walked themselves into paying too much for their houses. My sympathy for them will be somewhat limited. On the other hand, people who are directly impacted by a property crash who didn't actually contribute to the bubble, such as tenants who find their homes being dumped by overexposed investor-speculators, or people losing jobs as a result of the wider ramifications, that's where my sympathy will lie.

You havent shown any sympathy at all. I am sure the people who will be caught by any downturn in the market will not want sympathy anyway.

 

[whathome]

So only 1 out of the 5 would actually pay off their mortgages if they got the chance??

Great post Sharp.
It probably would have been 0 out of 5 a few months ago. 1 in 5 is a start in the right direction.

 

[phoenix_n]

This is known as the Winners Curse.

http://en.wikipedia.org/wiki/Winner's_curse

"The severity of the winner's curse gets stronger as the number of bidders increases. This is because the more bidders there are, the more likely it is that some of them have greatly overestimated the good's value. In technical terms, the winner's expected estimate is the value of the first order statistic, which increases as the number of bidders increases."

Isnt that what happened in the first quater of this year. I can attest to this having being involved in numerous bidding wars where thankfully i always lost.

 

[beattie]

You havent shown any sympathy at all. I am sure the people who will be caught by any downturn in the market will not want sympathy anyway.

So long as the government doesn't bail them out by intervening in the market to prop it up. I don't want my taxes to keep supporting this bubble. I feel really sorry for people who have recently got in and don't understand how future interest rate rises will adversely affect them. It's the lending policies (or lack of them) of the banks who you should be directing your annoyance at IMO

 

[walk2dewater]

Actually, this is where you are wrong, and where you are completely missing the points which I have consistently raised.

I have read all your posts. You made the comment about looking silly which in my view is extremely childish and distasteful given your obvious understanding of what the implications of a crash are.




I am definitely not naive, I recognise schadenfreude when I see it.




I am not a ftb, i am in my 30s and have a house which has a very low mortgage ...I am in no danger if there is a crash nor will I profit if it the boom continues as I dont intend on selling.



You havent shown any sympathy at all. I am sure the people who will be caught by any downturn in the market will not want sympathy anyway.

I didnt notice any sympathy when the market was going up, and people were selling their property for vast profit to those further down the "ladder".... I did however notice a pervasive smugness and I'm-alright-Jackness from those riding the bubble...

But answer me this Homeowner, cos this is the real crux of the issue: Why don't you want to see cheaper housing? Sure don't we all want things we need to be cheaper, cheaper petrol, cheaper clothes, cheaper food?

 

[kellyiom]

I'm not going in that bear cave! Regarding the yield discrepancy vs manhattan and dub, remember that rates there are higher therefore in terms of a margin over, they're actually quite similar.

In terms of crashes, I still don't see what the catalyst is that should make it any more imminent than six, nine months ago. The same discussions were taking place then, perhaps even a decade ago. Illiquid assets always 'gap' in a price correction, whether property, private equity, distressed debt as it settles until participants find the level. It's all down to attitude to risk. I agree with the posters on the prudence aspect; it can't be much fun seeing your wages nearly gone just to fund some sort of 'lifestyle' that's imposed on you by outside forces but if you're truly happy and can manage without too much stress, then regardless of the actual P&L on your house, then what does it matter?

 

[autumnleaf]

I was at a party over the weekend, and of course the subject turned to property eventually. There was one guy who was on holidays from the States. He made a remark that he had never seen any country so property mad but he supposed it was inevitable given the jumps in income in recent years. I mentioned that the ratio of average income:house price was about 10:1 and he was shocked. But a Polish guy thought that this wasn't so shocking since the ratio was prob even higher in Poland. He's trying to save for a place in Krakow but the prices keep rushing ahead of him. I also mentioned the E300k toilet in Lahinch. The American thought this was incredible but an Irishwoman remarked in all seriousness that it was a reasonable enough price given the location!

Basically myself and my wife are 28 years old with a 11month old baby. We are living very comfortably in a lovely 4 bedroom detached house on a site just outside a big town We have a small mortgage of 140k and have 20 years left to pay. Our house is standard (1,800sq foot) and we love it.
We have been feeling the pressure to sell the house and buy the big house and get the big mortgage that goes along with it, but we see the black clouds ahead and are prepared to stay put and “batten down the hatches”

Congrats on the house and the baby "Keeping up with the Joneses" is human nature and we've all felt twinges of it, but i think you're being v sensible with your attitude and in the long run you'll prob be a better off than these people in serious debt. (And you should prob thank whatever deity you believe in that you didn't get saddled with that gold-digging Beamer-loving wife!)

 

[Calina]

I am definitely not naive, I recognise schadenfreude

I would question that, to be honest with you.

However, to move back to the topic at hand, if an increasing number of buyers are unhappy at the prospect that someone might get a better deal than they are, I would see that as a recognition of possibly being in a poorer position than hitherto thought (where that position was "sure you can't lose on property). The point is, if you do buy at the top of the market - a position which can't be identified until it has actually turned, then you are open to issues relating to 1) negative equity and 2) difficulties in trading up 3) difficulties in increasing mortgages for structural/enhancement work if you are in negative equity.

As much of property discussion in this country is based on people convincing themselves that they got a great deal, how many people do you think are going to want to admit that they bought at the very top of the market? It is extremely worrying from the point of view of identifying where that turn will come if anecdotally, an increasing number of actual purchasers are concerned that they may, in fact, have bought at the top of the market and yes, they will fear looking silly. It is only human.

A wildly out of control property market is not good for any economy and the knock effects can last for years. They are still recovering in Japan, they took quite a while to recover in the UK. Unfortunately, the sum of argument against it happening here is "it's different here", but amongst the fundamentals which are different here is a heavily reliance on FDI and construction for our growth.

 

[Persius]

So the thread question is about public sentiment towards the housing market, so here is an account of my view:


...

This is modern Ireland and public sentiment regarding the property market – it all up, up and up!

Wow, doesn't sound like any change in sentiment among the population in general. And you seem to cover quite a cross section of Irish society. I was talking to a few of my relatives over the weekend. When I told them I was taking a break from looking for a property to purchase (I'm a potential FTB) the reaction was generally understanding. Not the typical "are you mad! you should hurry up and get on the ladder now before it's too late", but more "yeah, you might be right, prices seem to be levelling off, and it's hard to know which way it's going".

Sharp, sounds to me like you are in a good situation with a decent sized house, managable debts and a young baby. It's just a matter of adjusting your built in bullsh1t detectors to filter out all the conversation about the family up the road buying a new mansion/appartment abroad for XXX thousand euro ;-)

 

[thefisherman]

while i feel sorry for the individual i am concerned at the group behavior .
the funny thing is that if people were sensible and stopped paying ever increasing prices for an ever increasing supply of housing it probably would lead to a crash. which we bears fear.
i think we are going to have a big crash in this country, sooner rather or later.

 

[whathome]

In terms of crashes, I still don't see what the catalyst is that should make it any more imminent than six, nine months ago.

Three words : Interest Rate Rises

You make a good point on rates here vs US but their rates have stalled and ECB rates are rising so they may converge.

 

[phoenix_n]

In reality FTB's should be alright. So what if the house has fallen value they still need a place to live and they are reducing their capital. Once they didnt get into a bidding war or choose 'best house in worst location' then all things being equal there should be no real problems. Trader uppers made use of the equity and in reality are paying somewhat simmilar mortgages if not a bit higher. This group will need to cut costs but in general they overall expenditure is decreasing anyway.

Its really 1 and 2 bed apartments bought by investors that are gonna get the hit as when you have to subside the mortgage and having to deal with an illiquid asset then many will try to cut and run. The illiquidity of the asset, i think, will be the 'newest' conversation to be had at those parties. You're stuck with something than is costing you money and no-one wants to buy it. And you hear that poland/germany etc is the place to be buying.....