Current public sentiment towards the housing market?

[ducati-steve]

My 2 cents on 5x, 6x or 7x


It actually doesn't matter - what is important is your net available income (after tax, car loan, etc etc). Can your net available income comfortably cover the repayments on your mortage with a "buffer" for interest rate increases (and pay for your lifestyle).

If yes - then great, if no then "no go" but 2x 4x or 6x no longer has relevance .... its an old rule for a different tax system where your take home pay was a much smaller % of your total.

DS

 

[StoppedClock]

"Self emplyed" IT contractor lived in Oz till September 04 so < 2 years employment history in Ireland, offered 6.5 times my salary, 92% mortgage

 

[Guest126]

So you were not joking, the wife is gone unless she gets a new BMW...I had thought (hoped!) it was a slight exaggeration!!

 

[Guest107]

With BOI in 2002 it was 3.5 times your salary plus 1.5 times your partner's salary.

Are you not aware of any historic information any further back than 2002 , many of my assumptions about the lunacy nowadays aree based on long run data not post 2002 froth.

In 1996, 10 years ago, mortgages were

1. Max 90%
2. Based on 2.5x main and 1x second income
3. Repayment not IO
4. 20 year or maybe 25 year repayment terms.

a 35 year old who got a mortgage then will normally be clear by 55 . Tax was higher then so your take home was a lot smaller as a % of income.

In 2006 its

1. max 100%
2. mega x income , 5x-7x main in some cases.
3. IO so you still owe the lot in
4. 35 years, when you are 70

 

[StoppedClock]

FYI in Oz not only do you (as at end 04) need 10% deposit you also needed to prove where it came from i.e. not put in your account from folks, credit card etc. the night before, referred to over there as "Genuine Savings".

That said didn't stop their bubble...

 

[Persius]

With BOI in 2002 it was 3.5 times your salary plus 1.5 times your partner's salary.

You are correct in theory, which is one reason I thought I wouldn't be able to afford a house back in 2001 (I still don't have one), even though I could actually afford to meet the mortgage repayments. However talking to some people who did buy, and other anecdotal evidence, the banks regularly offered more on an "individual basis".

Now in theory, a single person can borrow up to 5 times their gross salary (if I remember correctly). As stated in previous posts, and often heard in conversations, the banks regularly offer more than this on an "individual basis". I think the likes of TSB and BoS are much less flexible as their loan quotations are made via call centers. However the mortgage advisors in the likes of BoI and EBS seem to have much more flexibility in deciding how big a mortgage to offer someone. And the brokers seem to also be able to get much more than the 5 times one salary. Did you see "I'm an adult, get me out of here"? If I remember correctly, the host was regularly able to get mortgages well above 5 times earnings to singles without any debt.

 

[homeowner]

Are you not aware of any historic information any further back than 2002 , many of my assumptions about the lunacy nowadays aree based on long run data not post 2002 froth.

In 1996, 10 years ago, mortgages were

1. Max 90%
2. Based on 2.5x main and 1x second income
3. Repayment not IO
4. 20 year or maybe 25 year repayment terms.

a 35 year old who got a mortgage then will normally be clear by 55 .

In 2006 its

1. max 100%
2. mega x income , 5x-7x main in some cases.
3. IO so you still owe the lot in
4. 35 years, when you are 70

Eh whats the point of all this?


I replied to a post that said banks were lending x10 salary which they are not. I mentioned a previous loan ratio of 3.5 times and now you are quoting multiplies back to 1996 and telling me I am "WRONG".

Move on.

 

[Guest107]

Eh whats the point of all this?

A mortgage of 3.5 x salary or higher is very recent , 2x or 2.5x is the long run historic multiple .

It is utterly wrong to use 3.5x as a starting point when looking at the sillyness the banks are encouraging.

 

[homeowner]

You are correct in theory, which is one reason I thought I wouldn't be able to afford a house back in 2001 (I still don't have one), even though I could actually afford to meet the mortgage repayments. However talking to some people who did buy, and other anecdotal evidence, the banks regularly offered more on an "individual basis".

Now in theory, a single person can borrow up to 5 times their gross salary (if I remember correctly). As stated in previous posts, and often heard in conversations, the banks regularly offer more than this on an "individual basis". I think the likes of TSB and BoS are much less flexible as their loan quotations are made via call centers. However the mortgage advisors in the likes of BoI and EBS seem to have much more flexibility in deciding how big a mortgage to offer someone. And the brokers seem to also be able to get much more than the 5 times one salary. Did you see "I'm an adult, get me out of here"? If I remember correctly, the host was regularly able to get mortgages well above 5 times earnings to singles without any debt.

Yeah its around 5 times now but I believe you that people are being offerred more than that. The banks keep moving the yardstick. I only hope those people can afford the repayments.

 

[Persius]

Further comparison to the US market. They're saying that the US is over-priced and going to crash, what about this comparison?

$640,000 - 915 sq ft in Ballybough, Dublin 3 : [broken link removed]

$640,000 - 960 sq ft in New York's extremely wealthy Upper East Side : http://realestate.nytimes.com/+comshare/vulisting.asp?Lid=253-NS6060810

What do people think are the percentage of specuvestors who will be happy with nominally flat prices, (i.e. the soft landing) and therefore hold on to properties for the long term

For the sake of discussion, some bullish arguements on Irish property

1) One of the reasons why it really "is different" in Ireland (mainly thinking of the cities) is the low density of housing. It has been said previously that the price someone pays for a house is not just the price of the time and materials that went into building the house, but also the price of the site. In a low density city such as Dublin, the price of sites (at least those in centralish locations) will be higher per household than the price of an equivalent site in a higher density city such as New York.

2) Specuvestors who were in it for the quick buck could be easily convinced to take a "long term view", and not try to sell in a flat market. Considering our obsession with property you could easily imagine this sort of conversation between a specuvestor (S) and his family/friends/bank manager (F) etc

S: The price of my investment property has plateaued out. There are no more capital gains to be got. I think it's time to sell.
F: Now mighn't be the best time to sell. You may have to accept a lower price than normal. Remember property is the best investment class in the long term. You should hold on to it as a pension.
S: Yeah, but the rent I'm getting isn't covering my mortgage. I have to contribute €500 myself every month
F: But this is standard for any type of investment. If you were in a pension fund you would also have to contribute a sum of money every month. With property, the tennant contributes more than half of that money. Besides rents will rise over time.
S: So you think I should continue ploughing money into my property
F: Sure. In the long term, prices will go up again. In 25 years it'll be worth a fortune.
S: Yeah, maybe you're right

3) ...

Opinions?

 

[Afuera]

Also I would like to point out that people under the age of say 26 who bought at their currently salary will most likely see a large increase in their salary as they progress in their careers and double incomes when they move in with someone, so what might seem like a huge multiple of salary now will not be so big in 5-10 years time. In fact those people will be in the best position for clearing their mortgages off much earlier.

Huge assumptions there! Unless you're a civil servant there's no guarantee you'll be making more in your chosen career in X years. Even civil servants may be forced to take pay cuts if the government runs into problems raising the moola to pay them!

In the past homeowners were lucky to have high inflation wipe out the real debt on their mortgage. Currently though, all of the central banks around the world have their sights set on fighting inflation so this is a scenario that is unlikely to repeat itself. People with jumbo mortages hanging over them for most of their life will not be in a position to do much at all.

 

[StoppedClock]

2) Specuvestors who were in it for the quick buck could be easily convinced to take a "long term view", and not try to sell in a flat market.

If they have a choice then perhaps they will hold on for the long term but if it is an IO and I is going up then what?

 

[Dusty]

Agreed. Sure there was people who made a killing even in the last 2 years!! The IO and 100% mortgages drove prices through the roof. FTB's thought it was 10 Christmas's at once. But I really think things have changed now. Would like to see more examples of an increase in supply before we can say things are turning though.

My point was that in those two years that you have been waiting for the long promised collapse in house prices they have risen significantly and are continuing to do so. Do you really think they will drop back that far to make your wait worth while or would you have been better off buying two years ago?

If you are buying a home (as opposed to an investment) it really doesn't matter as it will iron itself out in the long run (10-20 years) and we'll all look back and reminisce on how cheap houses where in 2006!

 

[Afuera]

2) Specuvestors who were in it for the quick buck could be easily convinced to take a "long term view", and not try to sell in a flat market.

This might be possible in a flat market but there's a very real possibility of some areas actually seeing drops in prices. If you're being told that "your property has lost 20,000 this year alone", I'd say it would start to feel a lot like deadweight.

 

[howstrange]

My point was that in those two years that you have been waiting for the long promised collapse in house prices they have risen significantly and are continuing to do so. Do you really think they will drop back that far to make your wait worth while or would you have been better off buying two years ago?

If you are buying a home (as opposed to an investment) it really doesn't matter as it will iron itself out in the long run (10-20 years) and we'll all look back and reminisce on how cheap houses where in 2006!

I totally agree with you. If I was buying a home that I was happy to stay in for a long time then price crashes are irrelevant. But when you all you can afford is some crap gaff in ballygobackwards and people are telling you buy it cos you can trade up in a couple of years then market stability is a factor! TBH I cant believe how mad prices have gone in the last year or so and if I had bought 2 years ago I could have made money. But thats history and this post is about 'what will happen'!! Do you think that it would be wise for a guy like me to buy NOW in some shack I dont want?? I dont! Its because of the recent price surges that I think the landing will be harder and faster! Everyone knows it is a bubble and bubbles always burst!!

 

[Afuera]

If you are buying a home (as opposed to an investment) it really doesn't matter as it will iron itself out in the long run (10-20 years) and we'll all look back and reminisce on how cheap houses where in 2006!

10-20 years sounds like a very long time to stay stuck in a small property, in a badly serviced area, that was only bought to get on the ladder in the first place!

 

[Remix]

US mortgage market rebounds on brighter outlook



[broken link removed]

I guess everything is hunky dory again!!

What a very strange headline from the Times based on such a small data blip!

Over to finfacts :

US weekly mortgage applications down 24.9% compared with same week in 2005

On an unadjusted basis, the Index increased 4.3 percent compared with the previous week but was down 24.9 percent compared with the same week one year earlier

http://www.finfacts.com/irelandbusinessnews/publish/article_10006885.shtml

 

[whathome]

One of the reasons why it really "is different" in Ireland (mainly thinking of the cities) is the low density of housing. It has been said previously that the price someone pays for a house is not just the price of the time and materials that went into building the house, but also the price of the site. In a low density city such as Dublin, the price of sites (at least those in centralish locations) will be higher per household than the price of an equivalent site in a higher density city such as New York.

If you're concerned about density, what about the area with the second best salaries in the US. Silicon Valley : avg salary $62,600 (€49,000)

This one is in Sunnyvale in the heart of silicon valley, California.

$639,000 - Detached, 1600 sq feet, 3 bedrooms, 2 bathrooms, 2 car garage


$640,000 - 915 sq ft in Ballybough, Dublin 3 : [broken link removed]

 

[ivuernis]

If you are buying a home (as opposed to an investment) it really doesn't matter as it will iron itself out in the long run (10-20 years) and we'll all look back and reminisce on how cheap houses where in 2006!

Of course it matters! There is no guarantee of anything in 10-20 years time.

 

[Calina]

If you are buying a home (as opposed to an investment) it really doesn't matter as it will iron itself out in the long run (10-20 years) and we'll all look back and reminisce on how cheap houses where in 2006!

But a lot of those homes that are being bought are being bought with the expectation of being able to trade up within a few years.

That may not be possible in a very volatile market.