Loki said:Ok then how do you know the extent of the effect? I mean I could just state any of the other reasons and say that is the main casue. I am not into this makea a wild statemnet that people agree on but have no proof. Lots of people used to think the sun rotated around the earth. The evidence proved them wrong!
Loki said:Ok then how do you know the extent of the effect? I mean I could just state any of the other reasons and say that is the main casue. I am not into this makea a wild statemnet that people agree on but have no proof. Lots of people used to think the sun rotated around the earth. The evidence proved them wrong!
ANd this tells us that the market is over priced becasue of speculator in this country how?Duplex said:Loki
I’m not familiar with the Roman market I’m afraid. I base my analysis on historic yields which were in excess of double digits in the past in the Irish residential market. I believe that markets adjust to reflect true risk over time. For instance the market in Split in Croatia has seen rising yields as investors became aware of the fundamental value of investment incomes.
Duplex said:Steel, cost and value are two different things. Nevertheless I would imagine that we will see some deflation in the cost of construction if a housing bust occurs.
Neffa said:What would you consider proof?
bearishbull said:i think the fact that yields are so low and still an asset price is rising at 10-20% is an indicator of specualtion in any market.question is what are they speculating on? speculating that they will get out before the bust? speculating that demand for housing wont be met despite the massive supply being constructed every year? speculating that ncb's predictions will come true?
http://www.oftwominds.com/blog.htmlPsychologist Elizabeth Kubler-Ross suggested the process of grieving has five distinct stages. In a somewhat analogous fashion, participants in the housing bubble will pass through five emotional stages: euphoria, doubt, denial, disillusion, realism.
Kubler-Ross's five stages were: denial, anger, bargaining, depression, and acceptance. As people grieve the losses of their paper profits, or more tragically, the loss of their homes or entire equity, they may well pass through these very human feelings along the way.
My list is somewhat different, as it starts with the essential emotional building-block of any bubble: euphoria. This is the sense of empowering glee as prices rise, seemingly inexorably, as the participants re-calculate their ever-rising wealth--and all without any application of labor! (Or recently, any deployment of capital, either.)
This stage can be seen in the chart of KB Homes, a company which is a good proxy for the large residential builders. The euphoria is visible in the sharp rise of the stock price from mid-2004 to mid-2005.
The decline (which I marked for emphasis) from this peak is the doubt/denial stages. As doubt about the housing bubble grows, the stock price falls. Then, as denial kicks in, the price recovers--but importantly, never to the previous high. This "lower highs, lower lows" is the classic stock market definition of a downtrend.
A similar battle between doubt and denial plays out in the media every month when housing prices, inventory and sales figures are released. Every lower number spurs doubt, and every stabilizing number elicits denial: everything is OK, prices are stabilizing, etc.
At some tipping point, denial gives way to full-blown disillusion. As declines in prices and sales and fast-rising inventories become inescapable trends, the flimsy walls of denial participants have constructed give way, and they become disillusioned with their real estate investments. Some decide to hang on, others decide to bail, and still more stop looking at the very real estate section they used to open first, when their net worth was rising by the month.
As the declines continue unabated, year after year, participants finally make a realistic appraisal of the situation: housing was a bubble, and the deflation seemingly lasts forever. Investors give up and sell in disgust, banks give up the ghost and go bankrupt or sell their portfolios of non-performing mortgages for pennies on the dollar, and the ranks of working realtors thins to those few with connections to lenders, who are still dumping their foreclosed properties.
When nobody in their right mind would consider buying real estate as an investment, the bottom will finally be reached. Unfortunately, all this takes a long time. That we are just in the very first stages of the decline are apparent in articles such as this one from The Wall Street Journal: Back To Reality, about the quickening slide in vacation home values.
Loki said:Figures stating year on year the amount of investors in the market for starters.
Duplex said:
Loki I appreciate what you’re saying however markets are not populated by rational players, they react to sentiment; fear, panic, euphoria.
Loki said:Well obviously not, as I am still asking how do you know speculators are keeping the prices high here?
Duplex said:Loki I hope that you’re not trying to wind me up. Do you think anyone wants to see people suffer because of this madness? Go and complain to the directors of the banks that are happily exploiting the gullible and sacrificing our country’s future for their short term gain.
If and when this bubble does burst I will do my bit to make sure that some of these cynical b******s suffer as well. (by reference to due legal process,)
Loki said:Many FTBs buyers are buying what is built here so I don't see how the specultors are the main cause and I have also stated many are not short term specultors from my experience which is the real danger. If none of the specultors back out of the market there wouldn't be a crash right? I mean that is the basis of most of the crash theories. People get scared and sell say if they don't what would happen. How many speculators are needed to panic to cause the crash? Is there another cause I am missing?
Glenbhoy said:I feel that property is overvalued here, but not by that much looking at historical norms.
Or perhaps you could point out which country you are referring to with your numbers?Posted by Askalot:
Can you please point me to the historical norm that supports average house prices at over ten times the industrial wage. Or the norm where the average monthly repayment is 45% of take home pay and that's when interest rates are at record lows. We are all floating on a sea of cheap credit that's about to get more and more expensive
i think thats not enough,i think it has to drop by at least 35% to offer "value" which is a 50% overvaluation based on current income and rent levels and on predicted interest rate levels circa end 2007.Glenbhoy said:Or perhaps you could point out which country you are referring to with your numbers?
I think you've got to consider household income, then you can safely halve all the numbers above. As I pointed out previously, there's very little difference in here and the UK in terms of multiples and affordability, likewise with the states and canada and we have'nt exactly introduced 150yr mortgages yet either.
Agreed there are definitely certain areas/addresses where the numbers make absolutely no sense, but in general, I would'nt put values much more than 25-30% overvalued.
Glenbhoy said:Agreed there are definitely certain areas/addresses where the numbers make absolutely no sense, but in general, I would'nt put values much more than 25-30% overvalued.
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