bearishbull
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How would a bursting bubble affect you? You'll still be living in the same house and you'll still be making the same mortgage repayments - right?chihiro said:if the bubble bursts we're all %$%$%$!!!!!
power1A reduction in house price values will only affect people who bought second homes as investment.
So if there is a bubble, won't the relative price of your desired house in Cork also have fallen proportionally?chihiro said:worried about resale and negative equity. will be getting a 97% mortgage. i know the days for making big returns are probably gone (if only i'd bought sooner!). chances are we could sell up in a few years and move to cork but would feel stuck in dublin if house had lost value.
RainyDay said:So if there is a bubble, won't the relative price of your desired house in Cork also have fallen proportionally?
Baldwin Park has been ground zero in the real-estate boom -- the Promised Land of six-figure flipping profits.
One example: Last September an investor paid $428,700 for a house in the east Orlando neighborhood, once a Navy base bustling with sailors, not builders. Six weeks later, he flipped it for $625,000.
A house bought for $279,200 last March is on the market for $499,500.
A townhouse bought in October for $337,700 is on the market for $445,000.
A house bought in October for $403,000 is on the market for $670,000. I actually found a comparable house from a builder in a better location for about $60,000 less.
Baldwin investors have developed a sense of entitlement to fast, huge profits. But now those prices have caused a backlog of inventory. There are about 90 listings on the market, and many have sat there for months. You'd never know it because "For Sale" signs aren't allowed.
Realtors say houses used to sell in weeks for full asking price. The unthinkable has happened. Baldwin Park has become a buyer's market.
Consider someone who paid $330,000 for a town house, hoping for a quick flip. The various fees amount to about $5,000 per year. He faces another $3,000 or so in property taxes. Throw in a $300,000 mortgage, and the monthly tab comes to about $2,400.
Some investors use creative loans to keep the number lower at the start. As the mortgage company starts adding more interest and principal, their payments go up.
So do their property taxes if they don't live there. Investors do not get the same protection against annual increases in appraised values as do homeowners. Nor do they get a homestead exemption.
So every month, these investors will be making payments, holding out for prices that are based on a real-estate frenzy that may no longer exist. If the market outlook dims, they do the math on what it costs to hold the asset versus the expected return of doing.
Duplex said:Interesting to get an American prospective on their bubble, it seems that the American media is less inhibited about discussing the subject than their Irish counterparts.
Baldwin Park has been ground zero in the real-estate boom -- the Promised Land of six-figure flipping profits.
RainyDay said:How would a bursting bubble affect you? You'll still be living in the same house and you'll still be making the same mortgage repayments - right?
walk2dewater said:Why do I get the sense that most Irish people don't really understand what a severe correction in prices entails? Or how property markets work, the interaction of marginal pricing, sentiment and volumes, or indeed whether they actually understand that property prices can and do fall and currently are falling outside Ireland. Neg equity will be a very real and ugly reality for many; too many finances, marriages, and aspirations will be ruined. Loss of income/employment, govt deficits/layoffs, and social disorder will impact everyone, even those with a large equity buffer (pre-2002 buyers)
The remarkable ability of the Irish construction/estate agent cabal to churn out and sell unit after unit is more than just a critical economic support, its become the psychological bedrock for the feel-good binge we're on. The inevitable outcome aint gonna be a nice, manageable 30% decline peak-to-trough as mentioned by the ESRI recently, we're talking significantly more. Why? well firstly prices have doubled twice since 1997 and we are currently in a mad 'race against rates' frenzy now, leading to I'd guess a 10%+ spike in 2006 alone. Second, escalating fear and panic half-way down the 'slope of hope' means that busts always overshoot, with the last sellers capitulating for buttons at the very bottom. losses of 50%+ is not unimaginable given the state we're in. If all this sound a bit loony, I suggest you hit the history books. The behaviour of market participants in boom and bust cycles is well documented.
At this stage, surely anyone promoting more price increases is the doom monger. I sincerely hope for 2006, 2007 we dont 'go Japanese' in ireland. Remember a 50% decline is equivalent to a 100% increase in the first place, and -50% will only get us back to 2002 prices. The sooner we hit the peak, take our deflationary lumps and start unwinding the excesses of this the better.
WTTW
..and yet Baldwin Park seems good value compared to Dublin South !
Chamar said:One highly likely outcome you ignore is that prices stagnate for 10/15 years i.e. soft landing. For example, despite the crunch that came with the nasdaq that is pretty much what has been happening in equity markets the last 5 years. A trend that is expected to continue. I agree though that people seem to have no knowledge, or wish to ignore many other housing crashes in countries more advanced than ours. A sort of "it could never happen here" mentality.
Glenbhoy said:Now CoffeeBrew, that's just a ridculous statement.
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