Posted: 17 Mar 2011 03:30 AM PDT
Ireland experienced a housng bubble even larger than ours, and they are facing many of the same problems.
Irvine Home Address ... 24 Wayfarer Irvine, CA 92614
The day investors stopped using toxic loans as a conduit to inflate prices, credit crunched, and the fate of the housing market was sealed. It was only a matter of how long and painful the journey back to reasonable valuations was going to be.
Many with a vested interest in real estate refuse to face that the value of the house is burned. Owners don't want to face it, banks don't want to face it, and the government isn't forcing them to face it. Lenders have life backwards: they have a value on their books that determines what they need to get for their bad loans or its underlying collateral. Markets don't work that way.
By Mar 10, 2011 4:01 PM PT-
I don't think the banks share her view on the evils of putting off the day of reckoning.
Our mortgage default rate runs at about 10% just like Ireland's, and their banks are delaying repossession just like ours are.
Wow! Someone in Ireland's government actually seems to care about what happens on banks balance sheets. No politician in the United States is questioning the accounting gimmicks currently being used by our major banks.
Historically, banks have always controlled the Republicans, but now with Democrats showing little or no spine when it comes to reigning in the banks, lenders are being allowed to post bogus accounting numbers on the idea that the market will come back and they will be made whole. That isn't gong to happen. There are far too many banks on the wrong side of the trade. They all have copious amounts of property, and they all need to dispose of it at top dollar.
What a joke. Their real estate prices are going to halve over a five year period, and they will take forever to get back to the peak. Their 5% loss rate likely didn't factor in the market conditions created by their own inventory.
Who is lining up to buy their overpriced homes?
That is classic. These private analysts portray the reality of what is going to happen to the economy and the housing market. Obviously, the central bank doesn't want to run that stress test (a realistic one) because it would show how totally screwed they really are.
We currently have 25% of our mortgages underwater, but if prices drop another 10%, we could easily reach 40% of mortgages underwater at the bottom.
His estimate of a 50% drop in Ireland looks reasonable when you consider prices more than doubled in 7 years.
Prices in Ireland are probably near where they would have been if no housing bubble occurred. However, a housing bubble did occur, and after the collapse, the downward price momentum and problems with supply will continue to push prices lower and cause an overshoot to the downside.
Strategic default will ravage what's left of the market there just as it has in Las Vegas.
Actually, I think there is...
Are the analysts correct, or will Ireland's banks be looking for more bailouts?
That is impressive. Savings will provide the internal capital for Ireland to prosper again. Americans are quite so thrifty.
If that statement is accurate, Irish banks may be better off than we give them credit (pun intended). Our banks are hamstrung by real estate losses, but they are severely hampered by derivative losses and commercial losses. It wasn't housing that brought down Citi.
Wow! That really is different than what we are doing. Here in the United States, the GSEs have been moving to relax the waiting period so they can manufacture enough buyers to recycle their bad loans.
If Ireland does make it more restrictive to get a new loan, their housing market is really going to crumble. I believe this policy to be an empty threat to deter strategic default. Nice idea, but the defaults are going to occur anyway, and the policy will end up quietly being changed to get buyers back into the queue.
And if they don't relax those laws, they are sentencing an entire generation to debt servitude.
That's really the issue faced both here and abroad: increase bank losses and reduce the debt burden on the population, or limit the bank losses and force families to spend their entire working lives to pay for the mistakes of bankers. Each government through its own process will determine who the winners and losers are in the battle of the banks versus the people.
From what I am seeing here in the US, the banks will probably win. Prices will stay inflated, debt-to-income ratios will remain elevated, and everyone will be forced to put the maximum amount of income possible toward a house payment if they want to own something comparable to a rental. People will drink the appreciation kool aid, but with everyone already stretched to the max, prices won't go up any faster than inflation. What happens then?
More than fifty percent of Irish mortgage are ARMs underwritten at the bottom of the interest rate cycle. Hmmm... do you think they may have some payment shock to deal with over the coming years as interest rates rise?
Adjustable rate mortgages will separate the successful owners from the unsuccessful ones over the next decade. Those trying to save a few dollars today will pay a higher price when they refinance. If they roll over a series of 3-year ARMs, in nine years, they may be paying the same mortgage balance at 9% instead of the 5% or less borrowers are locking in today.
ARM holders are signing up to give ever-increasing payments to their lenders for the foreseeable future.
ireland had a real estate bubble very similar to ours, and they are grappling with the same issues we are in its deflation.
I wonder if you can pick up any good cashflow properties there now that prices have crashed?
That pesky comparable
It must be nice to believe a precious cottage still commands peak pricing. Well, good luck to these sellers with the appraisal because a model match just sold last week for $488,000.
It's pretty hard for an appraiser to ignore a week-old model match a few blocks away that just sold for $207,000 less. Perhaps he can bump up the value with the upgrades. Pehaps a price as high as $525,000 might be justifiable, if the appraiser were so inclined.
If these owners want to get $695,000, it better be an FCB with a lot of cash. The're going to need it.
For the record, these people were responsible borrowers. They only increased their mortgage once, and it certainly appears that money was put into the property.
Irvine Home Address ... 24 Wayfarer Irvine, CA 92614
I would like to wish my visiting Irish mother-in-law a
Happy St. Patrick's Day!
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