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Posts tagged ‘negative equity’

Negative Equity and Debt Restructuring

We are all aware for the huge problem homeowners are facing
with negative equity issues

Dr. Constantin Gurdgiev has outlined here in this article a costing and a possible road map of what a possible bailout of the ordinary Irish home owner could look like.I find it an excellent well thought out process and the Government of the day should give it serious
consideration .It is not possible to continue to bailout the gangsters in the
banks and at the same time demand homeowners continue to pay back the full
The amount on properties that are now only worth less than half of what the banks
lent out to the hapless mortgage holders. It takes two to tangle and the banks
were negligent to say the least when offering these mortgages in the first
place .(due diligence and all that) I believe the banks have to step up to the
plate and the take on their part of the responsibility .The total lack of
regulation also implicates the Government and there is an obligation on the government
to take its share of the blame so in this case would advocate that up to two
thirds of the total debts be written off.But what chance of that ever happening?? None!Kenny and the boys are there to look after the banks and themselves

machholz

Negative Equity and Debt Restructuring

by Dr. Constantin Gurdgiev

This week, we finally learned the official figure for what
it would cost to address one of the biggest problems facing this
country.According to the Keane Report – or the Inter-Departmental
Mortgage Arrears Working Group Report – writing off negative equity for all
Irish mortgages will cost “in the region of €14 billion”. Doing the same just
for mortgages taken out between 2006 and 2008 would require some €10
billion. These numbers are truly staggering, not because of they are
so high, but the opposite: because they contrast the State’s unwillingness to
help ordinary Irish families caught in the gravest economic crisis we have ever
faced with the relatively low cost it would take to do so.

Let me explain. full article at source:http://trueeconomics.blogspot.com/2011/10/16102011-negative-equity-and-debt.html

UK Housing Market: Sellers Forced to Cut Asking Prices

By: Nadeem_Walayat

Since my May 2011 analysis, further research into the reasons for the differences in asking prices against valuations between areas has revealed the following possible explanations that are just as valid for most UK cities as they are for Sheffield:

Sellers

Grossly over valued properties will fail to sell, thus sellers risk chasing the market ever lower remaining just out of reach of   buyer interest. Therefore sellers need to get multiple valuations to get a more   realistic price and if their property fails to attract any interest to not delay   in cutting their asking price by a significant margin i.e. in steps of 10% so as to attract buyer   interest. Else you risk wishing you had cut earlier and thus obtained a higher   final sale price.

read full article at source here: http://www.marketoracle.co.uk/Article29357.html

Buyers

Given that the average asking price is estimated at 16% above valuations, It seriously pays for Buyers to do their own research, look at what similar previous properties actually   sold for in the area you are targeting. If a house looks fairly priced compared   against others in the area then ensure that there is not a reason why it differs   in price, which may be due to issues such as the property is leasehold instead   of freehold, or that there is an issue for instance with flooding.

  • Population Growth and Decline– Some areas of the city are witnessing falling or stagnant populations, which usually effects the mid range properties of an area rather than those at the higher or lower end, such as the East and the South of the City, which results in those seeking to sell properties over inflating asking prices as they compare general price trends across the city against their own properties expectations. The effect can be as serious as making the difference between 50% price increase over 10 years and zero increase or even a price fall.
  • Local Schools Changing Performance – House prices can be effected in both directions if the local schools improve or decline in performance over time, which may fail to register with home sellers as their children may have grown up many years ago.
  • Rivers – Up until June 2007 when Sheffield was hit with the Great Flood, many Sheffielders had never taken the issue of flooding seriously, however that no longer applies where the path of Sheffield’s many rivers has negatively impacted on house prices that are deemed to be at risk of flooding and therefore likely to incur difficulty in insuring, which effects both affluent and the poorer areas equally, where a matter of a 100 metres can effect similar houses to the difference of as much as 25% in price as well as resulting in greater supply on the market as these flood risk housing is more likely to remain on the market for far longer than properties elsewhere. The same holds true for all of the UK’s major cities that are built on canal and river water ways.
  • New Houses – New housing stock usually from the low to middle price range areas of the city are unlikely to appreciate much during the first 10 years. Which can result in over valuations by sellers as they price their houses in terms of how average properties in their area’s have appreciated.
  • Cluster of Valuations – Over valuations and realistic valuations tend to cluster by area’s because   home sellers tend to look at what price others in an area are also selling for and therefore price according to the competition.
  • Competing Estate Agents – There may be greater competition in overvalued areas between estate agents for   business therefore a tendency to give properties higher valuations so as to   secure business and shut out other agents, then a few months down the road when   properties have failed to sell ask clients to cut asking prices.
  • Crime Rates – Even a  few bad crime stories of shootings and killings can have a significant and lasting effect on buyer demand for an area as well as the longer-term trends for crimes such as burglaries.
  • Social Housing – Areas with more social housing will tend to see less appreciation in house prices, which may not be reflected in asking prices.
  • No or Negative Equity – Home owners trapped into no or negative equity properties will find it difficult to price their properties at a level that the market will bear. Those most likely to be in negative equity will have many of the contributing factors as listed above and be unwilling to accept less than their outstanding debt.
  • National Events Skewing Seller Expectations – One off national events can impact on Seller expectations such as is with the case of the Olympics in London, which has resulted in an estimated 10% inflation in asking prices even allowing for rising selling prices. The question mark is will London Sellers still be pricing in an Olympics premium after the Olympics? Meanwhile they can enjoy the boost for another year.
  • Public Sector Recession – Just as the Olympics are boosting London, so is the public sector recession as a consequence of 500,000 planned job losses to depress areas where public sector works tend to reside and that impacts harder on Northern UK cities such as Sheffield, Liverpool, Newcastle than Southern cities. Therefore Sellers in cities such as Sheffield may not be taking into account the consequents of a contracting public sector which will hit those areas of the city that rely more heavily on the public sector for employment i.e. the middle income bracket areas, hence expectations for sharply higher supply could result in a very wide margin of difference between seller expectations and what the market is prepared to pay.
  • Artificially Low Interest Rates – The current rate of inflation is 5% whilst the base interest rate is 0.5%. This results in low seller financing costs for mortgages and therefore reluctance for Sellers to market their properties in line with market demand. However sellers are playing a dangerous game as once interest rates do start to rise then they will see sharply higher debt financing costs, especially as market interest rates will move ahead of the base interest rate as well as coupled with less buyer interest as they are also similarly squeezed in terms of what they will be able to afford.

The net effect of the prevalence of over valued asking prices is for an ever increasing supply of property that will further put downward pressure on house prices especially in specific areas of cities, this is reflected in official statistics which show that 70% of properties  on the market have failed to sell this year hence sellers starting to cut asking prices.

Paul Maher sends us this mail

By

Paul Maher

To my mind, walking away from or defaulting on a mortgage in negative equity, makes perfect personal
economic sense. You survive. You learn. You live to fight another day without the millstone around your
neck. No longer would you have the crushing weight pounding and squeezing your head. Best of all, in the
event of your premature demise, your wife and children would not be saddled with the debt.
 
Now, imagine you are Ireland and you’re married to Brian Cowen. Brian insists on doing the “honourable”
thing and continues making payments on the Negative Equity Senior Bond ( NESBO). Unfortunately, for
you, Brian is getting a divorce in March and leaving you, Ireland his wife, and us his children, stuck with
this NESBO. Imagine your surprise when you find out that a Senior Bond holder, Goldman Sachs, uses
your Four billion euro payment to help fund it’s Ten billion euro  Employee Bonus  Plan. That’s right.
Goldman Sachs has used your money to help pay this outrageous bonus to it’s employees. GS is only
one Bondholder. Think of the good use the other Bondholders will put your childrens money to !!
 
There is no dishonour in defaulting on this Odious Debt. But how would a career politician with no life
experience or backbone  know that?
 
Paul Maher, Roscrea, Co.Tipperary

Comment:

I agree with you Paul on this one

machholz

Ronan Lyons spin on Housing stats

Nobody knows at this juncture the scale of the losses for bank balance sheets from mortgage write-downs. But the EU-IMF deal had to set aside a certain amount for contingencies relating to future losses – including those from mortgages – and chose €25bn. This post attempts to shed some light on the potential scale of mortgage write-downs. Given that purpose, it almost completely sidesteps the broader economic and social impact of negative equity, arrears and repossession, not because these are not important topics, but because they are worth their own research, not as sidepoints in a discussion about bank balance sheets.

The Morgan Kelly question: three types of bank assets

Morgan Kelly has been the most vociferous on the apparent “time bomb” for banks in Ireland’s mortgage arrears. His estimates stem from his “realistic loss” scenario, published on the Irish Economy website in May, where he estimated that of €370bn in all lending by Irish banks, a figure that includes loans abroad, €106bn would be lost. In truth, his estimate is driven almost entirely by Irish bank lending within Ireland, so he is predicting bank losses of €100bn off a loan book of €235bn.

Based on these figures, he then wrote an article in early November, entitled “If you thought the bank bailout was bad, wait until the mortgage defaults hit home“. One could legitimately assume from this that if losses from loans that went to NAMA were bad, those from mortgage foreclosures would be worse. Indeed, this was the general conclusion: this is an article that spooked markets around the world. I know, as I was out of the country at the time and saw the immediate reaction from a non-Irish perspective.

Given that Morgan has been right on so much over the last five years, including his prediction in that very article that Ireland would need an EU-led loan, is there nothing to do now but brace ourselves for the mortgage arrears time bomb that will surely make the bank bailout look like peanuts? To shed some light, it’s worth thinking about three main types of bank asset and therefore three main types of potential losses: NAMA, arrears and SMEs.

  • NAMA losses are losses from big property speculation. Irish banks lent out about €100bn in large chunks (i.e. typically more than €5m) for land and development which is now falling under NAMA’s remit.
  • Arrears losses will stem from residential properties that the banks have to foreclose and sell for less than the mortgage outstanding. Total residential mortgage lending in Ireland stands at about €115bn.
  • SME losses are where small businesses go under and banks have to take their place in the queue to get money out of the assets that are being liquidated. Corporate lending in Ireland stands at about another €100bn.

On the face of it then, it seems reasonable to say that if we’ve been focusing almost exclusively on the €100bn or so in NAMA-related lending, then the €100bn or so in mortgage lending is indeed an elephant in the room. (I will have to leave for the moment the issue of SME losses, both because I’m not an expert on that issue and because that was not the focus of Morgan’s article.) On NAMA losses, banks face somewhere in the region of €40bn of losses on NAMA-bound properties, in round numbers and allowing for past efforts at external recapitalisation.

Estimating the number of borrowers at risk

Is this €40bn in bank losses from land and development going to be small compared to the losses from bank balance sheets due to mortgage arrears? Suppose there are three types of people with mortgages: (1) new borrowers, with large debt which more than likely swamps their equity, (2) old borrowers, with small amounts of debt and (relatively) large amounts of equity in their homes, and (3) topper-uppers, who are probably in the main similar in profile to old borrowers. The risk category for banks is almost exclusively new borrowers, because it is unlikely that they will have to repossess the homes of old borrowers or of topper-uppers, and if they do, the equity in the house will very likely cover the debt.

So how many new borrowers are there? To be safe, we should assume that anyone who has borrowed since 2003 is at risk, whether they are first-time buyers or not, apart from topper-uppers. Why since 2003? If prices fall 55% by 2012 – which may just be enough to bring the rent-price ratio back to normality – prices will be back at levels seen in 2000, broadly speaking. This is about 20% below 2002 levels, so if someone who bought in 2002 had to sell in 2012, they could, as on average they will have paid off about 25% of the principal by then. By looking at quarterly IBF data, which go from 2005, and a similar Dept of the Environment series, it is possible to estimate there have been about 435,000 borrowers since 2003 who are either first-time buyers or mover-purchasers. This is out of a total of 800,000 mortgages.

In truth, given the loan-to-values and outstanding debt involved, it’s reasonable to think that 2003 and 2009 borrowers are of different types to their 2006 and 2007 counterparts. Using a combination of IBF, Dept of Environment and county-level Daft.ie data, it’s possible to estimate the number of households in negative equity. If house prices fall 55% from the peak, about 330,000 households would be in negative equity, compared to about 200,000 households now, including two thirds of all 2006-2007 borrowers and more than half of 2004, 2007 and 2008 borrowers.

But even then, we can’t just multiply 330,000 by, say, an average mortgage of €200,000 and assume that €65bn of the mortgage loan book is at risk. Many of those borrowers will remain employed and – perhaps grudgingly but consistently – pay off their mortgage each month. They may represent a threat to economic growth, as people feel less wealthy when their homes are worth less, but such households are not a threat to bank balance sheets.

Estimating how much of the loan book is at risk

Instead, we need to look at the proportion of negative equity households at risk of foreclosure, i.e. where circumstances such as unemployment lead not just to arrears and Court proceedings but ultimately foreclosure. The first step is to look at mortgages in arrears: there are currently 40,000, a figure that may rise to 100,000 in a pessimistic scenario. With an average mortgages of €200,000, this suggests that a maximum of €20bn of the mortgage loanbook is at risk.

(sorry Mr.Lyons even Brian Cowen acknowledges that 70,000 are currently in arrears and the average amount is more like 260,000 not 200,000)

Even then, the underlying asset, the house, will not have lost all its value. Very few properties would have only get half their loan-value back, the back of the envelope figure that Morgan uses. For this to be the case, the average borrower would have to have bought at the peak with a 100% interest-only mortgages. This is not the average – this is the upper bound. A more reasonable rule of thumb is that banks will recover two-thirds of loan value on average. So the upper bound in mortgage-related write-downs is now perhaps €7bn.

This figure still needs to be scaled down again, not just to reflect the fact that not everyone in arrears of less than 180 days progresses to deeper arrears, but also to reflect that not everyone  in six months or more of arrears has their home repossessed. At the moment, about one in four mortgages in arrears goes from the 90-180 days category to the 180-days-plus category. This may rise to one half over time, as people run out of outside options, but I’m not sure anyone is actually going to predict anything like 50,000 mortgages having Court Proceedings issued.

Currently, repossessions are running at a rate of about 300 a year. This will almost certainly rise as some of those currently scraping by fall victim to the ongoing recession and as the moratorium on repossession passes. But are we seriously expecting an average of 5,000 repossessions every year from 2011 to 2020? Suppose repossessions instead jump from 300 this year, to 1,500 next year, 5,000 in 2012 and 2013, and then falls back gradually to about 500 by 2020. That would be a calamitous scenario for all those affected. But what would it mean for the bank balance sheets? The graph below recaps the figures discussed in this post. The punchline is that repossession of 20,000 homes and their resale by banks for two-thirds of their loan value would mean balance sheet losses in the order of €1.3bn.

sorry again Mr.lyons but even the banks themselves expect multiples of this figure and we all know that the figures they themselves have given have always turned out the be to low ! 

stop trying to flog more overpriced houses !

Totals associated with mortgage lending and a scenario for mortgages Totals associated with mortgage lending and a scenario for mortgages

This is a far cry from claims that mortgage arrears will cast losses on banks that will make NAMA look like a sideshow. You could be three times as pessimistic about the number of repossessions and more cautious about final values and still struggle to get above €5bn in bank losses. You might even somehow be able to construct a case that I’m out by a factor of 10. But I struggle to see how someone could make the case that the figures above are out by a factor of 50, let alone 100.

Morgan’s article is full of depressing vistas: a “torrent of defaults”, a “social conflict on the scale of the Land War” and the rise of a “hard right, anti-Europe, anti-Traveller party”. Perhaps I am young and naive, or excessively fond of the Simpsons, but this reminds me of an exchange in the Simpsons, where TV host Kent Brockman asks his expert guest: “Hordes of panicky people seem to be evacuating the town for some unknown reason. Professor, without knowing precisely what the danger is, would you say it’s time for our viewers to crack each other’s heads open and feast on the goo inside?” To which the Professor responds: “Mmm, yes I would, Kent.”

That is perhaps the point. By basing his predictions for losses on the idea of 200,000 mortgages hitting the wall, Morgan is making a social prediction – i.e. that people will lose faith in society and all hell will break loose – not an economic one. He may yet be right, but if all social fabric is rent asunder, then probably most economic bets are off.

  

But wait a minute Finfacts don’t agree with your figures

Irish non-financial sector credit including residential mortgage lending outstanding continued to fall in April
By Finfacts Team
 
Source: Central Bank

Irish non-financial sector credit (NFC) credit, excluding valuation effects and the impact of transfers to the State toxic property loans agency NAMA, fell again in April, but at a slower pace than previous months so far in 2010. Residential mortgage lending outstanding (including securitised mortgages) declined by €348 million during April, bringing the annual rate of change in residential mortgage lending to minus 1.6 per cent.

The Central Bank said today that net flow of credit transactions during the month was just minus €109m (0.1 per cent), compared with minus €1.3bn (0.9 per cent) in March and minus €842mn (0.6 per cent) in February, implying repayments continue to exceed new lending. NFC credit outstanding on the aggregate balance sheet of Irish resident credit institutions was €134.2bn at end-April 2010, down from €139.5bn at end-March, with the transfer of loans to NAMA and an increase in impairment provisions accounting for almost the entire decline in outstanding amounts. The annual rate of change in NFC credit was minus 4.5 per cent in April, following a 4.6 per cent annual decline in March and a 3.6 per cent fall for the twelve months ending February 2010.

Residential mortgages (including securitised mortgages) declined by €348m during the month, and stood at €146.1bn at end-April 2010. The annual rate of change in mortgage lending fell to minus 1.6 per cent.

Then today we have this in the  Irish independent

By Emmet Oliver Deputy Business Editor

Tuesday December 14 2010

Ireland‘s economy will shrink again next year and unemployment will head toward 16pc, a gloomy report on the country’s prospects from Ernst & Young has said. Further austerity measures may be needed, it says.

While the Department of Finance expects growth of 1.75pc next year, the global accountancy company is forecasting a contraction of 2.3pc in terms of GDP.

The Government’s projections were “overly optimistic” and further austerity measures would be needed to rein in the deficit, the company claimed.

While the Government is expecting average growth of 2.75pc between 2011 and 2014, Ernst & Young estimated growth of just 0.8pc was more likely.

The company said it would be a challenge for the Government to fix the banks once and for all and to also control what it called “civil unrest”.

Early elections may delay the latest cuts and tax increases and a new government “may even back away from some of the announced measures”, claimed Ernst & Young.

“These factors increase the likelihood of some form of debt restructuring by the Government and banks,” claimed the company in an analysis included in its eurozone outlook.

It said the recent €85bn IMF/EU package does end uncertainty for Ireland, but final tests were needed to see what the banks required in terms of extra capital.

Challenges

Eventually Ireland should bounce back and become one of the fast-growing economies, but Ernst & Young sees major challenges before this happens.

“This seems a long way off and the Government and economy will have to overcome numerous hurdles,” it said.

The key plank of the company’s outlook is that consumer spending will not recover in the way the Government expects.

“The main drag on Irish GDP growth in the next two years will come from domestic demand,” it said.

Ernst & Young said this demand would be hit by a range of factors, including the austere budgets, but also by the scale of migration from the country and a likely rise in interest rates. The company pointed out that those leaving would be bringing with them skills and purchasing power.

“As such we do not expect the domestic economy to recover until a number of years into the fiscal adjustment cycle and until after the banking system is restored to health,” it said.

Ernst & Young wondered whether the €35bn of funding earmarked for the banks would be enough. “This will depend on the results of banking tests and stress analysis,” it said.

Extra austerity measures may be needed if the deficit reduction plan goes off track.

now look at figures from the USA

Cascading home values after an era when lenders let borrowers buy homes or refinance old loans with little or no downpayment has created a large class of property  powners with “negative equity” — a polite phrase for having a mortgage bigger than the home’s worth. (Less polite? “Under water” or “upside down” mortgages!)

According to number-crunching CoreLogic, 17.5% of Orange County homes with a mortgages — or 98,518 residences — were in a negative equity position in the third quarter. Yes, that means roughly 1-in-6 O.C. mortgages are bigger than the value of the real estate collateral behond the loan. Another 4.1% of homes with mortgages, or 22,942 residences, were “near” negative equity. (That’s within 5% of negative equity.)

So, all told, 21.6% are underwater or nearly upside-down locally. As bad as that sounds — and it’s not pretty — we offer some comparisons:

  • 22.5% of all U.S. homes with mortgages were in negative equity territory with an extra 5% of residences near negative equity. That’s 27.5% combined!
  • 32.8% of California residences are in negative equity; another 4.1% are near negative equity. Combined: 36.9%.

And the local trend itself is a tad encouraging:

  • In 2010’s second quarter, 18.1% of homes with mortgages were underwater; 4.1% were near negative equity. Combined: 22.2% — slight higher that Q3.
  • In Q1, negative equity rate was 19.2%; near negative equity was 4.1%. Combined: 23.3%.
  • In 2009’s fourth quarter, negative equity rate was 20%; near negative equity was 4.1%. Combined: 24.1%.

Mark Fleming, chief economist with CoreLogic, on the national scene: “Negative equity is a primary factor holding back the housing market and broader economy. The good news is that negative equity is slowly declining, but the bad news is that price declines are accelerating, which may put a stop to or reverse the recent improvement in negative equity.”

Last lets take a look at the UK

Home owners face repossession amid struggle to sell properties

Home owners are falling behind with their monthly mortgage payments at an alarming rate, charities warn, as estate agents reveal the struggle to sell properties.

Home owners face reposession amid struggle to sell properties
Home owners face reposession amid struggle to sell properties 
Myra Butterworth

By Myra Butterworth, Personal Finance Correspondent 7:00AM GMT 14 Dec 20101 Comment

Almost a million households are in arrears with their rent or mortgage, twice as many as a year ago, according to homeless charity Shelter.

Charities warned numbers would rise in the New Year and that those with children are most at risk of falling behind with their basic housing costs.

Campbell Robb, chief executive of Shelter, said: “Every two minutes someone faces the nightmare of losing their home and this research paint a disturbing picture of sharply rising numbers of people who face a daily struggle just to keep a roof over their head.

Conclusions 

So what does this all mean well I would be of the opinion that 4.5% impairment provisions by the banks are woefully inadequate and a provision of 12% would be more like what is needed?

In every other country the average impairment on mortgages is in the area of 10 – 15% why would Ireland be different?? I’m sticking with Morgan Kelly he has a better track record that you Mr.Lyons  

Machholz

Property Up-Date October 2010

Here is an excellent realistic analyses article from Ronan Lyons on the current property market, well worth a few minutes of your time .I would have one point that I would like to take up and that is I believe we are already past the 500,000 mark in the unemployed figures and I also believe we already have 70,000 people in severe mortgage arrears according to people I know in the real-estate business.

Some Dublin apartments in city centre are already selling for between 72, 000:00 and 125, 000.:00 euro .

I sold an apartment for 255,000:00 last september (2009) and I can now purchase this apartment back again for 125,000:00 that is a price reduction of more than 50% so if we are to expect a levelling off mid 2011 to 2012 then we have a way to go yet.

Personally I expect to see apartments in Dublin go to 45,000 to 65,000 depending on area

This will bring us back to other european city prices!

   

The latest Daft Report is out today, showing a further 3.7% fall in asking prices between June and September. In his commentary, Patrick Koucheravy comes up with the best estimate I’ve seen yet on the typical fall in land values around the country: 75% as a credible minimum average fall for land values.

What else does the report reveal? Two things in particular are worth highlighting: the rate of property price falls, and the rate at which properties are selling. After that, I’ll do some tea-leaf reading on when prices may level off, followed by an update of the number of households in negative equity around the country.

Are price falls easing?

The year-on-year rate of change in the index is, at -16%, the slowest rate of price falls since late 2008. This may sound like clutching at straws, but one thing we do know is that when prices do level off, that will have been preceded by a period of ever-shrinking property price falls. Going from about 20% year-on-year to about 15% year-on-year may be the first step in that process.

Perhaps more importantly, there looks to a change in dynamic in what’s driving the fall in the national average property price. For most of the recession, house prices in Dublin have fallen by more than elsewhere, in percentage terms each quarter. But for two of the last three quarters, that trend has reversed, with falls in Dublin below those in the “Rest-of-country” region (i.e. outside the five main cities). We may not be anywhere near there yet, but at least it looks like we’ve stopped diving further into the sea and may slowly be making our way back up to fresh air.

More on this below…

Are properties selling?

The total stock of properties on the market is doggedly stuck at 60,000, and now has been for over two years. This might suggest no – or at least very few – properties are selling. In fact, it seems that some properties are selling, and without difficulty. Again, Dublin is different from the rest of the country. In general, about 40% of properties posted for sale in April had sold by October 1. But in Dublin, the proportion is much higher, with only one in three of the properties posted for sale in the capital still for sale now.

Where might property prices level off?

There are plenty of ways one might try to calculate where prices level off – for example looking at the amount of oversupply, or my favourite yields. However, sometimes – as people who work in financial markets may tell you – statistics rather than economics can reveal what may happen. Consider the euro change in average property prices each quarter since early 2006. This is shown in the graph below, for the country on average (red), for Dublin (dark brown) and for outside the major cities (light brown).

Falls in house prices, by region, and extrapolated forward

What it reveals is that the quarter-on-quarter change in house prices worsened (i.e. got more negative) all the way until late 2008. Since then, particularly in Dublin, the falls each quarter have got smaller. The dashed lines take the average “improvement” in falls since late 2008 in each of the three lines and work them forward. For example, the falls in Dublin are getting smaller by on average €3,400 each quarter. If the easing off in house price falls seen in Dublin continues, house prices in the capital could stabilise as early as mid-2011. Outside the main cities, though, the equivalent “improvement” is just €400 a quarter. If this were to continue, prices might not level off until late 2014, something that may tally with yield or oversupply arguments.

No matter which way one looks at the housing market, though, it seems that a divide is emerging between Dublin at one end and the rural parts of the country at the other.

How many are in negative equity?

In the summer of 2009, I did some work, looking at county-level house prices and Live Register figures, as well as figures from the Irish Banking Federation on loan-to-value, to try and estimate the incidence of negative equity and unemployment around the country. With a year of new information, both from the property market and from the labour market, it’s time to revisit the numbers.

The figures are, as may be expected, frightening. About 200,000 mortgages are in negative equity, based off the best public information we have about who borrowed what and when. Small amounts of negative equity are, in the main, not an issue, if people keep their jobs and thus can keep up their payments. However, what is very worrying is that negative equity seems to hit some groups particular hard. It does not taper off up at the top. In fact, 100,000 mortgage-holders are in negative equity of greater than €50,000 – what anyone would term severe negative equity.

In many respects, this is a Greater Dublin area problem. Of the 100,000 in severe negative equity, two in five are in Dublin while a further 17,000 are in its four commuter counties. These are also the most likely to have bought smaller “ladder” properties at the height of the boom. In contrast, very few people in Limerick, Longford or Mayo are in severe negative equity, as house prices were lower there to begin with.

In a scenario where prices fall 55% from the peak, as some think possible, current figures suggest that 330,000 households – or more than half of mortgage-holders – would be in negative equity. What is particular worrying is that the new additions would not be as significant as the doubling of the numbers in severe negative equity of more than €50,000. Without knowing more about the relationship between mortgages and unemployment, it also suggests that if the Live Register reaches 500,000 next year, something in the region of 70,000 households – 4% of all homes – could be in both negative equity and unemployment/underemployment.

Source https://machholz.wordpress.com/wp-admin/post-new.php

“When the U.S. sneezes, the rest of the world catches cold.” 

For us here in Ireland this news from America is extremely important everything from Jobs, negative equity, Bank failures, credit availability and strikes.
Not so long ago, there was a saying “When the U.S. sneezes, the rest of the world catches cold.” The bad news is that America has pneumonia, so where does that leave us???
For us here in Ireland this is a flavour of what we are about to get, don’t believe the spin from the vested interests and government cronies
The news media here in Ireland is controlled by the government and they have their lackeys well placed throughout the country
Keep yourselves informed by looking and searching for the real facts and figures.
Here are some useful blogs that have good information streams
http://inflation.us/videos.html
http://www.namawinelake.wordpress.com/author/namawinelake/
http://www.davidmcwilliams.ie/
http://www.irishpeopleunion.com
http://www.publicinquiry.eu/
http://www.thestory.ie/
http://www.southofdub.blogspot.com/
http://www.irelandafternama.wordpress.com/
http://www.irisheconomy.ie/
http://www.trueeconomics.blogspot.com/

http://www.ted.com/

http://www.kildarestreet.com/ 

http://www.irishleftreview.org/ 

http://www.eirigi.org/

http://www.wsm.ie/

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