DoctorSolar Posted July 24, 2009 Report Share Posted July 24, 2009 EDIT: oops just saw it posted as a thread in it own right... Found this on jsmineset.com. From: Some will say oh "hindsight is 2020" but come on! These guys f&cked it up royally for the average citizen while the bankers escape with the loot. Link to comment Share on other sites More sharing options...
drbubb Posted July 25, 2009 Report Share Posted July 25, 2009 EDIT: oops just saw it posted as a thread in it own right... Found this on jsmineset.com. From: Some will say oh "hindsight is 2020" but come on! These guys f&cked it up royally for the average citizen while the bankers escape with the loot. Like I used to say about the mainstream economists before the Bubble burst: "He's either lying or stupid !" I dont think he's stupid, so Ockum's razor applies Link to comment Share on other sites More sharing options...
drbubb Posted July 25, 2009 Report Share Posted July 25, 2009 FOXTONS - more greedy than Goldman Sachs?? Buy-to-let landlords can claim million Thousands of buy-to-let landlords could be in line to claim millions back from estate agents as a result of a landmark High Court ruling yesterday against Foxtons. Mr Justice Mann ruled that leasing agreements made by Foxtons, which operates mainly in London, unfairly overcharged commission to landlords. The Judge described Foxtons' agreements as traps and timebombs. Foxtons, which lets some of the most expensive property in Central London, charged customers 11 per cent commission when a tenant continued to occupy the property for longer than the initial term of the lease, and an additional 2.5 per cent commission payment if a tenant agreed to buy the property from the owner. /see: http://www.singingpig.co.uk/forums/thread/813462.aspx Link to comment Share on other sites More sharing options...
DoctorSolar Posted July 26, 2009 Report Share Posted July 26, 2009 Dear god no! The taxpayer to be put on the hook for more risky lending to people without deposits for over priced houses. Give me strength Ministers consider scheme to guarantee mortgages First time home buyers could be thrown a lifeline under plans being considered by the Treasury to underwrite 'risky' mortgages, allowing people with only small deposits to buy homes. Since the credit crunch took hold, banks have demanded far tougher criteria for lending, asking buyers to provide between 25% and 30% of the price of a home as a deposit. There were 30,000 loans to first time buyers in the first three months of 2009 against an average of more than 100,000 a quarter in the previous decade. But the government is now studying a scheme used in Canada in the hope of encouraging banks and building societies to step up their lending. The Canadian programme requires all mortgages secured with a deposit of 20% or less to be insured by the government or private insurers, giving the banks more confidence to lend. The Treasury has taken soundings from specialist insurance companies such as Genworth Financial, which suggest that the Canadian housing market has withstood the pressures of the global financial crisis better than most. Link to comment Share on other sites More sharing options...
ziknik Posted July 26, 2009 Report Share Posted July 26, 2009 Dear god no! The taxpayer to be put on the hook for more risky lending to people without deposits for over priced houses. Give me strength Ministers consider scheme to guarantee mortgages I might sign up for some of that myself. STEP1: Take out huge mortgage that I cannot afford STEP2: Default STEP3: Sue HMG for making it possible for me to take out a mortgage that I couldn’t afford Link to comment Share on other sites More sharing options...
drbubb Posted July 27, 2009 Report Share Posted July 27, 2009 "Since the credit crunch took hold, banks have demanded far tougher criteria for lending, asking buyers to provide between 25% and 30% of the price of a home as a deposit." 70% Loans can still be risky, as UK lenders will discover in the years to come Link to comment Share on other sites More sharing options...
enrieb Posted July 27, 2009 Report Share Posted July 27, 2009 70% Loans can still be risky, as UK lenders will discover in the years to come Anecdotal, my sister finally bought a house. She's sort of intelligent in a functional conventionally university educated sense, but she gives far too much weight to the wisdom displayed by 'experts' in media organizations like the BBC or for that matter anyone whistling a popular economic tune or wearing a suit. Feels bad to say this, but it applies to a sizable proportion of people who regard themselves as housing bears. She is one of the generation that missed out on the bubble and considered herself a bear as a consolation, convincing herself that not buying a house 2003-7 was a smart move because housing was overvalued, but secretly, all the while cursing her decsion not to buy and feeling foolish, in hindsight, for missing out on the paper gains. As the bubble continued to progress she believed the house prices had some basis in reality, and now presented with the opportunity to buy at 2005-7 prices she has jumped at the chance. Houses on the road she has bought were valued at 240k peak, this is a gross overvaluation based on the mortgagees (as oppose to home owners) withdrawing mortgage equity to do up their homes and 'adding value'. In the case of the 240k valued houses this was achieved by building extensions onto the 3 bed semi's and turning them into 4 bed semi's, with the 3 bed semi's selling for around 200k at peak prices. Sister has managed to purchase a 4 bed semi for 120k at auction, now that does seems like a bargain compared to peak prices and it is a fantastic looking house needing very little work, however lets look at this in a little more detail. The previous owner did have the house valued at 240k peak prices, though despite buying the house pre 2000 for around the 60k mark, he had managed to withdraw so much equity in-order to 'add value' by modernizing, plastering, new kitchen, re-wiring, new windows, porch, koi carp pond, conservatory etc as well as building a full size extension to turn it into a 4 bed, the fool could no-longer afford the mortgage repayments. So 120k seems like a bargain, but is it a really a realistic price? is the buyer capable of keeping up the mortgage payments? Sadly I the answer to be a resounding no. I believe that she has put down at least 20k as a deposit, possibly more with the help of my parents, thus leaving her with a mortgage of at least 90-100k which is, at least, four times her income. Her current monthly payments are £500, which is less than she was paying in rent for her previous property, this I expect, is also including a discounted payment rate for the first 2 years. We all know on here that interest rates are ridiculously, unrealistically low compared to any historical measure and are unlikely to remain at these levels for any substantial period of time. When the fixed rate period has ended and interest rates are back up to more realistic levels then her payments could well be around a £1000-2000 a month, which she would be unable to pay, even with parents help. As a single person, this financial commitment for the next 25 years also means she will be unable to have children, unless she meets someone willing to pay the mortgage. Given her obsession to own property and be accepted as part of the herd, I feel that her decision to turn her back on the chance to have children will weigh heavy on her as the years progress. Its sad in an individual fly-on-the-wall sense, but in terms of the big economic picture this sort of lending doesn't make for secure mortgages. The majority of people buying, even at 50% off peak prices, are not in the financial position to be able to keep up repayments over the long term when interest rates return to normal. These mortgages, even with 20-30% deposits are still bad risks especially as the economy continues to contract. House prices will continue to fall for some time. Link to comment Share on other sites More sharing options...
drbubb Posted July 27, 2009 Report Share Posted July 27, 2009 Sister has managed to purchase a 4 bed semi for 120k at auction, now that does seems like a bargain compared to peak prices and it is a fantastic looking house needing very little work, however lets look at this in a little more detail. ...120k seems like a bargain, but is it a really a realistic price? is the buyer capable of keeping up the mortgage payments? Sadly I the answer to be a resounding no. I believe that she has put down at least 20k as a deposit, possibly more with the help of my parents, thus leaving her with a mortgage of at least 90-100k which is, at least, four times her income. Her current monthly payments are £500, which is less than she was paying in rent for her previous property, this I expect, is also including a discounted payment rate for the first 2 years. We all know on here that interest rates are ridiculously, unrealistically low compared to any historical measure and are unlikely to remain at these levels for any substantial period of time. When the fixed rate period has ended and interest rates are back up to more realistic levels then her payments could well be around a £1000-2000 a month, which she would be unable to pay, even with parents help. As a single person, this financial commitment for the next 25 years also means she will be unable to have children, unless she meets someone willing to pay the mortgage. Given her obsession to own property and be accepted as part of the herd, I feel that her decision to turn her back on the chance to have children will weigh heavy on her as the years progress. Its sad in an individual fly-on-the-wall sense, but in terms of the big economic picture this sort of lending doesn't make for secure mortgages. The majority of people buying, even at 50% off peak prices, are not in the financial position to be able to keep up repayments over the long term when interest rates return to normal. These mortgages, even with 20-30% deposits are still bad risks especially as the economy continues to contract. House prices will continue to fall for some time. I think she may do okay. 4BR is a large place, far bigger than the 2BR I live in with my gf - we downsized from a place more than 50% larger in order to live closer to central HK. I dont mind, because we now have better access to HK's cultural and social life, and a much nicer and more useful (for us) clubhouse. So 4BR sounds like a place where she can have a family life. What does she do with all those extra bedrooms now? Still, she may regret it, since if she slips into negative equity, her choices will be limited. She may find herself trapped in her "dreamhouse", when it is no longer a dream. That can be a nightmare Link to comment Share on other sites More sharing options...
romans holiday Posted July 27, 2009 Report Share Posted July 27, 2009 Anecdotal, my sister finally bought a house. She's sort of intelligent in a functional conventionally university educated sense, but she gives far too much weight to the wisdom displayed by 'experts' in media organizations like the BBC or for that matter anyone whistling a popular economic tune or wearing a suit. Feels bad to say this, but it applies to a sizable proportion of people who regard themselves as housing bears. She is one of the generation that missed out on the bubble and considered herself a bear as a consolation, convincing herself that not buying a house 2003-7 was a smart move because housing was overvalued, but secretly, all the while cursing her decsion not to buy and feeling foolish, in hindsight, for missing out on the paper gains. As the bubble continued to progress she believed the house prices had some basis in reality, and now presented with the opportunity to buy at 2005-7 prices she has jumped at the chance. Great post. Scratch the surface of some bears and you find a simmering bull. It will take a lot to kill this psychology. Two generations have seen continual inflation. First they saw monetary inflation in the seventies, after that they saw two decades of asset inflation which has created not only a certain psychology but a spending habit where money is not properly valued. Old habits die hard and are the reason why we will continue to see "irrational" bounces in most markets for some time to come. If only people could be patient, sock some money into various currencies and monetary metal then sit back and relax. Link to comment Share on other sites More sharing options...
nicejim Posted July 27, 2009 Report Share Posted July 27, 2009 Anecdotal, my sister finally bought a house... It doesn't seem like she needs 4 bedrooms. Getting a smaller house and saving/investing the difference in mortgage payments would probably have been a better choice, but as things stand there is the option of renting out bedrooms. If this is in the UK the first £4250 is tax free. Link to comment Share on other sites More sharing options...
ziknik Posted July 27, 2009 Report Share Posted July 27, 2009 ... We all know on here that interest rates are ridiculously, unrealistically low compared to any historical measure and are unlikely to remain at these levels for any substantial period of time. When the fixed rate period has ended and interest rates are back up to more realistic levels then her payments could well be around a £1000-2000 a month, which she would be unable to pay, even with parents help. ... I disagree, I believe interest rates will be held low for a long period to come. Link to comment Share on other sites More sharing options...
romans holiday Posted July 27, 2009 Report Share Posted July 27, 2009 I disagree, I believe interest rates will be held low for a long period to come. What's this? Coming over to the dark side? Link to comment Share on other sites More sharing options...
ziknik Posted July 27, 2009 Report Share Posted July 27, 2009 What's this? Coming over to the dark side? We are all on the same side – The deflation relative to gold side Link to comment Share on other sites More sharing options...
John Doe Posted July 27, 2009 Report Share Posted July 27, 2009 Sounds like she’s pulled a binder. She can always fix for 5 years (just above 5% at the moment). Worst case, she can have a friend rent a room or two. 50% off peak! Fair play. Wish I could find a nice one where I am for that sort of drop. Anything half decent at 15%ish off peak has just started to vanish here (Scotland). Really has just happened in the last 3 or 4 weeks. I’m guessing the big deposit/cash buyers jumping in thinking they might miss the bottom. To be honest, it's got me a little nervous myself (and I really am a bear). Had a look around at a couple of places last week just to see what we can get for our money, several other people looking at each property all at the same time (an EA trick I personally hate). That hasn’t happened for over a year or so. Link to comment Share on other sites More sharing options...
John Doe Posted July 27, 2009 Report Share Posted July 27, 2009 Ooops, that should read "pulled a blinder" Link to comment Share on other sites More sharing options...
DoctorSolar Posted July 27, 2009 Report Share Posted July 27, 2009 Sounds like she’s pulled a binder. She can always fix for 5 years (just above 5% at the moment). Worst case, she can have a friend rent a room or two. 50% off peak! Fair play. Wish I could find a nice one where I am for that sort of drop. Anything half decent at 15%ish off peak has just started to vanish here (Scotland). Really has just happened in the last 3 or 4 weeks. I’m guessing the big deposit/cash buyers jumping in thinking they might miss the bottom. To be honest, it's got me a little nervous myself (and I really am a bear). Had a look around at a couple of places last week just to see what we can get for our money, several other people looking at each property all at the same time (an EA trick I personally hate). That hasn’t happened for over a year or so. Hi John Doe, Do you mind if I ask where abouts in Scotland you have been looking? Are you looking to buy a place for yourself to stay? or to rent out? I've noticed the same thing here in Edinburgh. Anything decent is going pretty quick and at really only 15% off peak from what I can gather doing research using nethouseprices.com. Seems to me that all countries are in this mess now and therefore I am struggling to see why the UK will be forced to increase interest rates any time soon. I know that what G0ldfinger and Bubb have to say regarding UK housing makes absolute sense but it does get a little uneasy sitting here on the sidelines renting while prices stubbornly stay where they are and my cash deposit sits earning very little interest in the bank. On the plus side renting is still cheaper than owning (but not by much) and if house prices do miraculously start going up so should the value of my silver and gold holdings which will hopefully compensate. I have been buying a set GBP amount of gold every week for the past month or so but again im beginning to get concerned as to what will spark the next up leg from these levels. Then again all this might just be the calm of the eye of the storm as Jim Sinclair points out? Link to comment Share on other sites More sharing options...
enrieb Posted July 27, 2009 Report Share Posted July 27, 2009 It doesn't seem like she needs 4 bedrooms. Getting a smaller house and saving/investing the difference in mortgage payments would probably have been a better choice, but as things stand there is the option of renting out bedrooms. If this is in the UK the first £4250 is tax free. (DrBubb) What does she do with all those extra bedrooms now She wants to turn one of the bedrooms into a 'shoe room' and has plans to rent out the other rooms should she have difficulties affording the mortgage over the next few years. The problem is that Manchester is full of properties to rent and rooms in shared houses, so thats unlikely to be a reliable source of income. So she has a mortgage 50 percent larger than she needed in-order to put shoes in one room and to impress her friends with a house larger than most average families need to live in. The far better solution as nicejim has mentioned would have been to buy a smaller house and have less debt to service over the term of the mortgage. The other disturbing aspects to this deal is that she borrowed 5k more than was necessary inorder to renovate the house to 'add value'. The house did not need any work and it was in a perfectly presentable conditon, the 5k would have been far better spent lowing the value of the debt. 5k over the complete term of the mortgage must work out at over 15k, thats one hell of a way to 'add value' The concept of 'adding value' by borrowing money to spend on decoration is a hangover from the housing boom as idiots grasped for a simplistic explanation as to why their properties had gone up in value, not taking the time and effort to understand the credit markets effect on land prices. Its simply not necessary to 'add value' unless you are a professional property developer and are planning to sell. (John Doe @ Jul 27 2009, 03:23 PM) Sounds like she’s pulled a binder. She can always fix for 5 years (just above 5% at the moment). Worst case, she can have a friend rent a room or two. 50% off peak! Fair play. Wish I could find a nice one where I am for that sort of drop. The big picture is that ultimately the house may seem like a bargain compared to peak prices, prices that only existed temporarily due to insane credit conditions, but even at this price she is unlikely to be able to afford the mortgage payments over the long term. Therefore this is a risky mortgage and houses-prices will not be supported long term by these kind of lending standards. Link to comment Share on other sites More sharing options...
John Doe Posted July 27, 2009 Report Share Posted July 27, 2009 Hi Dr S. I'm in the East Dumbartonshire area. While I am nearly 100% sure prices will continue down over the next few years, albeit at a slow pace and possibly only another 10% or so, I too am doing the sums regarding rent vs mortgage at these very low rates. That said, I have a firm rule of never buying in Scotland in the summer, always waiting for winter as the seasonal variation here seems several times that in England (prob something to do with the weather ). So, while I am tempted at the moment, I will wait a few months more. Link to comment Share on other sites More sharing options...
DoctorSolar Posted July 27, 2009 Report Share Posted July 27, 2009 Hi Dr S. I'm in the East Dumbartonshire area. While I am nearly 100% sure prices will continue down over the next few years, albeit at a slow pace and possibly only another 10% or so, I too am doing the sums regarding rent vs mortgage at these very low rates. That said, I have a firm rule of never buying in Scotland in the summer, always waiting for winter as the seasonal variation here seems several times that in England (prob something to do with the weather ). So, while I am tempted at the moment, I will wait a few months more. Hi John Doe, Cheers for the reply. Yep buying in the depths of winter is definitely the way to go. There is typically less to choose from but prices do seem much less from past experience. Link to comment Share on other sites More sharing options...
drbubb Posted July 28, 2009 Report Share Posted July 28, 2009 I know that what G0ldfinger and Bubb have to say regarding UK housing makes absolute sense but it does get a little uneasy sitting here on the sidelines renting while prices stubbornly stay where they are and my cash deposit sits earning very little interest in the bank. On the plus side renting is still cheaper than owning (but not by much) and if house prices do miraculously start going up so should the value of my silver and gold holdings which will hopefully compensate. I have been buying a set GBP amount of gold every week for the past month or so but again im beginning to get concerned as to what will spark the next up leg from these levels. Then again all this might just be the calm of the eye of the storm as Jim Sinclair points out? Better get your money out od Sterling while there's still time I bought Sterling puts again yesterday. I sold July $171 puts at over $8.00 (a few days ago), and bought Sept. $171 puts at under $8.00 Link to comment Share on other sites More sharing options...
drbubb Posted July 28, 2009 Report Share Posted July 28, 2009 She wants to turn one of the bedrooms into a 'shoe room' and has plans to rent out the other rooms should she have difficulties affording the mortgage over the next few years. The problem is that Manchester is full of properties to rent and rooms in shared houses, so thats unlikely to be a reliable source of income. So she has a mortgage 50 percent larger than she needed in-order to put shoes in one room and to impress her friends with a house larger than most average families need to live in. You're kidding? You mean like an Emelda Marcos museum? That sort of shoe room? That's alot of extra cost for the meaningless purpose of impressing others. We people visit us, they are impressed by how we managed to downsize so much, and live comfortably in so little space, with the help of some well-designed built in furniture. It works partly because we are on the 50th floor, and have views in three directions Other friends are copying the downsize move, albeit in their own ways. The far better solution as nicejim has mentioned would have been to buy a smaller house and have less debt to service over the term of the mortgage. The other disturbing aspects to this deal is that she borrowed 5k more than was necessary inorder to renovate the house to 'add value'. The house did not need any work and it was in a perfectly presentable conditon, the 5k would have been far better spent lowing the value of the debt. 5k over the complete term of the mortgage must work out at over 15k, thats one hell of a way to 'add value' The concept of 'adding value' by borrowing money to spend on decoration is a hangover from the housing boom as idiots grasped for a simplistic explanation as to why their properties had gone up in value, not taking the time and effort to understand the credit markets effect on land prices. Its simply not necessary to 'add value' unless you are a professional property developer and are planning to sell. The big picture is that ultimately the house may seem like a bargain compared to peak prices, prices that only existed temporarily due to insane credit conditions, but even at this price she is unlikely to be able to afford the mortgage payments over the long term. Therefore this is a risky mortgage and houses-prices will not be supported long term by these kind of lending standards. Right. I think she's operating on a 2005-7 paradigm: "Buy as much house as you can afford, and wait". Maybe she and her friends, just dont "get it" yet. It's hard to give up old obsessions sometimes. It's her life. She's free to do that. But if she's other-driven, she will feel increasing uncomfortable, as she realises the extra debt has robbed her of financial flexibility, in order to fulfill an outmoded dream. The big picture is that ultimately the house may seem like a bargain compared to peak prices, prices that only existed temporarily due to insane credit conditions, but even at this price she is unlikely to be able to afford the mortgage payments over the long term. Therefore this is a risky mortgage and houses-prices will not be supported long term by these kind of lending standards. Link to comment Share on other sites More sharing options...
drbubb Posted July 28, 2009 Report Share Posted July 28, 2009 ... From a HPC thread talking about "asking prices back at 2007 highs" ... As it is this bull trap is on its way to cancelling out the falls of the last 18 months (which of course means that if falls resume prices will be much 'stickier' on the downside since vendors will be confident of a quick resurgence in the market in a short space of time. It's mystifying to me and it seems it needs explanation beyond the normal bull trap models since the housing market was hit so hard and everyone was saying that there was simply no money around with which to buy houses, so damaged were balance sheets (of individuals and corporates). As usual, people get it backwards. The DC Bounce hasnt cancelled anything. A few suckers have overpaid. So what? In general, prices remain 10-15% below their peaks, especially inb places like London, which is experiencing depopulation, which has a nasty negative impact on house prices. Let the fools throw away their money, and think they are being clever. The market will teach them a life-long lesson. When prices soon (by year-end or end Q1-2010, and maybe sooner) drop back below their lows of 2009, then the "RUG WILL BE PULLED" and bullish confidence broken for years or decades. That is exactly the function of a DC bounce, to destroy bullish sentiment for good, and allow the really nasty part of the cycle to begin - a sharp downwards slide in prices. As yourself, who do you want to listen to? The Bulls, who have shown so little understanding of the realities of this property cycle, or people who ahve called it correctly? Link to comment Share on other sites More sharing options...
romans holiday Posted July 28, 2009 Report Share Posted July 28, 2009 As usual, people get it backwards. The DC Bounce hasnt cancelled anything. A few suckers have overpaid. So what? In general, prices remain 10-15% below their peaks, especially inb places like London, which is experiencing depopulation, which has a nasty negative impact on house prices. Let the fools throw away their money, and think they are being clever. The market will teach them a life-long lesson. When prices soon (by year-end or end Q1-2010, and maybe sooner) drop back below their lows of 2009, then the "RUG WILL BE PULLED" and bullish confidence broken for years or decades. That is exactly the function of a DC bounce, to destroy bullish sentiment for good, and allow the really nasty part of the cycle to begin - a sharp downwards slide in prices. As yourself, who do you want to listen to? The Bulls, who have shown so little understanding of the realities of this property cycle, or people who ahve called it correctly? The other thing is, a lot who have cash and in a position to buy are being sucked [not derogatively meant] up by the market here. There simply will be a lot less people in a position to buy in the near future. Many that manage to sell will be relieved to have had a lucky escape and will not rush back into property. The market needs a steady stream of buyers to support high prices. Ergo prices will have to come down when the "inventory" of buyers dry up. Link to comment Share on other sites More sharing options...
DoctorSolar Posted July 28, 2009 Report Share Posted July 28, 2009 Better get your money out od Sterling while there's still time I bought Sterling puts again yesterday. I sold July $171 puts at over $8.00 (a few days ago), and bought Sept. $171 puts at under $8.00 Hi Dr B, Where to move it to? USD? CAD? EUR? Gold? Silver? An equal mix of all? Thanks Link to comment Share on other sites More sharing options...
romans holiday Posted July 28, 2009 Report Share Posted July 28, 2009 Hi Dr B, Where to move it to? USD? CAD? EUR? Gold? Silver? An equal mix of all? Thanks Buy puts on all of them. Link to comment Share on other sites More sharing options...
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