Prices could fall by a further 15% if rate of decline continues into next year…

ANALYSIS: Oversupply, the lack of mortgage financing and the cost of borrowing are all playing a part as property prices continue to decline

THE GOOD news on the property market: July’s monthly fall in homes prices was the second smallest this year. The bad news: a single month is not enough to suggest that the deteriorating trend over the course of 2011 has been arrested.

The average monthly fall in prices over the first seven months of this year was 1.4 per cent. The average of the 12 months of 2010 was 0.9 per cent.

The accelerating underlying rate of price declines up to the middle of this year is cause for concern. And delving deeper into yesterday’s figures gives no reason to believe any segment of the market has been immune.

The chart shows declines in prices from January to July ranged from 6-11 per cent. That has added to the already massive declines registered among every market segment since 2007, with apartments now less than half peak prices and most other properties, regardless of location, down at least 39 per cent.

Many factors are likely account for the renewed weakness.

On the supply side, a large stock of unsold homes exists, and there is little sign that inroads are being made into that. According to property website daft.ie, the number of unsold properties up to the second quarter of the year remained stubbornly high, with hardly any reduction over the past three years.

On the demand side, almost every factor is working against price stabilisation. The numbers at work continue to decline and real incomes are stagnating, at best. Yesterday’s figures showing a growing number of people who are unable to service their mortgages are further evidence of these depressing trends.

The lack of new mortgage financing is another factor weighing on the market, with the latest figures to June showing that bank lending for property purchases continues to fall.

The cost of mortgage financing has been yet another factor in putting people off borrowing to buy property, even for those who are in a position to persuade a bank to lend to them.

The European Central Bank’s perplexing decision to increase interest rates twice this year looks like more of a mistake with each passing day. The hikes were justified by an increase in the headline rate of inflation caused by higher commodity prices. But with those increases partially reversed and a real risk of renewed recession, even the inflation hawks of Frankfurt are likely to be dissuaded from further tightening. It is even possible that this year’s increases could be reversed.

If almost all of the drivers of demand are weak, the psychology of buyers in a market in which prices are falling is almost certainly influencing price developments. Any form of deflation tends to feed off itself, with potential buyers postponing their purchases in anticipation of even lower prices.

When will the Irish property market reach bottom, and how low will the low-point be? Given all the dynamics, it is very difficult to see the market stabilising until next year at the earliest. If the current (2011) rate of decline continues for another 12 months, prices would fall by close to 15 per cent from their current level.

Under the central scenario underpinning the EU-IMF bank rescue, a further 21 per cent decline is anticipated before the market hits bottom. Under the worst-case scenario drawn up by legions of foreign consultants, a further 29 per cent decline could take place, bring the cumulative fall from the peak to 59 per cent (it now stands at 43 per cent).

By this metric, there is still some way to go before the bank bailout costs would be pushed up yet again.

Report by DAN O’BRIEN – Irish Times

Ireland Property – Daft Property – http://daftproperty.blogspot.com

Mortgage rescue deal could cost you up to €50,000…

But it is still only option for thousands.

STRUGGLING homeowners who make deals with lenders to reduce their mortgage payments face paying tens of thousands of euro in extra interest charges.

New figures show that almost 70,000 people have now restructured their mortgages — mostly by extending the repayment period or switching to ‘interest only’ payments.

The Irish Independent can reveal that those with a typical €200,000 home loan who extend their mortgage term by just five years face paying €34,000 more in interest charges. And borrowers could end up paying more than €50,000 in extra interest for the same €200,000 mortgage.

The startling figures have been produced by personal finance expert Brendan Burgess. They reveal the huge long-term costs for families seeking to ease the burden.

But the Central Bank, which has been leading the way on policies to ease the mortgage crisis, admitted it had “no figures” on the cost implications for borrowers who restructure their mortgage.

The costs are particularly pertinent since the Government has to come up with a plan to deal with the mortgage crisis by the end of the year under the EU-IMF bailout deal.

But there will be no “debt forgiveness”. The solution is likely to focus heavily on “restructuring” mortgage debt.

Those measures are expected to include encouraging banks to offer more flexibility to mortgage customers in difficulty — by agreeing to suspend payments or allowing borrowers to temporarily make lower payments.

Both of those solutions are likely to add to the ultimate interest costs of the loan since it will take people longer to pay back what they have borrowed.

The banks have to outline the full interest costs of the new mortgage terms when they agree any restructuring.

Documents on most banks’ websites acknowledge that extra costs are “likely” or “possible”.

A spokesman for the banks’ lobby group, the Irish Banking Federation, said: “There’s a possibility, if not a probability, that there will be higher interest payments (if you restructure your mortgage).

“It’s an important consideration for people to take into account.”

Mr Burgess pointed out that while you could end up with higher interest rates over the lifetime of your mortgage, there were benefits to restructuring your loan rather than letting the situation slide.

If you have mortgage arrears, of say €10,000, and agree to have those added on to your main loan, you could end up paying them back over 20 years, piling on higher interest costs.

But at least the €10,000 would not count as arrears anymore. “If you don’t have any arrears, the bank can’t initiate legal action against you,” Mr Burgess said.

Lumping in arrears with a mortgage that carries interest at a rate of perhaps 5pc is cheaper than taking out a personal loan to pay off arrears, since those loans can carry interest rates of more than 12pc.

Homeowners also have the option of reverting to their “old” system of mortgage repayments if their circumstances improve.

This would reduce the long- term impact on interest payments.

And the real cost of any extra interest payments will be lessened, because of inflation. The rising cost of goods and services means €10,000 in the future will be worth less than €10,000 is worth now.

Yesterday’s Central Bank data charts the worsening plight of mortgage holders, with almost 56,000 now behind on their payments by more than three months, up from about 50,000 at the start of the year.

The figures include 15,723 cases that are in arrears of more than six months, 7,236 where a formal demand has been issued but no court proceedings have been taken, and 3,027 where court proceedings have been issued.

Repossessions

Just 54 properties were repossessed on foot of court proceedings in the three months to June, while another 119 were repossessed through abandonment and voluntary surrender.

There was some good news for mortgage holders, however, as European Central Bank chief Jean-Claude Trichet offered further hope that interest rates are unlikely to rise soon.

Worries about inflation have typically prompted the ECB to hike rates. Mr Trichet yesterday said he was reviewing inflation risks in Europe with the results ready within weeks.

And if it is judged that inflation is no longer as big a risk, hikes are likely to be put on the back-burner.

Report by Laura Noonan and Siobhan Creaton – Irish Independent

Ireland Property – Daft Property – http://daftproperty.blogspot.com

What sparked this post is a common occurance which popped up yesterday, again. Some prospective tenatns want to move from their current place, from their current owner to a new place. 

The ladies have rented from the owner for about 8 years in several locations that the owner had. That’s a good sign of loyalty when a tenant wants to stick to renting from a particular owner even if their needs change. 

But at some point the owner decided to hire a management company and is now losing these tenants. The reason? The management company has let in less qualifed tenants into the building and repairs are not getting done.

I can understand having to get a management company, but one has to be prepared and has to keep an eye on them. It kind of defyies the whole point of hiring a manager, but if you don’t look out for your property don’t expect the manager to. 

There are good managers out there and often it’s not the company, but the individual agent assigned to your account that is messing up.

Keep abreast of what is happening at your property, however you do it, but do it or it’s going to cost you lost rents, unnecessary repairs and a devaluation of the property and maybe even more then that.

Derelict properties add to Dublin’s poor litter rating…

A POOR showing for Dublin city has spoiled the latest anti-litter league which shows the best State-wide results since 2002.

According to the survey, commissioned by Irish Business Against Litter, much of the capital is “as littered as it has been in many years”.

While the State generally achieved the highest level of cleanliness since monitoring by the business group began a decade ago, “derelict and vacant” properties contributed to the capital’s poor showing.

Parts of Cork also fared badly in the survey, with the Knocknaheeny area of the city being placed joint bottom of the league with Dublin’s north inner city.

The survey named individual stores across the State where it said there was excessive litter. These included Tesco in New Ross and Mallow, and McDonald’s, KFC and Pizza Hut in Sligo. Several public buildings were also heavily littered, including Galway’s Merlin Park Hospital.

Sweet wrappers were the most prevalent type of litter, followed by cigarette butts, fast food wrappings, plastic bottles and chewing gum.

The situation is so bad in some areas that Minister for the Environment Phil Hogan has said he will shortly bring in new regulations to give local authorities additional powers to tackle those who litter and dump illegally.

The Minister said he was pleased to note 37 towns and cities achieved the top-rated accolade “clean to European norms”, the highest level of cleanliness nationally in the league’s history.

In all 53 towns and cities were considered and two-thirds of them deemed to be clean to European norms. Among them were the cities of Waterford, Galway and, also for the first time, Cork. Killarney, Kilkenny and Wexford were also deemed clean to European norms. The cleanliness rating for the whole country was the highest since the surveys began.

Tom Cavanagh, chairman of Irish Business Against Litter, said towns were putting in “great effort to show their best sides to tourists to our country” but that tourists typically arrived in Dublin. Before they got to experience Ireland’s overall cleanliness they were first exposed to “widespread litter”, starting at the roads from Dublin airport.

According to An Taisce, which conducted the survey, there was an unprecedented number of seriously littered sites in the capital. It said “the majority of the sites in Dublin were not just littered but suffering from long-term abuse and neglect. Food-related litter was common on most of the approach roads to the city.”

While welcoming the national result, Mr Hogan took issue with the findings in relation to Dublin. He said he did “not accept that the areas chosen for the survey adequately reflect the overall situation on the ground”.

He said: “I regularly walk the streets of our capital and am impressed with how Dublin City Council continues to maintain the city centre. I am aware of the significant effort being put in by the four Dublin local authorities to combat litter in their functional areas, and I am confident that they will continue to strive to improve the situation.”

Mr Hogan said the Derelict Sites Act was being examined by Minister for State Willie Penrose to see how it might be used with ghost estates across the country, and Mr Hogan reminded local authorities it was an instrument they could use.

IBAL ANTI-LITTER LEAGUE RESULTS

CLEAN TO EUROPEAN NORMS: 1 Killarney; 2 Trim; 3 Cavan; 4 Swords; 5 Monaghan; 6 Youghal; 7 Wexford; 8 Ballincollig; 9 Dún Laoghaire; 10 Tramore; 11 Castlebar; 12 Waterford City; 13 Galway City; 14 Kilkenny; 15 Bray; 16 Ennis; 17 Ballina; 18 Cobh; 19 Naas; 20 Longford; 21 Dungarvan; 22 Nenagh; 23 Drogheda; 24 Fermoy; 25 Sligo; 26 Newcastle West; 27 Tuam; 28 Roscommon; 29 Navan; 30 Tullamore; 31 Arklow; 32 Kildare; 33 Dundalk; 34 Tralee; 35 Mullingar; 36 Gorey; 37 Cork City.

MODERATELY LITTERED: 38 Letterkenny; 39 Maynooth; 40 Athlone; 41 Carlow; 42 Tallaght; 43 Limerick City; 44 Portlaoise; 45 Mallow; 46 New Ross.

LITTERED: 47 Clonmel; 48 Wicklow; 49 Tipperary; 50 Dublin Airport environs; 51 Dublin City.

LITTER BLACKSPOTS: 52 Knocknaheeney, Cork; 53 north inner city Dublin.

Report by TIM O’BRIEN – Irish Times

Ireland Property – Daft Property – http://daftproperty.blogspot.com

They presided over the crash — but no one was ever fired.

An “endemic culture of rewarding failure” in Ireland has meant that not one person in the Department of Finance, the Central Bank or the Financial Regulator’s office has been sacked for their role in the worst financial and economic crisis in history.

While their former political masters in Fianna Fail were slaughtered at the polls in February, it has been confirmed to this newspaper this weekend that not a single official or adviser was laid off for their failure either to adequately prepare for the crash, or for their failure to deal swiftly with it when it happened.

“Nobody in the Department of Finance has been fired since January 2008,” a spokeswoman told the Sunday Independent.

Friends First chief economist Jim Power said that while many of those who were in key positions during the crash have since moved on or retired, their departure has come at a significant cost to the taxpayer.

“There is an endemic culture here in Ireland of rewarding failure, and it is not restricted to the public sector. Look at Brian Goggin in Bank of Ireland.”

Mr Power said the fact that no one has been fired is a damming indictment of how things are done here and the taxpayer always pays to remove underperforming people.

“That no one has been fired is typical of how things are done in Ireland, but there has been a clear-out of those who underperformed. The only thing is they have all been paid off handsomely for stepping down,” he said.

Mr Power did say that there seemed to be a move to promote younger promising talent to senior positions within the civil service.

A spokeswoman for the Central Bank and the Financial Regulator said that there has been a significant restructuring of the organisation since 2008.

The present governor, Patrick Honohan, replaced John Hurley while Matthew Elderfield was brought in from Bermuda to replace the widely disgraced regulator Pat Neary. Both Mr Neary and Mr Hurley received substantial pay-offs to depart.

Mr Neary, who retired in 2008, got a massive €630,000 pay-off. This was despite his office having knowledge about the secret directors’ loans of up to €129m to ex-Anglo Irish Bank chairman Sean FitzPatrick for at least 11 months.

Under the terms of his contract, Mr Neary will also receive a guaranteed public service pension of almost €143,000 a year, €2,750 per week, for the rest of his life.

Last year, the Department of Finance’s top official at the time of the bank guarantee received a pension top-up worth €725,000 in added years on his retirement earlier this year, the Sunday Independent can reveal.

As a result, David Doyle, who stepped down at the age of 60 at the beginning of February 2010, walked away with an initial golden handshake worth almost €600,000 and has seen the value of his pension increased significantly.

His top-up and severance payment are among a number included in a €10.5m pension lump sum payout to top civil servants by all government departments since 2005.

Report by DANIEL McCONNELL – Sunday Independent

Ireland Property – Daft Property – http://daftproperty.blogspot.com

I was listening to a discussion on home ownership numbers.  They are the lowest in 10 years, but they made a note that if you take into account all the people who are late on their mortgage the real ownership rate is near 59% vs 69% because in a normal situation those people behind on their mortgage would be out by now and probably renting.

Homeownership is over promoted as a saviour of society as the forced piggy bank that will fund your retirement and savings, but that’s false.  

Home-ownership is nice, but it’s not necessary, especially in this more mobile world. Consider that many of the people who purchased homes even in the late 1990′s have lower equity or none at this point, after 11+ years of ownership, though, we are in extraordinary times.

Also, we’ve been coming across many people who want to buy a home, but think they may need to sell in 2 or 3 years. Unless you get a home way below market, which is hard, or you change it somehow to add value then it is unlikely you’ll be able sell the home with a profit. It cost money to buy and sell a home: a lot of money and it takes about 2-3 years just to break even if the market cooperates.

But guess what. Someone has to own the property that 41% of people are renting and that’s where investors come in.

Morgan Kelly predicts further unforseen losses for banks…

Kelly warns billions owed by small number of big developers

UCD economist Morgan Kelly has predicted that bad debts of a small number of wealthy buy-to-let property investors could lead to previously unforeseen losses for the banks.

Professor Kelly claims this group could cause major problems, even if the overall number of people not repaying home loans does not rise drastically.

However, Prof Kelly, who is renowned for his doom-laden analysis of the housing market, admitted he had no idea how big the resulting losses could be if these ‘super-investors’ cannot repay their loans.

Prof Kelly, who forecast the original property bust, says in a new academic paper that many wealthy buy-to-let property investors have multiple loans and if they get into trouble that losses will be magnified.

In the paper, published on the UCD website, the economist said there could be as few as 2,000 mortgages of more than €1m taken out by property speculators at the height of the boom, with a combined value of €3bn.

However, Prof Kelly said the biggest 10,000 buy-to-let property investors may owe in the region of €10bn between them.

The analysis is based on Department of the Environment figures that show bigger mortgages taken on during the boom tend to have been interest only, and Prof Kelly said they were more likely to have been used to buy investment properties than to buy homes.

He said around 10,000 investors, often accountants, lawyers and other professionals, spent between €1m and €2m each buying property between 2006 and 2008. These tended to be bought with interest-only mortgages worth around 80pc of the value of the house, he said.

“The extent of losses on these large investor loans are, of course, unknowable at this stage,” he said.

Defaults

Prof Kelly admits the findings remain tentative but, if true, they suggest that losses for the banks could rise sharply — even if the total number of defaults does not — if the bigger borrowers get into trouble.

The data don’t show how many people had more than one mortgage but suggest a small concentration of big debts.

The findings, however, do fit with recent comments from Prof Kelly when he said debt forgiveness for struggling home owners could cost between €5bn and €6bn — less than previous estimates. That relatively low figure is also based on Prof Kelly’s view that home buyers typically have smaller mortgages than property investors.

Last week at an economics seminar, he used that point to argue in favour of a debt forgiveness scheme for home owners unable to cope with their debts — saying it could be done at a relatively small financial cost.

Report by Donal O’Donovan – Irish Independent

Ireland Property – Daft Property – http://daftproperty.blogspot.com

Litchfield Park just like most cities in Greater Phoenix have experienced a run on properties without a resupply, reducing the inventory to long time lows. At this point there are only 169 properties for sale and 72 sales in the last 30 days, bringing the supply of Litchfield Park homes to only 2.3 months.

[ Graph: The Cromford Report ]

None the less the monthly sales and average annual sales prices are down. Long term appreciation is down to a negative 1.9% annually, meaning homes purchased in 2001 are down at a rate of 1.9% over the last decade.

View Litchfield Park homes for sale.

Government won’t write off struggling homeowners’ debt…

THE Government is not considering a ‘debt-forgiveness’ scheme to write off billions of mortgage debt for struggling homeowners, Tanaiste Eamon Gilmore confirmed yesterday.

The comments came as public demand grows for a mass mortgage write-off. One homeowners’ group is claiming 60,000 people face losing their homes unless a solution to the mortgage crisis is found.

The clamour follows last week’s claim by renowned economist Morgan Kelly that a debt-forgiveness scheme to rescue those in severe difficulty with their mortgages would cost just €5bn or €6bn.

But Mr Gilmore yesterday moved to calm growing expectations that a scheme was imminent, saying the Government was not considering “some kind of blanket write-off or mortgage debt forgiveness, as is being suggested by some”.

It is understood that many senior cabinet figures, including Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin, have serious reservations about embracing any kind of mass mortgage write-offs.

Subsidising

They are believed to be conscious of how debt forgiveness would be viewed by low-paid workers who have never been in a position to buy a house, and would be effectively subsidising the home ownership of those who are better off.

The Government also has concerns about the cost of a debt-forgiveness scheme, which many estimate at more than twice Mr Kelly’s figure.

Mr Gilmore yesterday stressed that the Government was exploring ways to help those having difficulty paying their mortgages and at risk of losing their homes.

The last government extended mortgage interest relief for those who bought when prices were at their highest and extensive work has been done on developing procedures to ensure banks deal fairly with those in arrears. The Central Bank is also engaged with banks on possible new measures to deal with the mortgage crisis.

Report by Laura Noonan – Irish Independent

Ireland Property – Daft Property – http://daftproperty.blogspot.com

Buy, Sell, Explore: a website designed to be simple + informative.

The idea and reason for creating the new version, version 4.0, of Phoenix Market Trends was to make the most important information quickly accessible while providing an extremely customizable experience for users. As you can the main navigation elements are limited to what are the three most important categories to visitors – Buy, Sell & Explore

Buy feature:

This tab provides access to available inventory: all Phoenix homes for sale. It contains both the quick search and main featured listings element. The homes search has a Walk Score, Bird’s Eye View, full details about the property, large photos, all to help buyers get as much information as possible to determine interest in the property. If a property is a candidate it can be shared or saved as a favorite to retrieve later along with other saved properties.

For buyers this is the starting point with access to homes for sale and the Phoenix Home Buyer’s Guide with many articles, tips and advice about buying real estate in Phoenix along with the basic layout of the process. There is an advanced mortgage calculator, a guide for Canadians and investment guide with more content coming as we import the 2,000+ articles from the older system.

Sell feature:

The sell tab is geared toward those visitors who want to sell Phoenix real estate, starting of with a short form to submit an address of a property to be sold. One of our agents will review the market and comparables and provide an estimated value of the property. These listing agents, or agents versed in the process of listing and selling properties, are featured to the right.

This section also features the Phoenix Home Seller’s Guide with resources, tips, articles and advice about selling real estate, from start to finish including what inPhoenix Realty Group offers sellers, from our ‘marketing with measureable results’ to a comparison of what can can expect from us against the market.

Explore feature:

The final main tab in our featured area is the “Explore” tab. This provides users access to and feature information on the most important communities in Greater Phoenix: this is the best places to start exploring the phoenix regions and delve  into more detail or access the community specific properties for sale. On the left, you will find a list of the top 10 communities.

On the right you will find a new feature, the random community spotlight. This feature is designed to combine high end photography of Phoenix communities and is tied into the MLS IDX with upd to date community statistics like high and low price, inventory and median price: this is updated daily.

Multi platform:

Version 4.0 is designed to work well with mobile devices. Visit it on an ipad and the primary navigation is easy to view and above the fold. 

We’ve also noticed that at this point 12% of users use mobile devices ranging from iPhones, Android phones, Blackberrys to iPads and similar devices, so we’ve implemented a mobile friendly home search which allows users to quickly and easily search for homes on their phone with access to lots of information.

Our goal has always been to provide a lot of relevant information and to disseminate the information so that our clients and future clients will be better informed about the processes of real estate in Arizona and the market to make a more informed decisions. That includes market statistics, neighborhood profiles, investment strategies and the ins and outs of the real estate process and version 4.0 of this website takes us further in that direction.