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What was Ireland's problem?
- Thread starter vk60546
- Start date
Quote from dandxg:
Can anyone tell me what the terms were for Irish home buyers? Did they have no doc, no down payment loans like the US? I ask because I believe in learning from the mistakes of others. I ask because some feel that Canada has a bubble housing market. But they require down payments and have no tax write offs for home owners as the US does.
The NINJA loans etc are a symptom not a cause of a bubble. If a property market becomes 100% overvalued, even people who put down 20%, 30%, 40%, 50% deposits lose all their home equity.
The mistake to avoid is being overexposed to real estate when prices reach historically extreme bubble valuations. Make sure you can survive a 50% or even 75% fall in prices without being financially devastated.
To look at valuations, just compare real estate prices to things like local incomes, rental cost for equivalent properties, and so on. Then look at the historic ratios for your area and see how out of whack they are. If it costs 2k monthly all-in to own a place, and only 800 to rent it, then prices are out of whack. If historic price to income was 3-4, and now it's 8-10, then it's a bubble. If rental yields used to be 5-7%, and now they are 2.5%, it's a bubble. Etc.
Quote from Ghost of Cutten:
The NINJA loans etc are a symptom not a cause of a bubble. If a property market becomes 100% overvalued, even people who put down 20%, 30%, 40%, 50% deposits lose all their home equity.
The mistake to avoid is being overexposed to real estate when prices reach historically extreme bubble valuations. Make sure you can survive a 50% or even 75% fall in prices without being financially devastated.
To look at valuations, just compare real estate prices to things like local incomes, rental cost for equivalent properties, and so on. Then look at the historic ratios for your area and see how out of whack they are. If it costs 2k monthly all-in to own a place, and only 800 to rent it, then prices are out of whack. If historic price to income was 3-4, and now it's 8-10, then it's a bubble. If rental yields used to be 5-7%, and now they are 2.5%, it's a bubble. Etc.
Thanks makes sense.
Quote from FerdinandAlx:
There's a popular myth that all economic growth comes from the private sector, that governments necessarily work inefficiently, that government intervention is always harmful. I think Friedman has provided us with some great insights into the functioning of markets and the value that markets provide. I'm not a socialist and I don't subscribe to the idea of a collectivist utopia. I think that government should be limited to those services that it is able to uniquely provide as a monopoly of force. This does include economic policy making, market and financial regulation, research spending for the military and sciences, providing physical infrastructure such as roads and railways, the protection of strategic industries such as agriculture and steelmaking among other things. These are all pretty run off the mill. People support those government services even if they would make an ideological statement such as "all growth comes from the private sector". They support them because one by one they're all reasonable services to be provided by the government.
"When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck."
you are a socialist through and through.
"these are all pretty run off the mill. People support those government services even if they would make an ideological statement such as "all growth comes from the private sector"
only socialists would agree with your presumptious statement.
Claudius has it right. The euro is a bad idea that needs to be put out of its misery as quickly as possible. The euro provided one half of the formula that has brought Ireland to its knees: a currency with what had been a ridiculously low rate of interest given how quickly Ireland had been growing.
Non-eurozone countries that also fell into the troubles that Ireland now has also fell into the stupid trap of thinking that financial deregulation - laissez-faire - works. That would be the US and the UK. That provided the other half of the formula.
Ireland had the euro, and it embraced financial deregulation. Voila, ground zero for a housing bubble that exceeded the wildest idiocy that went on here in the US, or over in the UK. While we started with very low rates of interest, these were at least gradually raised as the bubble progressed, which at least limited its destructive power, something Ireland was powerless to do anything about as a result of its embrace of the euro.
I don't get why anyone would start a thread on Ireland wondering about or even talking about government intervention in the market. Nor do I get why it's any part of the discussion. If the situation is observed objectively, the conclusions would be to put strict limits on the growth of banks - more government intervention - and strict limits on bailouts for holders of bank debt - less government intervention.
Finally, once everything stabilizes, you need to have an exit plan for getting out from under the euro, so as to prevent lower interest rates than the economy needs when it's growing fast from giving out the kind of distorted price signals the financial side got from the cost of money in the economic cycle that led to the bubble.
I don't know whether that qualifies as more or less government intervention by the ideological lights of the soaring intellects who bring this red herring up, nor do I care. It is common sense.
Non-eurozone countries that also fell into the troubles that Ireland now has also fell into the stupid trap of thinking that financial deregulation - laissez-faire - works. That would be the US and the UK. That provided the other half of the formula.
Ireland had the euro, and it embraced financial deregulation. Voila, ground zero for a housing bubble that exceeded the wildest idiocy that went on here in the US, or over in the UK. While we started with very low rates of interest, these were at least gradually raised as the bubble progressed, which at least limited its destructive power, something Ireland was powerless to do anything about as a result of its embrace of the euro.
I don't get why anyone would start a thread on Ireland wondering about or even talking about government intervention in the market. Nor do I get why it's any part of the discussion. If the situation is observed objectively, the conclusions would be to put strict limits on the growth of banks - more government intervention - and strict limits on bailouts for holders of bank debt - less government intervention.
Finally, once everything stabilizes, you need to have an exit plan for getting out from under the euro, so as to prevent lower interest rates than the economy needs when it's growing fast from giving out the kind of distorted price signals the financial side got from the cost of money in the economic cycle that led to the bubble.
I don't know whether that qualifies as more or less government intervention by the ideological lights of the soaring intellects who bring this red herring up, nor do I care. It is common sense.
Quote from zdreg:
I suggest that both of you read milton friedman's capitalism and freedom for an understanding of the superiority of free markets and a very limited role for governments.
Milton spent his entire career sucking on a government teet of one kind or another, first living off Roosevelt's New Deal busywork programs, then enjoying a decades of taxpayer-funded leisure in ivory-tower academia.
History will not look favorably on his fundamentally flawed economic principles.
Quote from Ghost of Cutten:
The NINJA loans etc are a symptom not a cause of a bubble. If a property market becomes 100% overvalued, even people who put down 20%, 30%, 40%, 50% deposits lose all their home equity.
Wrong! The NINJA loans and their ilk fueled the real estate bubble. If the NINJAs couldn't get a loan then demand would have been dampened, and prices would not haven risen like a sub-launched ICBM, and the bubble would not have formed.
The mistake to avoid is being overexposed to real estate when prices reach historically extreme bubble valuations. Make sure you can survive a 50% or even 75% fall in prices without being financially devastated.
Well, that goes for any asset-class that is in the bubblesphere. The only problem is, is knowing when an asset-class in a bubble. Are people buying gold at $1,300-$1,400/oz topping the market? Hard to tell sometimes isn't it? As they say, hindsight is 20/20.
To look at valuations, just compare real estate prices to things like local incomes, rental cost for equivalent properties, and so on. Then look at the historic ratios for your area and see how out of whack they are. If it costs 2k monthly all-in to own a place, and only 800 to rent it, then prices are out of whack. If historic price to income was 3-4, and now it's 8-10, then it's a bubble. If rental yields used to be 5-7%, and now they are 2.5%, it's a bubble. Etc.
If it costs 2k monthly all-in to own a place, then the homeowner is not going to rent it for $800, at least not for long, and if it can be rented for that, then it means that prices WERE out of whack, but have since corrected, since demand is surely down or the homeowner would simply sell rather than continuing to bleed money.
Quote from zdreg:
"When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck."
you are a socialist through and through.
No he is not. To describe someone as a socialist you have to first understand what socialism is. By applying that crude caricature of socialism that has long existed in the US you show that you clearly do not.
Note that, before you rush to brand me as one, I am not a socialist. But I have taken the time to understand what it is, its merits (elementary prerequisites of a moral and civiziled society, you might say), and why i disagree with it. I suggest you do the same.
Quote from zdreg:
"these are all pretty run off the mill. People support those government services even if they would make an ideological statement such as "all growth comes from the private sector"
only socialists would agree with your presumptious statement. [/B]
Are you suggesting that only socialists would agree with a notion that is clearly common sense? Surely not.
Please outline for us those Govt services that you think would be better handled by the private sector? I'm interested in where you draw the line of demarcation.
Thx
D
dandxg -
http://www.scribd.com/doc/38541631/38509625-the-Elusive-Canadian-Housing-Bubble-Fall-2010-Musings
Also, see Danielle Park, a Canadian money manager. Well informed view of the Markets and some about real estate in Canada:
http://watch.bnn.ca/#clip378134
http://www.scribd.com/doc/38541631/38509625-the-Elusive-Canadian-Housing-Bubble-Fall-2010-Musings
Also, see Danielle Park, a Canadian money manager. Well informed view of the Markets and some about real estate in Canada:
http://watch.bnn.ca/#clip378134