Yes, we’re well aware that San Francisco is not in Ireland (although we are home to many an Irish builder or craftsman), but the following quote couldn’t help but catch our fancy: “It has taken us 10 years to get into this situation – it will in all likelihood take us 10 years to get out of it.”
Quite simply, then real estate market tends to move in long cycles. And anybody who thinks that we have already weathered the current real estate storm in San Francisco is not only out of touch with history, but also reality.
∙ Warning that house prices may fall by 80% [The Irish Times]
Whatever. I challenge anyone to find a period of time in the last 20 years when primo Glasthule flats haven’t outperformed the ISEQ.
What? Where?
My former roommate was Irish. He had a house in some backwater over there and insisted that it would never go down in value.
I didn’t try and argue with him (why bother?) — just let the market do the talking.
^^^ Dude wins post of the day! 🙂
I’m Irish and even with an 80% correction, prices in dublin and the surrounding areas are still astronomical..
It’s also astonishing how many Irish people have 2, 3 or 4 houses and especially holiday houses/flats.
The Irish really took full advantage of the credit extended to them by ze Germans
And ze germans are going to be crying in their spaten when they don’t get paid back.
I would agree with you dub dub except that it’s just a barb aimed at paco. And what could we expect when the editor lead with a barb of his own, “And anybody who thinks that we have already weathered the current real estate storm in San Francisco is not only out of touch with history, but also reality.”
By the way, who’s the editor aiming at?
🙂
Geeze, this site has become so depressing… Even “HousingPanic” decided it had out-blogged its purpose. At what point do people stop reveling in the decline and start looking for solutions?
Might have to stop into Suppenküche via Place Pigalle and then Danny Coyle’s on the way home.
“At what point do people stop reveling in the decline and start looking for solutions? ”
The decline is the solution.
Value = (what you get)/(what you paid)
Every day more and more homebuyers are getting more and more value. This is good. If you’re looking to buy a home, that is. Sucks if you’re a current owner who was expecting free money to fall out of the sky and into their laps.
Schnitzlehaus is way better than Suppenkuche.
BDB, how do you make the umlaut?
Diemos, you stole my comment. The best cure for a nasty hangover is to not get so drunk in the first place. After that, time is the only real cure. Hair of the dog (i.e. gov’t intervention / stimulus) will reduce the imediate suffering, but prolong the recovery period. Sláinte Mhaith!!
I’d rate them: Suppenkuche, Walzwerk, then Schnitzelhaus, then Schroeder’s. (Speizenkammer in Alameda gets a shout-out too.) I triple dog dare anybody to eat at all five of them in one week’s time. Ouch.
It’s not looking so rosy in Ireland any more. Heard the news about Dell? It’s cutting nearly two-thirds of its workforce at its Co. Limerick plant. I think BDB is right — the EU party is over.
There once was a bubble in homes
And chancers took out huge loans.
The bubble’s gone, “Pop!
And the prices will drop
Despite the homedebtors’ moans.
That’s it for me today. See you lot at O’Murphy’s for a pint of the black stuff.
ü
Hold down the alt key and type 0252 the let go alt, assuming you are using a PC.
Or Cut and paste from the interwebs.
One of my best friends just moved to Limerick. 2000 jobs are gone from Dell, but luckily he moved in July, and got a job before it got bad there, not that Limerick was ever any way great.
But you know.
They timed it well, selling in Dublin and buying in Limerick.
“Sucks if you’re a current owner who was expecting free money to fall out of the sky and into their laps.”
Are you positive the government isn’t going to give free money to “homedebtors”?
“Are you positive the government isn’t going to give free money to “homedebtors”?”
Nope. There is literally no limit to the amount of mischief a government with a printing press and the will to use it can get up to. There’s nothing to stop the government from handing out a trillion dollars per person tomorrow. Poof! Instantly all debts are wiped out, all money patiently and painfully accumulated becomes worthless. Warren Buffet and your homeless crack addict suddenly have an equal amount of money and all real assets inflate to the stratosphere.
The only thing that stops this from happening is that it doesn’t serve the interests of the people who control the printing press.
Satchel expounded on this at length and I think he was right. There will be all sorts of programs to “save” homeowners and “keep people in their homes” but the real agenda will be to keep them bleeding for as long as possible.
btw,
The CME housing futures that track the S&P/Case-Shiller median home price indices of 10 major cities offer a clue into how much more investors think home prices have to fall. In the chart below, we highlight the percentage difference between the October ’08 actual Case-Shiller numbers (the most recent set of numbers) and the current price of the November ’09 futures contracts.
The composite 10-city November ’09 contract is currently trading 12% below its October ’08 level. San Francisco is expected to fall the most in 2009 at -18%, followed by Los Angeles (-16.6%), and Las Vegas (-13%). The rest of the cities are expected to fall less than the composite, with Boston home prices expected to fall the least at -6%. Miami, Denver, DC, and San Diego are all expected to see home prices fall by less than 10% from 10/08 to 11/09.
So one crackpot predicts an 80% decline in Ireland and that’s news for SF?
Let’s put this crackpot in perspective… if prices were $100,000 10 years ago and are now $400,000, an 80% drop brings them to $80,000. In other words, prices will be 20% below what they were when the market first took off.
Well, I don’t know about you, but I can’t wait to buy a 2/2 on the Russian Hill for $200,000. In the meantime I’m selling the GG Bridge for $100,000 or best offer.
sfrob,
I’ll co-sign on that 200K 2/2. I agree that will never happen.
Seriously, even if someone throws wildly insane numbers do not mean that prices will not go down significantly in both SF and other “laid back gone trendy” locales. They already have, actually. Just to say that no city is immune from a crash as is proven here day after day.
I don’t think that’s what the editor is implying, sfrob. I’ve read that the UK/Ireland had a housing bubble that dwarfed ours by comparison. Home prices in certain areas there nearly tripled since 2000 before peaking in late ’07. And this was off of a base that was already relatively expensive.
Plus mortgage interest isn’t tax deductible there unless you’re a landlord, and there was a much higher use of exotic loans – I believe they even had 125% loans for first-time buyers!
And why not? How could home prices in the UK or Ireland ever fall? They’re not making any more land, surrounded on FOUR sides by water (not just 3 sides like SF), etc.
Anyway, I’m sure there are some plugged-in Brits who can correct me if my details are wrong, but bigger bubble = bigger correction.
They’re not making any more resources either. Particularly in Ireland. Ireland offered up a lot of tax incentives to businesses, apparently. I actually had a conversation with a guy who owns in both Ireland and SF, but lives in Grass Valley. He was of the opinion that Dublin and Cork will fare better, but as a whole the country will take decades to recover. His synopsis was the jobs pipeline created unbalanced optimism, and all of a sudden there was a larger buying demographic, all of whom had acces to the easy credit. Add in the competition factor.
And on the competition note, many of the price retreats we’ve seen from “apples” on this very site can be explained by just that. A lack of competition. I wonder how many price retreats we’ve seen on here are actually lower than the last sale’s initial list price. I’m not saying that that is by any means insignificant. But again, steady runups without improvement is a sucker bet. Right now with rare exception, the competition is gone.
And, un-luck? Do you mean bad luck? They speak English in Ireland you know. Or did Foolio write the initial hedder? And “Luck of the Irish, not!” didn’t quite seem to work?
diemos wrote:
You say that like it’s a bad thing.
For the capitalist marketplace to work, the people who made poor decisions need to be punished, and buying an overpriced asset at the peak market price is a poor decision. Keeping people paying on loans that they were too stupid to realize they should have never taken on is a valid and justified way of ensuring that the marketplace-based economic punishment actually gets administered.
Since the people who stood on the sidelines, scrimped and saved their money, and did *not* buy at the peak, did *not* get a negative amortization loan, did *not* take out a HELOC to put the down payment on another speculative real estate investment as “income property” because their personal financial guru was *not* Robert T. Kiyosaki, etc., etc., etc., are *not* being rewarded except by lower prices when they eventually buy, the people who *did* do all of these things need to be punished.
If I had my way, there would be a straight path to price discovery. No special programs, just allowing the unrestrained free market to work: foreclosure after foreclosure, assignment of 370 FICO scores, backyard pools in vacant suburban McMansions being converted to mosquito breeding ponds, blood running in the streets until all of this rot is out of the system and people wake up from the fever dream that the real estate market was having up until 2007. Obviously, our political system isn’t going to let that happen. “Programs to keep people in their homes” and getting them to pay down the loans on them is the next (or perhaps third) best plan.
@Brahma… agree with all except “backyard pools in vacant suburban McMansions being converted to mosquito breeding ponds”
My preferred solution is to just publish skateboarders roadmaps to empty pools.
“You say that like it’s a bad thing.”
Foreclosure is the solution not the problem.
It allows a person with a mortgage they can’t afford to walk away and start renting an apartment that they can afford. It allows someone who can afford the house to buy it. It gives the lender a stinging lesson about not loaning money to people who can’t pay it back. It’s all good.
But be careful.
Everything in the economy connects to everything else. However we decide to deal with this situation will send ripples through the rest of the economy. If we follow your suggestion to reach price discovery through foreclosure that means a lot of loans are not going to get paid back. Suddenly all sorts of private and public pension funds, annuities, insurance companies will all go bankrupt as the securities that make up their assets are shown to be worthless. Maybe you lose your pension, maybe your taxes skyrocket to make good on those promises.
On the other hand if we try to make the debtors pay back their debts then they will have to stop their consumer spending. Without consumer spending the economy contracts, a lot of people loss their jobs, maybe even you. Loans go bad anyway when people lose their job and can’t pay their mortgage.
Maybe we print up $10T and pay off everyone’s mortgage and the foolish are rewarded and the sensible punished but the pensions are saved and the economy keeps ticking over with the pain spread evenly across the populace through inflation.
Government is an exercise in the art of unintended consequences. Before implementing what seems to be a just solution you might want to consider thoroughly how it might boomerang on you.
Umlaut on a Mac: hold Option +u, then type the letter you’d like the umlaut on.
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