Now where'd I put that Bear trap ?

Long time lurker, first time poster, so I thought I might as well contribute some of my thoughts.

I’ve been a bear for about the last 3 years, when I reached the conclusion that something a wee bit nuts was happening in the Irish property market.

Looking at the classic bubble plot, one of the critical points has to be what form the ‘bear trap’ takes & this is the point where I think we’ll know if we’re in for a long drawn-out collapse, or something more painful, but probably better for the country :-/

I have a feeling the ECB will play a critical part in this in the next 6 months. I wonder if holding interest rates in Sept. would be enough for a lot of those holding off to decide to return to the market ?

You can be sure that if the rates hold the VIs will trumpet from the roof tops that that is the soft landing they promised us all ! The EAs & vendors will then flood the market with properties to take advantage of improved sentiment. Very little will shift, but I think the high end is where any sales will happen.

The problem is that I think the ECB might well follow-up with a full half percent increase in Jan, that might be enough to prompt a full on collapse. Otherwise I afraid if we continue on with piecemeal reductions to affordability, we’re in for a long drawn-out deflation of the bubble.

ff

Housing market threatens to hit eurozone growth

ft.com/cms/s/0/db3056b2-4eb4-11dc-85e7-0000779fd2ac.html

I think their data is a bit out of date if they think that Irish HP will thread water this year.

Agreed - although as has been pointed out time and again on the Pin, the price increases, modest as they are (and if the figures are to be accepted), only take into account actual sales. They do not account for what has been a complete collapse in the volume of sales. The fact that the VIs and others are spinning like their lives depend on it and still only coming up with zero to one percent projected growth based on actual sales says it all.

I think of this now like a game of cluedo. An international who dunnit? a blame game unravelling in front of us. I’ve no doubt some guys on here or global house price crash or itulip have been well on top of this for some time now and there must be vindication in seeing this coming.

Just by focusing on Ireland I thought Ireland did have quite unique circumstances for a bubble to appear. Mostly around the fact that up to ten years ago it was a hopelessly immature country and economy, yet people since then have been spending money on houses and consuming generally like money was going out of fashion.

I’ll hold my hands up I thought it was FF and the builders in the canope with the candle stick that were shafting us all this while with restricted supply. The long established and much maligned ‘golden circle’ of Irish society was ‘wot done it’. Now though the international dimension has come in and suddenly all the talk about the Irish property market seems so parochial and irrelevant.

Ah but the irony of how petty cute hoorist Irish market fixing may become unstuck by a global tsunami of a credit bubble - the only factor ‘they’ couldn’t control… :imp:
It could’ve been the perfect crime.

It could’ve been the perfect crime.

actually I’ve heard a few people saying that the Irish property prices have only been hit because of the problems in USA, they don’t claim to know they hows and why’s but they’ve been convinced that the wheels are coming off Irish property not because Irish property was overvalued, but because of some mortgage problem in America.

This allows the irish bubble to burst while preserving the Ireland is different mantra. These people will be ripe for the next asset bubble when assurances that the global credit problems have been sorted out, and this time property prices will go up forever.

-Rd

I don’t think we’ll see a bear trap this time. There’s certainly been little sign of a bear trap in the US housing market anyway.

As AD points out, Irelands property market woes are miniscule and parochial compared to the global credit crunch. If this were a regular bubble bursting scenario, I think we’d see a bear trap once ECB rises stop or even begin to fall, but I think the Irish banking community’s ability to finance mortgage debt will be so severely restricted by that stage, that a bear trap is unlikely.

OK boys I’m confused.

I thought a bear trap occurs when the bears, expecting the asset in question to fall significantly, put everything on a massive short sale. Then the asset unexpectedly rises and because of the nature of the short sale, the short sellers lose more money than they actually put on the market.

But you can’t actually “short” house prices in Ireland. Individuals can’t anyway.

It might be irksome to guess wrongly, but it’s hardly in the same league as betting 100K and losing 500K

"I have a feeling the ECB will play a critical part in this in the next 6 months. I wonder if holding interest rates in Sept. would be enough for a lot of those holding off to decide to return to the market ? "

I’d just like to add something in relation to this. I am a late 20something FTB (If I was buying). I guess I’m the one supposed to step in to save the Economy. I am in a good, reasonably well paying job. If I take the figure the bank say they are prepared to lend me (35 year mortgage, 100%). It comes nowhere close to the cheapest multi-bedroom dwelling in my city on daft.

I am not waiting to buy because I am either canny or savvy, I literally cannot afford a dwelling in the city in which I live.

That is the reality of my situation, and no amount of VI wishfull thinking will change it. Again even if I was to borrow as much as I could for as long as I could (which is less than desireable from my point of view, but that’s another issue) I still wouldn’t have enough money to buy a place to live.

Sorry VI’s but the cavalry ain’t coming.

:laughing:

You’re forgetting the part where you’re supposed to shack up out of desperation and buy a 2 bedroom shoebox for the sake of respectability.

Delaying an intended purchase, or selling your current gaff if you think prices are going to fall is effectively the same as shorting, and you’ll miss out if the prices in fact rise.

seriously.

Actually I’ve just searched again on Daft and I can now include single room properties in the above, not that a bank will give you the economy propping 100% mortgage for one of those.

I must stress I’m not badly paid (considerably above the average industrial wage) and I don’t qualify for a mortgage which would purchase a single property on daft in my city, that’s Ireland 2007 for you.

By “shack up out of desperation”, you do know I meant “double income”?

Yeah? :wink:

Is that what they’re calling it now?

I don’t like to seem like a nit-picker, but I am, so that’s how it looks: selling your current gaff if you think prices are going to fall is not quite as risky as stock-shorting.

You’ll possibly lose a certain fraction of the price of the house, but you can’t lose ten times the price of a house like an unlucky/greedy short-seller can.

I apologise, I’ll go spread my pedantry elsewhere…

Oh!! hahaha… yeah!

Excellent chat up line… let’s get you out of those clothes and into some lifelong debt honey!

I thought a bear trap was where a bear, having held off at the peak but thinking the asset cycle has finally reached it’s trough, buys in to the cycle again, only to find that the trough was merely a blip and the asset continues downwards… or is that the bull trap?

Either way, if the share price goes up 10x or the house price goes up 10x, you’re in deep doodoo. Assuming you ‘must’ buy a house that is.

conor_mc, the bear trap is more often used in the stock world, because the downside can be many multiples of the amount you bet.

A millionaire who bets 10K on shorting a single stock can be bankrupted if that stock shoots up enough, as I understand it. Hence the scary metaphor.

I’m borrowing from ARW’s blog here…

arandomwalk.com/2007/06/26/housing-bubble-phases/

…but my understanding of bull-trap/bear-trap is in terms of a bubble cycle.

Looking at the cycle, I think we’re actually discussing bull-traps here, rather than bear-traps!