The War of the VIs

Howitzer got me thinking with this post buried in another thread , it deserves its own.

To add insult to injury the situation at the peak was different. Thats because EAs had agencies with banks and the agencies paid a nice ocmmission when the EAs got 2 commissions, often selling a mortgage .

In the second half of last year the banks dramatically cut the commissions for Mortgages .

Now we have 2 divergent interests, I cannot see how these can be reconciled.

The EAs need vloume and will hack at the banks ‘security’ to get the volume.

OTOH the banks have securitised a lot of product which is possibly underwater in terms of value.

The VIs are at war, with each other.

EA’s business is volume.

It’s better to be making 1% of 300k that 1% of sod all. I would imagine it would also be a prudent time too raise the commission charges to 1.5% …

For me, the more interesting side is the psychology of buying. Take, for example, a house going for €500k. Now everyone and their dog is predicting a fall this year. Let’s take a nice easy round figure of 10%. So a buying couple thinks “well house prices are gonna drop 10%, so that’s €450k, lets offer them €430k”. And the cycle continues.

The standoff between buyers and sellers remains the most interesting thing for me. Sooner or later the lemmings (sellers) will all start to jump off that cliff (of price drops, and substantial ones at that) and the resultant race to the bottom isn’t going to be pretty.

In full

There’s only ever going to be one winner is this modern version of Mothra vs Godzilla, the banks. Estate Agents can talk up the market all they want but it’s the volume of loans that the banks are prepared to give that will dictate what volumes of sales are achieved in the Sping season, and the banks know this number is going to be very small relative to the overhang in the market.

The only way the banks can prevent a collapse in the value of their assets is if they convince sellers not to sell.

They have been getting quite astute at this for the last few years, convincing virtually every trader upper to rent out their 1st property, and take on another mortgage, rather than genuinely trading up.

The EAs are screwed unless they can convince sellers that the market is fucked and they need to cut their prices alarmingly.

Crack out the popcorn.

Great points made in previous posts. Buyers ability to extract discounts is growing daily and prices are coming down, that’s all we know for certain. But the pace is slow. The trajectory and timeframe toward that specific point of maximum pessissim, the capitulation point, are the only real questions left.

My take on it is this. Austin, Dan, Hooke-MacDonald et al are becoming rapidly, if not already, irrelevant. The banks will want to prevent sellers from caving in and ditching properties for big, obvious, market-setting, discounts, thereby ruining their asset book, and they will have some control of that for some time. But the banks can’t have it boths ways. Inevitably the ‘have-to’ sellers will grow very large relative to all sellers. At the same time long-term money rates creep up, while banks share prices and asset book diminish further. At the same time, willing and able buyers get fewer and fewer. The critical build up of these factors combined with the unique and intense herd mentality here will result in what will appear like an instant collapse. There will be a week, perhaps a weekend, where it all comes apart. It’s called Capitulation. Watch for it in the US, its very close.

If you’re waiting to buy a property for your family (non-investment purposes), and simply want to get past the greatest price drops, Capitulation is the time to strike with aggressive bids. Though be prepared to buy at auction. If you’re an assset vulture, it would still be too early.

All IMHO of course.

Dont quite follow. Why not hang on a bit longer and get the family home for less as well?

Because renting sucks? Because you or spouse simply feels the need? Kids? Personally, I wont be buying then. Capitulation (Spring 09?) will probably just signal the start of a long period of property prices going nowhere.

OK - I see what youre saying - but surely if somebody’s abstained thus far, they could hang on a bit longer and save themselves a substantial amount.

I sort of agree with WTTW. In the UK the best houses could be had for steep discounts in the early part of the crash. In the later stages, there were new builds, dead people’s houses and forced sales, as “investors” held on for a recovery. The banks also seemed to do this with the quality repos i.e. the ones in the nice areas that they over a mint on, with just the dross getting churned. Of course, whether the repo is sold depends on whether it is securitized. If it is, the servicing bank almost certainly doesn’t care - in this regard, it is different this time. The disconnect between the mortgage and the bank works both ways.

The problem with this is that Irish prices are so out of whack that any steep discount you offer will almost certainly be rejected. So if you are looking for a 3-bed semi in D6 and are unwilling to pay seven figures, you may have a wait on your hands.

You could be old and grey before you see that 8)

A Nice 2 Bed Apartment in Carrick On Shannon shouldn’t cost too much all the same, a job lot of 22 ‘belonging’ to Michael Lynn will shortly be going on the market there.

The banks will not hit peak overhang until next year with the best deals to be in H2 2009 I would think. I should think that drive by offers will be entertained !

Depends how you define D6!!!

3 beds in D6

… and this one is a sneaky offer from 6 figures …and it’s proper D6.

They can have €650k now (from me !).

Market would probably pay €800k ish.

Or they can sell it for the asking price. In 2015 !

The address is misspelled and consequently the map location is incorrect. As you’ll see on Myhome it’s further outside Ranelagh.

This is exactly the case in my opinion. Why else would AIB be having a mortgage expo event at this time (when I would hope most people could see that the bubble has burst)?
I can’t seem to find any details online but there was an ad on RTE for it last night.