Of Interest Only

This report from todays Indo, on growing concerns of the consequences of lax lending by Irish Banks.

A MORTGAGE crisis is looming for first-time buyers over the aggressive marketing of interest-only and 100pc mortgages by banks and building societies, the Consumers' Association said yesterday.

Figures in a research report by Davy Stockbrokers estimated recently that up to four out of every 10 mortgages sold to first-time buyers are now 100pc homeloans. The report also found that the average first-time buyer was being offered a 35-year mortgage in a bid to counteract rapidly rising housing prices.

Yesterday, chief executive of the Consumers' Association Dermott Jewell said the promotion of 100pc and interest-only mortgages was "dangerous and an accident waiting to happen". "We were promised by the financial industry when these products were introduced that they would only be offered to a certain few. That is certainly not the case now."

The words closing, stable, and door spring to mind. Ho hum.

A Miscellany of Housing Stats

Housing Completions

1998 42,000
1999 45,000
2000 48,000
2001 52,000
2002 56,000
2003 66,000
2004 75,000
2005 81,000
2006 100,000 (est)

Housing Loan Approvals

2000 80,858
2001 69,062
2002 93,136
2003 97,888
2004 104,305
2005 120,637

The Sixth Housing Land Availability Survey June 2004.

12,500 hectares of zoned serviced land in the state with an estimated yield of 367,000 housing units.

National House Building Cost Index 2004.

2.8% year on year. Below general Inflation.


Sources: (CSO, DOE)

Extreme Home Staging

It seems Americans are hard wired to produce the tawdriest marketing schmaltz conceivable.
But this story of ‘extreme home staging’ is so gag worthy that I’m almost reluctant to repeat it here. So if anyone has a particular aversion to ‘lifestyle’ peddling, please navigate away from this blog, you have been warned.

NEW YORK (CNNMoney.com) -- Home sellers long ago discovered that small touches could boost selling prices - fresh flowers, the smell of freshly baked cookies. Now a real estate developer, Centex of Dallas, is adding in beautiful people.

The experiment in what's called "staging" is simple: Home buyers enter a home and see not just furniture but real people - actors - playing out the life they might lead there. "Staged model homes tend to be sterile and dry - this was a way to put the heartbeat back into the home," said Jim Garfield, spokesman for Roddan Paolucci Roddan, Centex's publicist.

In one performance, the 'model' family spent about three hours pretending it was Mom's birthday. They baked a cake, sang happy birthday and the children drew and framed a picture - of a Centex house. The original cast included a former Baywatch hunk, Jaason Simmons, in the role of Dad.

"It's physically manifesting somebody's dream," said Garfield.

Amanda Larson, a marketing director for Centex, says the idea came about when she sat down with Roddan's creative people and worked out an idea to make the visiting-a-model-home experience "more interactive and more
memorable."

http://money.cnn.com/2006/07/03/real_estate/

I warned you didn’t I.

This ‘extreme home staging’ will no doubt hit our shores as the market slows. Expect to encounter actors in pristine show homes in Mullingar, possibly partaking in a game of familial Monopoly, the child exclaiming, ‘Mammy, Daddy I landed on the Glens Executive Housing Development in Mullingar, I’ve won, I’ve won!’

No Iceland, not Ireland.

The Financial Times reports on the troubled economy of an island nation in the North Atlantic.

Geir Haarde, Iceland's new prime minister plans to cool his country's overheating economy with a series of reforms aimed at ensuring that the island-nation avoids a hard landing. The comprehensive action plan includes measures to tame a booming housing market, curb wage inflation, improve financial regulation and rein in public spending. "We have given ourselves some breathing space," he told the FT.

Iceland has been the focus of international attention since February when investors, including many hedge funds, concluded the economy was dangerously overheating and withdrew funds, triggering a 30 per cent depreciation in the currency.

Fears of an economic meltdown have since dissipated. But the central bank acknowledges that growth will "go down rather quickly" next year and external economic developments could still trigger a sharper-than-expected correction. The economic boom was driven by the liberalisation of the housing market, tax reductions and overseas investment in power and aluminum projects. The effects of these factors were exaggerated due to the small size of the economy of Iceland which has a population of just 300,000.

As part of his reform package, Mr Haarde, has reduced the amount the Housing Finance Corporation - a state owned body that controls around 40 per cent of the mortgage market - is able to lend to borrowers. He is considering abolishing it in future, he said.

The prime minister has separately reached an agreement with unions to moderate wage claims and end a policy of broad tax reductions and replace it with a reallocation of tax benefits to the less wealthy. Mr Haarde has also halted government spending on some infrastructure projects and is prepared to suspend future spending if needed, he said.


http://www.ft.com/cms/s/0e635268-0c8b-11db-8235-0000779e2340.html

Tech Bubble Looks Like a Picnic

The Wall Street Journal has this interview with Kenneth Heebner. “To get a lay of the land, we tracked down Kenneth Heebner, who since 1994 has managed the $1.2 billion CGM Realty Fund. It has the best 10-year record of all real-estate-focused mutual funds, according to fund tracker Lipper Inc.”

“WSJ: How is the housing market? Mr. Heebner: A significant decline in prices is coming. A huge buildup of inventories is taking place, and then we’re going to see a major [retrenchment] in hot markets in California, Arizona, Florida and up the East Coast. These markets could fall 50% from their peaks.”

“WSJ: What has you so concerned? Mr. Heebner: I’m worried that more people will default on their mortgages. Risky mortgages..have been widely used in the last two years. Some people got 100% financing for their homes. It made the tech bubble look like a picnic.”

“As housing prices fall more people will be under water, and these people are just going to walk away from their homes. They are going to say, ‘I’m outta here.’ You’re going to see increasing foreclosures over the next several years. As [home] prices come down, it will create a difficult environment for home builders.”

“WSJ: What data have you most worried? Mr. Heebner: We’re seeing a huge increase in inventories of unsold homes. The role of incentives in selling a home is increasing so the weakness doesn’t show up immediately in list prices. Large price declines will follow in inflated markets.”

PRTB ?

Following the discovery of a couple of hundred thousand empty homes by Census enumerators recently. I was less than shocked when I unearthed the following statistics published by the Private Residential Tenancies Board.

At the end of 2005, the number of registrations with the PRTB was 83,983 and this was in respect of 53,070 landlords and 150,518 tenants. At 3 March 2006, the number of registrations with the PRTB was 88,593 and this was in respect of 55,685 landlords and 160,251 tenants.

So, as far as the government is concerned, out of an Irish population of 4,200,000, only 160,000 are private sector tenants. Only 88,593 private sector rental properties exist in the state, about 7-8% of the housing stock. When you consider that agents believe that investors purchase roughly 40% of new build output, (running at 80,000 units currently) the disparity between the PRTB’s figures and the probable actuality is remarkable.

There is something remiss in the Irish property market, we have tens of thousands of empty homes, and a private rented sector that barley exists (statistically). Poor Bertie Ahern is labouring in a qualitative information desert, hence his bad tempered fits when pressed on the issue of Irish housing. Shirty Bertie hasn’t a notion, no one has.

http://www.prtb.ie/pubregfStats.htm
http://www.prtb.ie/pubregister.htm
The second link provides a county by county breakdown of PRTB registered properties.