Is there or is there not another housing bubble?

In reference to No evidence of another Irish housing bubble, IMF says by Peter Hamilton on 26 June 2017 in the Irish Times.

The answer is no but close monitoring is needed. A Washington-based company, the International Monetary Fund (IMF), has confirmed there is no housing bubble in Ireland. Even with the quickly rising prices of property and an increase of mortgage approvals, IMF realizes this is significant but it is not a housing bubble… yet.

There is no statistics to show there is an imbalance of the pricing of houses. However, there is an increase demand for housing that could lead to an imbalance, especially with the Central Bank’s mortgage lender rules and the help-to-buy scheme for first timers. IMF has recommended close monitoring of the market to make sure a bubble is not formed.

The likeliness of this increase of housing demand should …

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ESRI is saying there is no housing bubble

With reference to ESRI says rapid rise in house prices does not signal new bubble by Eoin Burke-Kennedy 22 June 2017 in the Irish Times.

The Economic and Social Research Institute, ESRI, is stating that even though the housing prices and rents are rising rapidly this does not necessarily mean a new housing bubble. The official house construction may be overestimating the housing activity, according to the ESRI.

ESRI’s latest economic commentary included a section saying that even though new credit is growing in the residential market and small companies, a good credit risk assessment is still in place and seems to provide no risk.

ESRI still believes the housing prices and rent will be rising from the growing imbalance between supply and demand. The predicted the long-run housing demand to increase from 25,000 to 30,000-35,000.

The government supposedly overestimated the level of supply which may have overstated the true level of construction activity. Government estimating the housing supply at 15,000 in 2016 and ESRI at 12,700.

There is a lot of speculations of another housing bubble coming about. …

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How Do American Mortgages Work? Part 9: The Financial Crisis

What caused the Housing Bubble in the United States during the early 200s? Experts’ continuous debate on what the root of the cause is but Fannie Mae and Freddie Mac have less to do with it than you think. Fannie and Freddie backed about half of all the home-loan originations in 2002 but a new market for mortgage-backed securities were arising. Loan originators backed by Wall Street were straying away from selling the loans to Fannie and Freddie but creating their own mortgage backed securities with high-risk subprime mortgages. These would include something called a hybrid adjustable-rate mortgages with balloon payments which are nearly impossible to sustain without refinancing. It left Fannie and Freddie only backing up around 30% of the loans in 2005 and 2006.

The big players of Wall Street like Lehman Brothers and Bear Stearns would package the subprime loans into securities. The credit-rating agency would then rate them falsely-high so they can sell to investors who were unaware of the actual health of the security. Everyone saw how the housing prices were rising and didn’t see …

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How Do American Mortgages Work? Part 5: Fannie Mae and Freddie Mac

The main goal of Fannie Mae and Freddie Mac is to give the national mortgage market some liquidity. They purchase the loans from the mortgage firms (only under strict standards with size, credit score, and underwriting). For the next step, they package up the loans into Mortgage-backed securities, which they guarantee the payments on the securities to the investors even if a mortgage defaults.

These standards led to a more reliable ad sustainable mortgage products with longer terms and fixed-rate mortgages. On top of that investors knew that even if a mortgage defaults in their invested security, Fannie and Freddie will supplement the payments to them. Which made mortgage securities seem like a safe and sustainable investment.

Fannie Mae was created in 1938 in part of the New Deal Legislation to help with the housing crisis during the Great Depression. The goal was to buy all the FHA-insured loans to help recover the lenders’ money supply. It was originally apart of the Federal Housing Administration (FHA).

Freddie Mac was established in 1970 to keep the supply of money moving for …

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Yet Another Warning of a Property Bubble: More Perspectives

The Organization for Economic Co-operation and Development has voiced fears that the economy is overheating. This comes soon after the Fiscal Advisory Council heeded similar warnings earlier this week.

The OECD believes that the banking system is still fragile, with bad loans still accounting for 17% of the total. And while the government has already put into place plenty of macro-prudential policies, there is still the possibility that rapidly rising prices lead to another bubble and burst that would disrupt the delicate economy.

Indicative of OEDC’s stance, overall property market prices are up 8.2% this year at the end of April. The boom in construction is already visible on Dublin’s skyline. Irish Times counted 70 construction cranes towering over Dublin from the 7th floor of their office building on June 1st. This number represents a sizable increase compared to the number Irish Times counted in the first few months of this year. The number of cranes is predicted to continue to rise based on the number of large …

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Danger of a new housing bubble?

While the economy is still in recovery, housing supply has been quickly picking up in the past few years. With government construction plans such as the 2013 Forfas Strategy, Capital Investment Plan, and Action Plan for Housing and the Homeless, the housing boom will likely continue if not further accelerate in the years to come.

There are voices of warning: the Fiscal Advisory Council warns that the trends in output and employment in the construction industry may overheat the overall economy, leading to rapidly raising prices and wages. There are also those who believe that output in the construction industry is recovering slowly and still well below what it should be. DKM Economic Consultants recently published a report lamenting a lack of skilled personnel in construction and advocating for greater government funding and availability of apprenticeships.

Acknowledging that the housing supply response is driven by pent up demand, The Fiscal Advisory Council warns that the speed and scale of the response is the real issue. A dramatic increase …

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Sean Moncrieff show, Newstalk 106

We were pleased to chat with Sean Moncrieff on his afternoon show on Newstalk 106. Karl told everybody in the office that his Newstalk ‘Bingo Card’ had finally reached completion after seven years (this was the last show he needed to get on to be on every show he could potentially appear on).

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