US Real Estate roundtable.

CNBC hosted a discussion about whether home prices will go up in 2010, with Kenneth Rosen, UC Berkeley Haas School of Business; Matthew Garrison, The Matt Garrison Group and CNBC’s Diana Olick. The American situation is vastly different from that in Ireland but it makes for interesting comparison.

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How much of a deposit do I need?

When making a mortgage application this is a question that many first time buyers want to know, how much money do I must I have for a deposit? Well, that kind of depends on which bank provides the mortgage finance!

Lending criteria is different for every bank/building society/lender, this goes for rates, the general underwriting criteria as well as the ‘loan to value‘, the deposit you need is 100% minus the Maximum LTV and that will give you the deposit amount you require. For instance, ICS have a maximum LTV of 92% so the deposit you need – if you are obtaining finance through them – is 100% – 92% = 8%.

What is interesting in that example is that when you go ‘sale agreed’ on a property the estate agent will ask for a security deposit and the balance of 10% at the signing of contracts, this is an example …

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Valuations in property are currently meaningless

Free markets, or indeed markets in general, have a tendency to set prices, not through control, not by one person holding up a placard and shouting from the rooftops, but rather through the process of prices reaching a point at where they occur, where demand and supply are reacting with each other.

So if you look for €3 million for a three bed semi in Donnycarney your property will not sell, no matter how much you want it to. At the same time, if you were to list a property there for €50,000 it would sell overnight, and both of these extremes demonstrate a pricing being totally out of balance with the market. The interesting point now though is this: The market itself doesn’t know what is happening, so valuations are currently meaningless. By that I mean the people who go out and value property are not able to make accurate assumptions about property prices in this market, we are seeing this daily, and then dealing with the end result which is …

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It’s not all gloom and doom: some of the things will improve in the downturn

I’m a big bad bear, have been for quite some time, but even the likes of me can see that the property fallout will have some good aspects. News generally covers the bad side of things perfectly well so if you need some of that go Google ‘Credit Crunch’. Today we’ll consider some of the good things.

1. First time buyers will get cheaper houses – Even though the state seems determined to halt the downward trend in property prices (by starting a state backed lender who will give out loans the bank won’t), it is kind of like King Canute hoping the tide won’t come in.

The market as a whole, is a stronger force that the €1.66 billion the state has put in front of it. This will eventually lead to the market clearing values being reached. What is the market clearing value? Well, frankly nobody knows, but we can thankfully describe it: market clearing values are the price on …

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It's not all gloom and doom: some of the things will improve in the downturn

I’m a big bad bear, have been for quite some time, but even the likes of me can see that the property fallout will have some good aspects. News generally covers the bad side of things perfectly well so if you need some of that go Google ‘Credit Crunch’. Today we’ll consider some of the good things.

1. First time buyers will get cheaper houses – Even though the state seems determined to halt the downward trend in property prices (by starting a state backed lender who will give out loans the bank won’t), it is kind of like King Canute hoping the tide won’t come in.

The market as a whole, is a stronger force that the €1.66 billion the state has put in front of it. This will eventually lead to the market clearing values being reached. What is the market clearing value? Well, frankly nobody knows, but we can thankfully describe it: market clearing values are the price on …

Read More