Won't somebody please think of the first-time buyers

From http://www.independent.ie/business/personal-finance/property-mortgages/firsttime-home-buyers-told-to-take-5000-deal-of-a-lifetime-3258938.html

From the Indo today.

"""

In an interview with the Irish Independent, junior finance minister Brian Hayes said the deal would not be extended in December's Budget, and buyers must act before the "train will have left the station".

"This is an offer of a lifetime, it won't come again," said Mr Hayes. "All our futures are based on getting the property market going again. People need to act fast to avail of it."

"Jesus, won't somebody please think of the first time buyers, they're so cute and helpless, with their floppy ears and their big round eyes."

"""

He didn't actually say that last bit.

He apparently did say, "all our futures are based on getting the property market going again."

Maybe when he says "all our futures", he just means his mates who bought 50 apartments off the plans in 2006.

Let's give Brian the benefit of the doubt and assume he really means that the future of Ireland is based on getting the property market going again. Then you could rephrase that as, "we've been in govt for 2 years now and we have done fuck all to replace the fantasy economy of the previous 10 years with a real economy built on something other than selling badly built houses to one-another using Germany's savings".

By giving all first time buyers a 5k/year tax break you just push up their bidding power by 10s of ks. You transfer wealth from our govt (that is cutting back on health and education) to landlords and investors trying to cut their losses in a falling market (owner-occupiers don't benefit unless they're selling up and leaving the country or something).

Of course this is not news to these people, this is the intended result (unless they really are mind-boggingly stupid - I give that about a 20% likelihood) and they know that no one is ever going to argue against helping first-time buyers. Every first time-buyer is a voter and the child of 2 more voters.

A rising property market can be either a bubble or the result of real prosperity. It's never the _cause_ of real prosperity (for the majority at least, whenever there are losers, there are of course some winners). Trying raise it directly is just a bad idea. It's a bit like trying to treat low blood pressure with a bicycle pump and a needle. You may well cause a brief spike in pressure but you're not going to like the end result.


Cross posted on

Independent nonsense: banks should be lending to house buyers

So, house prices are way down but the silly banks aren't lending. As usual the Independent leaves out half the story.

The monthly cost of a mortgage (and so the ability to repay it) is determined by the price times the interest rate. Interest rates for Irish borrowers are about twice what they were.

Our interest rates used to be a little above the ECB but now they're massively above it. There's a double reason for this. Irish banks have to pay lots more for their credit now, they can't get it at ECB rates anymore. So they have to charge people what the bank is paying plus a margin for profit.

Secondly, the banks sold a load of tracker mortgages which means that for all those customers, not only are they not getting to add a profit margin, they are actually charging those customers less than what it costs the bank. The result is that they have to add an even bigger profit margin on their non-tracker loans. Yes, if you don't have a tracker not only are you not as well off as those who got a tracker, you are actually being charged extra because of them!

The only mention of "interest" in that whole article is for the buyers who are "interested" in the properties.

So should the banks be lending? I had no idea before I read that article I have no better idea afterwards.

Spitzer, The Fed, Banks and Bush

Greg Palast is always good fun. In this article he talks about the sub-prime crisis and the massive bailout given to the banks (but not the home-buyers) hit by it. Makes me really glad I don't live over there but it's not like anyone's immune to the goings on.

I wonder did all of the ratings agencies rate the sub-prime junk as AAA or just a select few. Are they now out of business? Do their customers have a right to sue for negligence. It's not that AAA rated stocks must never go boom but an unafforable loan to someone who can't pay it back is exactly the opposite of AAA.