They should be so lucky

Today's NY Times has an article about a house in Malahide, Co. Dublin bought by an American couple in 2006. John and Blakey Shirey moved from New Hampshire to Ireland in 2004 when John's company posted him to Ireland. They rented for two years before buying a "small red-brick home" in Malahide, an "exclusive area by the seaside." The Times says that the Shireys wouldn't divulge the price they paid for the house, but that local real estate agents say that local prices have fallen "15 to 20 percent since they bought their home three years ago."

I'm no expert on property values in Malahide, but I'd very surprised if the Shireys could get much more than 65% of their 2006 purchase price these days.

Comments:

jakethedog27 wrote:
"I'm no expert on property values in Malahide, but I'd very surprised if the Shireys could get much more than 65% of their 2006 purchase price these days"

"The Times says that the Shireys wouldn't divulge the price they paid for the house, but that local real estate agents say that local prices have fallen "15 to 20 percent since they bought their home three years ago"

Am I missing something. Based on the facts provided I would guess that the Shireys are not going to more 80-85% of the purchase price.

Can you share more info on why you think its 35%? Not trying bust you chops I am truly want to know. Does the 15-20% represent sales comps or are people just asking for 15-20% less and actually selling 35% less???

6/11/2009 7:48 PM EDT

TheYank wrote:
Jake, like I said I'm not expert. However, I don't know anyone who believes their house is worth anything like 80% of what it was worth in 2006. If you have a look at this site you'll see that prices are probably down quite a bit more than the estimates the Times provides. The Times trusted real estate agents, people who have a vested interest in talking up the property market. Look at that page I linked to and you'll see a house similarly sized to the one the Shireys own and it is on the market now for €450,000, but had been listed at €800 in 2007. (Now, I admit I'm trusting in a site full of user-generated content, so take from that what you will.) Still, the real estate agents are the last people I'd trust.
6/12/2009 6:22 AM EDT


TheYank wrote:
Don't know where my link went. Hope this works. http://bit.ly/XR7lt

jakethedog27 wrote:
Ok so it comes down to trusting the NY Times and RE Professionals or trusting you ("no expert") and a "site full of user generated content".

Hmmmmmmmmmm

6/12/2009 4:12 PM EDT

TheYank wrote:
You could be right jakethedog27. Maybe I'm just a pessimist (and I am). I own a house here and if I had to sell - based on what I hear/read/etc - I'd hope to get 70% of the value of the house near me that sold in the summer of 2006.
6/12/2009 6:23 AM EDT

TheYank wrote:
Or maybe it's because I just assumed we'd already hit the bottom. http://archives.tcm.ie/businesspost/2009/05/10/story41602.asp
6/12/2009 5:11 PM EDT

jakethedog27 wrote:
Yank-I like the last article you linked....it is all true Ireland went crazy.But at the time it made perfect sense and no one has the abilty to see the future. But there are some possible flaws with the link...maybe you can help shed some light on. It states: "The value of the asset will have some relation to the yield the asset returns. In houses, the yield is the rent. In the US, a house was traditionally valued at some multiple of the rent it generated. Typically, the value of a house was calculated at 12 to 14 times its annual rent. This relationship has held in the US for over 100 years. There is no reason to believe that this shouldn’t be the way to value Irish houses". This all true I own a two family in Boston and paid $550K for it I get 39K per year little better than his calculation but close enough..so I agree but I think the info in not complete. Prices need to drop but not using this ratio. The question for you or the guy that wrote this is..using the 12-14 times annnual rent ratio what happens when rents are artificially inflated(using this math my home was worth $900K in 2002 -never )? As the banks get tighter and people lose their homes...they are going to need places to live. A smart LL knows that a weak sales market= a strong rental market. Bottom line is homeowners that bought at the top cant afford to sell less than 65% of the value...you will never see it....the Shirleys have two choices wait it out(suck it up)...or drop the keys off at the Bank and go back to NH. The RE broker is telling the truth...but is talking about asking price and asking price....don't mean a thing. The true value of RE is whatever someone is willing to pay for it. Anything below 70% is going back to the bank.
6/12/2009 6:47 PM EDT

jakethedog27 wrote:
Oh by the way when I get some cash I heading your way to buy some bank owned...prime RE...right after I get back from my spending spree in Florida.

Oh wait I have no $....get you next time.
6/12/2009 6:49 PM EDT

TheYank wrote:
Jake, you and I are pretty much in agreement now. One thing McWilliams left out of his article, but he did highlight constantly for the past 5 years was the massive disconnect between rents and home prices. When the economy was red hot the valuations based on the rents that were available at the time were still much lower than what people were paying.

The NY Times didn't say whether the Shireys had the money to buy their place outright or if they got a mortgage. They may have accumulated sufficient equity in their NH home to buy their Dublin house without debt. Also, one thing in their favor is that some of their loss will be mitigated by the appreciation of the euro against the dollar, depending on when they exchanged their money.
6/13/2009 6:40 AM EDT

TheYank wrote:
By the way, here's a little tale. Was talking with a man who grew up in Jackson Heights, NY, where I was born. He was telling me that his parents bought the house he now lives in back in 1928. They paid $65,000 for the house. My own grandparents bought the house I lived in as a young boy in 1934. They paid $5,700. The two houses are about six blocks apart and pretty much identical in size.

This man told me that the value of his house only matched what his parents paid for it some time in the mid-late 1970s. How's that for scary!
6/13/2009 6:43 AM EDT