Thursday, April 03, 2008

A Sort Of Homecoming

David McWilliams on the housing market yesterday:
'Like thousands of other Irish people, he believed the twin fallacies
that (1) property always goes up and (2) there will always be cheap money.

No one in a position of responsibility -- from the State to the
banks that were lending to the (often financially-compromised) commentariat who
hogged business pages -- questioned these fatal assumptions.

The upshot of this collective thinking is that the housing market became, on the way up, more an exercise in mass psychology than individual economics.

The herd took over and very few people sold when the market was
going up. Indeed, why sell if the bank was prepared to give you equity release
if you needed the cash and, more importantly, why sell if the prices were

Today, according to the TSB/ESRI index, Irish house prices adjusted for
inflation ("real house prices" in an economist's jargon) are lower than they
were in 2004. This is a steep decline. As inflation is likely to move upwards
and house prices downwards, the real price of houses is going to fall even

One of the great myths peddled in the boom was that the house price boom was all dependent on fundamentals, like demography. Well sorry to have to tell you, but the demographic situation has got better for the housing market in the past two years, yet prices have been falling.

You would be mad to buy this year when even estate agents and banks are
expecting prices to drop. Buying now is tantamount to giving money away.'

And if you want to believe he's wrong (instead of proving him wrong, which none of the swindlers seem to be able to do) then compare the price of houses now with last September when all the vested interests were telling us that 'Now is the time to buy'.

They lie, they lie and they lie again. And all to, literally, rob us of our hard-earned. Why anyone listens to them is beyond me.
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