House prices

[woolybanana]

I wonder how accurate this will be:

http://tempsreel.nouvelobs.com/speciales/la_crise_financiere/20090113.OBS9563/les_prix_des_logements_anciens_en_france_devraient_chut.html

The prices decreased into 2007 by 3,1%, according to Fnaim, after ten d' years of continuous rise. In fact especially the old houses undergo the fall. (c) Reuters The prices of the old residences in France should again fall of 10% in 2009 compared to 2008, after a fall of 3,1% in 2008, estimated the National federation of l' real estate Tuesday January 13 at the time d' a press conference. This reversal of the market intervenes after ten d' years of uninterrupted rise: 14,0% in 2003,15,5% (a record) in 2004,10,9% in 2005,7,2% in 2006 and 3,6% in 2007. In 2008, the retreat of the price of the houses (- 4,9%), more marked than that of the apartments (- 1,2%), illustrates a " reconcentration" request towards the agglomerations, consequence of the increase in the transport costs, according to the federation which gathers the majority of the real estate agents.

A limited fall of the rates of appropriations Consequence of the crisis, which makes the more careful banks more sensitive to the cold and households, real loans with the households (130 billion d' euros) also dropped by 12,3% compared to 2007. Fnaim deplores that the effective fall of the rate of the real estate credits, from now on of l' order of 5% per one 15 years period, is not stronger, several banking institutions having " informed qu' they would be attentive with the safeguard of their marges". On the other hand, the rents increased by 2,6% in 2008 compared with +0,9% in 2007, much of households having deferred their d' projects; possibility of home-ownership with the profit of the hiring. To start again the market of l' old, Fnaim claims in particular l' extension to this sector of the doubling of the loan atrate zero (PTZ), measurement contained in the revival program of l' economy but only for the new housing.

[Anton Redman]

Supply and demand. On my 40 minute drive into Bordeaux I pass two or three hundred homes which have been built over the last three years. Despite Bordeaux's investment in park and ride these also make cummuting in a less attractive prospect. There are not many attractive well maintained older homes and with rench labour rates driven maiinly by high taxes and cotisations it is hard to make renovation attractive.

Pretty much agree with it.

Any chance of not posting the next one in Cinerama ?

[seb47]

Reading between the lines it seems to be stating the obvious. Or maybe not........

The first ten million years were the worst. And the second ten million: they were the worst, too. The third ten million I didn't enjoy at all. After that, I went into a bit of a decline.

Anyway the answer is definitely 42.

Sorry

Peter 

[Frank]

Hitch Hikers Guide to the Galaxy!!!!

I always thought the answer was Wednesday[:P]

[seb47]

Yes. Unlike Marvin - with a brain the size of a planet and who is trying to calculate the chances of survival, I'm trying to look on the shiny side. What goes around comes around.

I'm not trying to disparage Woolybananas and AR's comments but we've been here (probably in negative equity) before.

Lets not get too depressed.  

Peter

 

[nectarine]

My niece recently took on a mortgage in the UK and was complaining about the interest rate, until I reminded her that in the very early 80s my mortgage rose and peaked at 15%. She doesn't complain much now!

So, yes, we have been here before, we just have short memories and forget that mortgages can be expensive, houses shoot up in value and then crash down, negative equity means that people just hand over their house keys and walk away from the property ..... just history repeating itself.

[Nelson]

[quote user="nectarine"]My niece recently took on a mortgage in the UK and was complaining about the interest rate, until I reminded her that in the very early 80s my mortgage rose and peaked at 15%. She doesn't complain much now! So, yes, we have been here before, we just have short memories and forget that mortgages can be expensive, houses shoot up in value and then crash down, negative equity means that people just hand over their house keys and walk away from the property ..... just history repeating itself.[/quote]

 

Then when things get better (as they will) the bank chase these people for the difference between what was owed and what the house sold for , plus interest of course.

[Uncle Aggy]

[quote user="jetlag"]

Hitch Hikers Guide to the Galaxy!!!!

I always thought the answer was Wednesday[:P]

[/quote]

No, It's Thursday. I could never get the hang of Thursdays.

[Benjamin]

[quote user="nectarine"]My niece recently took on a mortgage in the UK and was complaining about the interest rate, until I reminded her that in the very early 80s my mortgage rose and peaked at 15%. She doesn't complain much now!

So, yes, we have been here before, we just have short memories and forget that mortgages can be expensive, houses shoot up in value and then crash down, negative equity means that people just hand over their house keys and walk away from the property ..... just history repeating itself.[/quote]

We had a mortgage at the same time so I understand what you are saying. However, and it's a big however, we didn't have the amount of personal debt that seems to be the norm now in the UK.

[Scooby]

[quote user="Nelson"]

[quote user="nectarine"]My niece recently took on a mortgage in the UK and was complaining about the interest rate, until I reminded her that in the very early 80s my mortgage rose and peaked at 15%. She doesn't complain much now! So, yes, we have been here before, we just have short memories and forget that mortgages can be expensive, houses shoot up in value and then crash down, negative equity means that people just hand over their house keys and walk away from the property ..... just history repeating itself.[/quote]

 

Then when things get better (as they will) the bank chase these people for the difference between what was owed and what the house sold for , plus interest of course.

[/quote]

What difference?  ATM the houses are being sold (in a third party sale) for less than the amounts outstanding on the mortgages so the proceeds rarely cover the debt.  In the exceptional case when it does, the excess is repaid to the borrower.

[Benjamin]

[quote user="Scooby"][quote user="Nelson"]

[quote user="nectarine"]My niece recently took on a mortgage in the UK and was complaining about the interest rate, until I reminded her that in the very early 80s my mortgage rose and peaked at 15%. She doesn't complain much now! So, yes, we have been here before, we just have short memories and forget that mortgages can be expensive, houses shoot up in value and then crash down, negative equity means that people just hand over their house keys and walk away from the property ..... just history repeating itself.[/quote]

 

Then when things get better (as they will) the bank chase these people for the difference between what was owed and what the house sold for , plus interest of course.

[/quote]

What difference?  ATM the houses are being sold (in a third party sale) for less than the amounts outstanding on the mortgages so the proceeds rarely cover the debt.  In the exceptional case when it does, the excess is repaid to the borrower.

[/quote]

What pressures are the lenders under to obtain the best price possible? Or is their sole motivation to realise sufficient funds to cover the borrower's indebtedness? Who is the arbitrator if a debtor feels their former house was sold too cheaply?

[Chancer]

Benjamin

In the uk in theory the lender is obliged to obtain a reasonable market value balancing the price against the interest continuing to accrue, if it is sold at auction or by sealed bids (without cheating) then they can be seen to have met their obligations, when selling via an agent, especially one with shall we say "close relations" with investors there is a possibility of undervaluing and double dealing, proving it is another thing and anyone naive enough to put the keys through the lenders letterbox, and many do, are not really in a positiuon to winge about the subsequent sale price.

In France it is completely different, whilst on one hand repossesions take a lot longer once a liquidator is appointed the ex-owner has no rights, the liquidator is only responsible for raising enough money to pay off the "hypotheques" held on the property.

I know this because this is how I purchased my property, a long abandoned Hôtel for the price of a mid range family car.

It is very interesting to read through the various charges that were made against the property during the previous patrons tenure going back many years, several of them for taxes foncieres and proffesional.

[Scooby]

[quote user="Benjamin"]

What pressures are the lenders under to obtain the best price possible? Or is their sole motivation to realise sufficient funds to cover the borrower's indebtedness? Who is the arbitrator if a debtor feels their former house was sold too cheaply?

[/quote]

It's in the banks interests to ensure they get the best price.  Further they are bound by the FSA to ensure they get the best price under the 'treating customers fairly (TCF)' rules.  They go to great lengths to ensure they achieve a fair price.  Borrowers can contact the FSA if they feel that a price isn't fair.

[Nelson]

Scooby all I am saying is that just handing over the keys should be the very last resort as any outstanding debt after the lender sells the property remains with the borrower. As long as the lender communicates with the borrower about the debt at least once every six years then this debt will remain forever, when the lender thinks that the borrowers financial situation has improved they will represent the debt plus interest.

Benjamin Although the lenders are supposed to obtain the best price who`s to say they didn`t as far as I know there is no arbitrator.

regards

[Scooby]

Of course they re-present the debt - the borrower still owes the money!  Wouldn't you???  If you have any doubt regarding the sale at a fair price - contact the FSA (http://www.fsa.gov.uk/pages/doing/regulated/tcf/index.shtml)

You have to remember, that in a declining market, the amount that a house sale will realise diminishes as each month passes.  It's in neither the borrower's nor the lender's interest to defer a sale indefinitely.

[Nelson]

Scooby one last time . ALL I AM SAYING IS THAT BY HANDING OVER THE KEYS YOU DO NOT JUST WALK AWAY

[Scooby]

I agree.  And why should you?

[woolybanana]

some do as they think it will wipe it all out.

[Benjamin]

[quote user="Scooby"]

It's in the banks interests to ensure they get the best price.  Further they are bound by the FSA to ensure they get the best price under the 'treating customers fairly (TCF)' rules.  They go to great lengths to ensure they achieve a fair price.  Borrowers can contact the FSA if they feel that a price isn't fair.

[/quote]

Is this the same FSA who have presided over the current banking scandal?

They also stood by and watched the complete miss-selling of Mortgage Indemnity Insurance as well as many other financial products.

As for saying they (the banks) go to great lengths to ensure they achieve a fair price, this is absolute tosh. The process is is that a property in default is put onto the market and, when received, an offer is made public. If no one offers more within a certain amount of time the property is sold to the highest bidder. Plain, straightforward, simple. And the mortgagor ends up being liable for the difference.

 

[dragonrouge]

Dear Scooby you undoubtedly have a career in the Banking Industry.

Before I left banking and where let us say I achieved a senior position at Regional Level Birmingham wise for a bank that now has got itself into trouble I was responsible for obviously a huge budget its income its costs and its debts.

However my starting point was not seat of the pants and any deal that did not stack up did not get my signature for one of the secrets of banking is yes you lend but your profit is the interest and you thus have to get back plus capital.

So I have say 30 years experience of dealing with repossessions be they JCB's Rolls Royces or indeed and sadly houses.

You say that it is rare that there is a surplus and thus its fine and dandy to go back to the borrowers for the shortfall.  I agree providing they can repay or have the chance or being able to repay.

However as to the former I am sorry but I have seen substantial excess funds but when its in recovery in the bank and whole host of charges hits the account and daily as well then wrap it up with auctions costs and the like finalisation charges etc etc.

Please believe me when the banks see a surplus they milk it and I have 30 years of experience that goes to prove what I assert.

The only true market but that gives the game away is the auction room.  But a question which is the bank owes a duty of care in respect of repossessions..........but to whom.  The bank its shareholders or the unfortunate people who have lost their houses.  When you answer that question you will see what I mean.

 

[odile]

15%  - if I remember rightly our mortgage went up to 18% under Maggie!

And now we have finally paid it all- can hardly get any% on careful savings! B......r

[Scooby]

[quote user="dragonrouge"]

Dear Scooby you undoubtedly have a career in the Banking Industry.

The only true market but that gives the game away is the auction room.  But a question which is the bank owes a duty of care in respect of repossessions..........but to whom.  The bank its shareholders or the unfortunate people who have lost their houses.  When you answer that question you will see what I mean.

[/quote]

Firstly- you are right re the career in the banking sector.  I am a (very) senior manager in a UK bank.  I have also been responsible for the set up of a company within our bank to buy properties where the mortgage is in arrears.  Properties that would otherwise be sold at auction at very low prices - far lower than we buy them at.  So yes I am very familiar with what happens and the FSA guidelines in these circumstances.  Your last sentence, however, demonstrates that you have been out of the banking business for some while - otherwise you would know the answer. 

You also assume that every institution offering mortgages has shareholders.  This is not the case.  Many mortgage lenders operate in the mutual sector - i.e. they are owned by their savers.  So the losses on mortgage defaults for these institutions are borne by the savers and not faceless shareholders.

(Nevertheless, even where the bank is owned by shareholders - why shouldn't shareholders expect a reasonable return - after all they are ordinary people in the street / pension funds etc.)   

[Scooby]

[quote user="Benjamin"]

As for saying they (the banks) go to great lengths to ensure they achieve a fair price, this is absolute tosh. The process is is that a property in default is put onto the market and, when received, an offer is made public. If no one offers more within a certain amount of time the property is sold to the highest bidder. Plain, straightforward, simple. And the mortgagor ends up being liable for the difference.

[/quote]

Again - you clearly are not familiar with current regulatory requirements in these circumstances. 

PS It's the mortgagee who is liable for the difference - and that is as it should be.  They defaulted on their debt.  If you sold your car and the buyer didn't pay up - would you be happy with the excuse that they were currently broke and so shouldn't pay any outstanding monies...even if you later learned that their circumstances had changed so that they now had the wherewithal to meet the outstanding debt?    Remember, the money we lend is financed by savers.  Should we tell the savers 'Very sorry Mrs Y, Mr & Mrs X couldn't pay their mortgage so you will have to forfeit your savings.'

As an aside, how many other businesses do you know that wouldn't pursue an outstanding debt until all chance of recovery had gone.  Not many.

[Danny]

[quote user="Scooby"]
 Remember, the money we lend is financed by savers.  Should we tell the savers 'Very sorry Mrs Y, Mr & Mrs X couldn't pay their mortgage so you will have to forfeit your savings.'

[/quote]

Scooby, I can't argue with your reasoning at all or the points you have made.

"The money we lend is financed by savers" is a little misleading though, surely. Is it not the case that banks mostly make loans based on the amounts of their reserves (and make profits from the interest charged) rather than actually giving out the savings of Mrs Y etc. to others as loans?

Feel free to correct/inform me - as jargon free as possible is appreciated. I have no expertise/experience in banking at all.

Danny

[Sunday Driver]

In very simple terms, banks raise money by accepting funds deposited on current account (eg, your monthly salary or pension), accepting savings deposits (eg, your nest egg) and by various other means.  They then lend that money by making advances to customers on current account (eg, business overdrafts), by providing installment loans/mortgages, and by investing in marketable debt securities and other forms of money lending.

That means they take MrsY's savings and pay her 3% for the privilege of using her money to earn a profit for themselves.  That profit comes from lending that money to Mr X at 5%.

The extent of bank lending is certainly governed by the amounts of their reserves - banking regulations require them to have sufficient capital/reserves to absorb losses without defaulting on their own obligations.  That means that if they lose Mrs Y's money through Mr X defaulting on his loan then, if necessary, the bank can pay her savings back from their reserves.

Of course, increased bad debts will have an impact on the bank's reserves and it's subsequent ability to cover it's funding position. When unrecoverable debts reach a certain critical mass, that's when Mrs Y's savings become at risk.  I think that's the point that Scooby was making about containing potential losses.....