Negative Equity in the Irish Housing Market: Estimates Using Loan Level Data
The sharp decline in house prices since 2007 has led to the emergence of widespread negative equity in Ireland. For a large sample of borrowers in negative equity the paper provides details on the characteristics of the borrowers and their mortgages by analysing loans taken out to purchase a primary residence in the period 2005 to 2012. The emergence of negative equity is not just about price drops. Loan characteristics such as the loan-to-value ratio and the length of the mortgage term also have a role to play. The analysis finds the situation in Ireland to be much more severe than that being experienced in other housing market downturns at present, with 64 per cent of borrowers from the period 2005-2012 in negative equity. Analysis by age gives rise to concern, with the majority of those in negative equity aged under 40 years. Traditionally, this is the age group most active in the housing market. The paper also points to the large wealth loss, in the order of ?43 billion, experienced by Irish households as a result of the fall in prices. With only moderate house price growth expected in the years ahead there is a generation of mortgage borrowers whose housing market experience will have been overwhelmingly negative and who will remain in negative equity for some time.
|Date of creation:||Aug 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (353-1) 863 2000
Fax: (353-1) 863 2100
Web page: http://www.esri.ie
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Henley, Andrew, 1998. "Residential Mobility, Housing Equity and the Labour Market," Economic Journal, Royal Economic Society, vol. 108(447), pages 414-27, March.
- Kennedy, Gerard & McIndoe-Calder, Tara, 2012.
"The Irish Mortgage Market: Stylised Facts, Negative Equity and Arrears,"
Quarterly Bulletin Articles,
Central Bank of Ireland, pages 85-108, February.
- Kennedy, Gerard & McIndoe Calder, Tara, 2011. "The Irish Mortgage Market: Stylised Facts, Negative Equity and Arrears," Research Technical Papers 12/RT/11, Central Bank of Ireland.
- Christopher Foote & Kristopher Gerardi & Lorenz Goette & Paul S. Willen, 2009.
"Reducing foreclosures: no easy answers,"
2009-15, Federal Reserve Bank of Atlanta.
- Fernando Ferreira & Joseph Gyourko & Joseph Tracy, 2008.
"Housing busts and household mobility,"
350, Federal Reserve Bank of New York.
- Richard Disney & John Gathergood & Andrew Henley, 2010. "House Price Shocks, Negative Equity, and Household Consumption in the United Kingdom," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1179-1207, December.
- Addison-Smyth, Diarmaid & McQuinn, Kieran & O'Reilly, Gerard, 2009.
"Modelling Credit in the Irish Mortgage Market,"
The Economic and Social Review,
Economic and Social Studies, vol. 40(4), pages 371-392.
- Andra C. Ghent & Marianna Kudlyak, 2011. "Recourse and Residential Mortgage Default: Evidence from US States 1," Review of Financial Studies, Society for Financial Studies, vol. 24(9), pages 3139-3186.
- Schulhofer-Wohl, Sam, 2012.
"Negative equity does not reduce homeowners’ mobility,"
Federal Reserve Bank of Minneapolis, issue Feb, pages 1-17.
- Sam Schulhofer-Wohl, 2011. "Negative Equity Does Not Reduce Homeowners' Mobility," NBER Working Papers 16701, National Bureau of Economic Research, Inc.
- Sam Schulhofer-Wohl, 2010. "Negative equity does not reduce homeowners' mobility," Working Papers 682, Federal Reserve Bank of Minneapolis.
- Luci Ellis, 2008.
"The housing meltdown: Why did it happen in the United States?,"
BIS Working Papers
259, Bank for International Settlements.
- Luci Ellis, 2010. "The Housing Meltdown: Why Did It Happen in the United States?," International Real Estate Review, Asian Real Estate Society, vol. 13(3), pages 351-394.
- Luci Ellis, 2008. "How many in negative equity? The role of mortgage contract characteristics," BIS Quarterly Review, Bank for International Settlements, December.
When requesting a correction, please mention this item's handle: RePEc:esr:wpaper:wp463. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sarah Burns)
If references are entirely missing, you can add them using this form.