“An invisible force has guided Buyers and Sellers of Vancouver homes. An unprecedented number of Sellers have listed their homes for sale while at the same time many Vancouver home buyers have decided that they are ‘not buying now’. This collective behavior is often called a ‘murmuration’.” … “Perhaps recent examples of a similar activity might be the ‘Occupy’ movement or globally we might consider how it came to be that so many countries in Europe arrived at the brink of financial disaster at the same time.” …
“At the right time of year if you were to visit Otmoor, a bird sanctuary near Oxford England, you will find Starlings performing a spectacular event known as murmurations. Some might describe these events as spectacular pulsating avian aerobatic operas. Scientists more pragmatic, note it as the Starling’s way of ensuring survival against predators and the maintaining of Starling social hierarchy.
Using murmuration as a model one asks why so many Vancouver home sellers decided to sell at the same time? Was it about survival? Are they acting selfishly in the hope of protecting themselves from the predator of financial disaster by selling their homes and escaping. What was the trigger? Was it the neighbour selling at a price much higher than they anticipated that lead them to believe they could only maintain their social status by selling their home at a higher price?” …
“It is fair to say that human behavior is at times shaped by invisible forces which lead us to behave in ways that may not be in our best interest. While it is fascinating to observe this kind of behavior in animals, for humans it has in many cases proven destructive. You can see this in the number of sales of Vancouver homes and the frustration of Buyers not able to pay the price asked.”
- from ‘Invisible Force Guides Buyers and Sellers of Vancouver Real Estate?’, Larry Yatkowsky, 13 Sep 2012
The theory above appears to blame market collapse on something akin to a senseless stampede. The implication is that people in a perfectly normal and healthy environment may all suddenly start behaving together in an almost insane way, all getting swept up in behaviour that “may not be in their best interest”. Actually, this better explains the START of a bubble than it does the unwinding.
Sentiment and herd behaviour is important, but it alone does not cause a perfectly healthy market to collapse. The point is that the market is deeply unhealthy; it is the proverbial accident waiting to happen. Once a speculative mania has driven prices two or three standard deviations from the norm as judged by fundamental values, a price collapse is a healthy and natural phenomenon. It’s the expanding of the bubble that is perverse and ‘destructive’.
Regarding this series:
There is only one BIG reason for falling prices in Vancouver RE: the speculative mania is over.
That is all you need to know to explain the price action that will play out over the next few years.
On the way up we had people attributing price strength to all sorts of bizarre and invalid causes: the Olympics, running out of land, etc. On the way down we expect similarly bizarre arguments for price drops; commentators will offer many erroneous theories as to why prices are falling. We’re already beginning to see them, and the crash has barely commenced.
We’ll collect them; please submit new examples you come across. – vreaa
#1 – Climate Change Caused The Crash
“Prices will continue to fall, as outside buyers from other Provinces such as Ontario, Alberta and Manitoba finally realize that climate change has now become an important issue in British Columbia. What was once an enviable temperature and small secret now has become a drag, as the winter, spring and summer months are now cooler and wetter than before.”
- thinkandact, commenting at the Globe and Mail, 2 Aug 2012
#2 – The Conservatives Attacked The Vancouver Housing Market And Caused The Crash
“The reality is that because banks also own investment dealers, their CEOs would prefer to see more Canadian money flowing into the equity markets rather than into real estate. … I wouldn’t be surprised if Prime Minister Stephen Harper, a trained economist, has been influenced by a Zambian-born economist in crafting mortgage-amortization policies that may kill the Vancouver housing market and create significant hardship.”
- Charlie Smith, Georgia Straight, 3 Aug 2012
#3 – Vancouver RE Bears Caused The Crash
“The common theme I see in your “anecdotes” is YOU! There is no shift in the “general mood”. YOU are the catalyst bringing down the mood among your friends. I can only hope you don’t have too many friends, or you will singlehandedly bring down the market.”
- ‘Anonymous’, at VCI 21 Aug 2012, in response to ‘Makaya’ posting two stories of people becoming bearish on the Vancouver market
#4 – An Invisible Force Caused The Crash
“An invisible force has guided Buyers and Sellers of Vancouver homes. An unprecedented number of Sellers have listed their homes for sale while at the same time many Vancouver home buyers have decided that they are ‘not buying now’. This collective behavior is often called a ‘murmuration’. It is fair to say that human behavior is at times shaped by invisible forces which lead us to behave in ways that may not be in our best interest.”
- ‘Invisible Force Guides Buyers and Sellers of Vancouver Real Estate?’, Larry Yatkowsky, 13 Sep 2012