Tag Archives: Capitulation

“Several bears I know that were sitting on the sidelines have finally thrown in the towel and bought in the past couple of months.”

“Several bears I know that were sitting on the sidelines have finally thrown in the towel and bought in the past couple of months. Perhaps a contrarian indicator that a top is near?”
Troll at vancouvercondo.info, 31 Aug 2011 11:25am

If we’d kept a list of the succession of contrarian bells that have rung for this market over the years, it’d be might long…
But, yeah, bears capitulating is always noteworthy.
Poor schmucks, they should have come to the meetings.
– vreaa

$1.6M Teardowns – “Until demand shrivels at the higher end, families at the lower end will be priced out as we can’t compete with the developers. I’ve given up and can’t wait to get my family out of here.”

“Who’s to say the market will ever correct? I keep hoping it will but I’ve finally given up and am in the process of making plans to leave Vancouver once and for all.
In my neighbourhood, teardowns, or what developers consider teardowns, sell within days for well over $1.6 million. Having said this, developed houses selling in the $3 to $4 million range are taking a lot longer to sell than they used to. Anyway, it seems that the market in this area is driven by the upper end, not the lower end. Developers calculate what they can sell the finished product for and then calculate their maximum price for a teardown based on the finished product. Until demand shrivels at the higher end, families at the lower end will be priced out as we can’t compete with the developers. As I said I’ve given up and can’t wait to get my family out of here.”

chopper at vancouvercondo.info 21 Aug 2011 6:44pm

“One of my best friends has decided to move to Australia. Early 30s, born in greater Vancouver, 2 university degrees. Buying is completely out of the question. Would like to stay but for the high cost of living and low salary.”

human at VREAA 29 May 2011 at 11:38am“One of my best friends has decided to move to Australia with an Australian woman he is dating. Early 30s, born in greater Vancouver, 2 university degrees (one professional), can’t make enough money as a renter to save anything. Buying is completely out of the question for them. They would like to stay here but the high cost of living and low salary is driving the decision.”

human -> Pity about losing your friends. If it’s any consolation, we do like your handle! (Same race as us here at VREAA; please send us more of your kind.) – vreaa

Five Couples Lost To Vancouver Because Of RE Prices – “In the past few weeks, the number of our friends who have either moved away, taken steps toward moving or expressed interest in leaving Vancouver has been truly alarming.”

Sheesh at vancouvercondo.info May 28th, 2011 at 10:23 am-
“In the past few weeks, the number of our friends who have either moved away, taken steps toward moving or expressed interest in leaving Vancouver has been truly alarming. They are all highly educated professionals and the ridiculous cost of living in Vancouver relative to the professional salaries and opportunities available have them suddenly running for the hills.
I don’t know if it is coincidence or if this is a sign of a larger trend, but I feel like we have all waited a really long time for things to get better here and now, in our 30s to early 40s, we are tired of sitting around waiting for a piece of the pie to come our way.
One couple both have MBAs but have had trouble finding work here that lives up to their potential. A corporate recruiter told them staying in Vancouver will kill their careers; one has already found work in Toronto so we expect both to be gone in a few months.
Another couple, both with Masters degrees, is moving to Edmonton. The husband found a job there and they have just put in an offer on a house. They can buy a beautiful house for grown-ups there for the same monthly costs as renting a dark, dank one-bedroom in the West End.
Another couple have met with an immigration lawyer about moving to the States. They can sell their place here and, with the equity, buy a sweet little house in a trendy neigbourhood in Portland for $300,000.
We also know a Canadian/English couple that were going to move here after living in Japan for many years but, after a real estate tour of each city, chose London, England, as the more affordable option!
The last couple that wants to leave is us! Unfortunately, our jobs are keeping us in Vancouver for now. But we have a young son and just don’t see Vancouver as a place where we can raise a family, save for retirement and have anything left over to buy a place.
All of us, by the way, would pick Vancouver as their first choice. It just seems like the city doesn’t want us. At this rate I really have to wonder what kind of place this will be in five or ten years. Can money launderers, speculators and offshore investors really make Vancouver “The Best Place on Earth?”
There are lots of nice places to live in this world; looks like a lot of us that didn’t get in on the ground floor are setting off to find another one.”

We share this poster’s concerns. Speculative manias in real estate cause misallocation of human capital, and our city is going to be poorer for it. – vreaa

Sold Vancouver House 800K in 2010; “Wife Is Out Of Patience”; “Social Pressure Is Enormous” To Rebuy; “Nothing makes sense anymore”.

This anecdote extracted from Garth Turner’s headline piece at greaterfool.ca, 1 May 2011 -
“Corey sold a house in Vancouver last year and was sitting on eight hundred grand. In a wretched savings account. Where, he opined, to invest? Corey’s spouse was hot to burn through all that cash, using it as a downpayment on new digs.
On 30 April, Corey wrote the following: “My wife is out of patience. She constantly refers to some friends who were waiting for the correction, then capitulated after tiring of living with the in-laws for a year. They built their new dream home (just moved in) and could likely sell for several hundred thousand more than they built for. Everyone believes it is different here because of the Chinese buyers, and the social pressure is enormous.
Nothing makes sense anymore:
* wages are stagnant,
* a lot of people are highly indebt[ed] and leveraged but do not seem to worry
* economically things don’t make sense to support an escalating housing market, but everyone here drinks the cool-aid they are fed by the MSM
* people are insane – some in our hood are buying and then trying to flip the house within say 6 months for 200,000 – 300,000 profit (with little or no renos).
* Anyone who dares suggest that interest rates are about to rise soon dismiss the idea saying that the impact will be minimal, or that the government will not raise rates with a high dollar etc.
* If I suggest to friends that the housing market is going to correct they look at me as if I have 2 heads
* Some are so confident that nothing will change that they are buying before they have sold, gambling that they will get their price (or more)

. . . I am beginning to doubt . . . and to wonder myself if the Chinese do make things “different here”?”

“I know a couple waiting for 5 years for prices to come down so they can afford a house with a garden and have a baby. Finally they gave up on Vancouver and moved to Seattle.”

paradox April 11th, 2011 at 2:14 pm“I know a couple who has been waiting for 5 years for prices to come down so they can afford a house with a garden and have a baby. They both work in manufacturing industry and have decent jobs. Finally they gave up on Vancouver and moved to Seattle. They are expecting a baby now. We don’t need more immigrants. Make life affordable for people already here and they will certainly have more kids. We will pay a dear price in the future.”

That’s another three people lost to Vancouver directly because of the RE bubble. -vreaa

Bearish Buyers: Capitulation, Of Sorts – “Yeah, if there was ever a clearer signal of the top of the market. I’m also the guy who enters the shortest cashier line-up at the grocery store but still manages to exit after everyone in the longer ones.”

Bear capitulation occurs when a long term RE bear gives in and buys.
Yelling “That’s it, I’ve had enough, this market is absolutely crazy, I resign myself to renting for life!” doesn’t count. Also, leaving Vancouver may seem like capitulation but it isn’t. The bear has to give in and buy. One of the laws of bubblology states that the bubble is over when the very last bear that is going to buy throws themselves on the frenzied pyre of the market and is consumed in the flames. When that happens, we can get on with the crash, already.
Here are two (rare) anecdotes of bear capitulation, but they are both ‘qualified’ capitulations, and we thus don’t present them as evidence of a top. Our brief comment follows at the end of this post.
We don’t see very many stories of bear capitulation: if you know any, please send them along. – vreaa

Lost Soul gave an account of their purchase on two threads at RE Talks, 8 Mar 2011 and 25 Mar 2011. Excerpts from Lost Soul’s comments:
“This loooooong time bear likely will be an owner soon (accepted offer).
Please don’t categorize me as a bull. I’m buying with the expectation that we will take a financial hit for it.
We didn’t all of a sudden grow horns and start snorting. But something did grow and popped out after nine months and we needed more space. It’s not all about money. :wink:
Could we have just found a bigger rental? — I suppose, but we just wanted a place to settle into and be able to do what we wanted with it without worrying about what the landlord would think.
Do we think this is a wise *financial* decision? — not a chance — this is pure consumption in our view. If by some bizarre happenstance the value of our place goes up 50% in the next year, we will not all of a sudden start crowing about how we were so brilliant to buy.
What if the market gets halved? — Bring it on! The loss on this purchase of course will be unpleasant but it also means that the next place we buy will have dropped twice as much in absolute dollars so net we’d still be ahead (if not by so much as not purchasing at all now). And ‘No’, the loss on the current place would not wipe out our dp for the next one — contrary to the beliefs of some here, bears are not necessarily on welfare living in their parents’ basement.
(Still) My advice to others: *We* are fortunate to have the savings and income to pull this off. If *you* are purchasing a place you’re not happy to live in for the next 35 years and buying it means Kraft Dinners, you might as well wait and pray for a crash — the “buy small and climb the property ladder” approach isn’t going to work.”

[In response to a comment “Lost Soul Buying…”] “Yeah, if there was ever a clearer signal of the top of the market. I’m also the guy who enters the shortest cashier line-up at the grocery store but still manages to exit after everyone in the longer ones.”

And a related story from enki at RE Talks 26 Mar 2011 8:47pm“I totally sympathize; I am a longstanding bear (and still am), and finally bought a townhome in Abby in August [2010]. I didn’t want to buy, but I was tired of waiting, and wanted some stability. Living across the street from some very good mountain biking didn’t hurt either. I bought the cheapest thing I could tolerate, and resigned myself to losing some equity while keeping my wife.”

These stories don’t really qualify as complete capitulation, as the protagonists remain mentally bearish, and actually anticipate a drop in prices. In complete capitulation the bear overextends themselves as much as other current buyers, and emerges from the experience as a born-again bull.
The anecdotes above are perhaps best seen as stories of ‘partial capitulation’. They are of interest, because, for a prospective buyer, the ‘partial buy’ and ‘renting’ are both compromises, but with different inconveniences.
For the record, we don’t think ‘partial buying’ is a good idea. Moving up during a crash may be more challenging than one expects. – vreaa

[Update: An exchange on 29 Mar 2011 between posters at RE Talks turns ugly, and Lost Soul confirms they paid cash for the above deal. Screen caps here and here.]