[Probably Fabricated Market Timer Emotional Capitulation Anecdote] – “I sold my westside home for around $950K in 2004. Now I can’t afford to buy back. You have to believe the incredible pressure I get from my family to buy. They are ashamed of me. I am severely depressed I will never be able to buy what I once had again. The bulls are right, I am priced out for ever.”


.
Yes, the markets can be a bitch. Yes, it is demoralizing to get the general picture right yet get the timing wrong. And, yes, to be down a lot on paper can be excruciating, moreso when you’re playing with your own accommodation and are vilified by your family and community for doing so.

Markets can go from ditzy to completely-bigtime-insane before they sober up.
This poster [** see postscript] was correct, the Vancouver market was already overvalued in 2004. It hit the insanity jets in 2006 and then the free-money magic-blow-off after-burners in 2009. It was going to roll over and die in 2008 but star-dust bailed it out. This poster was mentally short in a mother of a virtual-short squeeze. We say ‘mentally’ and ‘virtual’ because he wasn’t really short, but he felt like he was short.
This poster’s current mind-frame represents a form of mental capitulation, but it doesn’t show real capitulation. Real capitulation would involve action, it would involve this poster buying back into the market for $1M+; a far lesser house for far more money. Thus a bear would become the last of the bulls. Students of the markets all know what happens when the last bear who is going to capitulate does so.
We still estimate that it is highly probable that individuals in this poster’s situation will have the opportunity, in future, to buy back the 2004-$940K westside property, now selling at far more than $1.5M, for 2004 prices or less. We also suspect that many prior market participants will be so gun-shy that they will not step up to the plate, and that, once falling, prices will fall well below 2004 levels. Yes, this may seem crazy to many at this point. Insanity is a common ingredient in Vancouver RE market moves. -vreaa

‘Chinese renter’ at vancouvercondo.info December 1st, 2010 at 5:41 pm“I am Chinese Canadian, not recent immigrant, previous home owner, presently renting. Sold my westside home for around $950K in 2004 after it’s price had recovered from a drop in value in the late 90′s. I haven’t brought since. That same house is now worth minimum 1.5 million. Sure renting is not costing me as much than to buy right now but I loss an asset that is now worth 1.5 million by not re-buying back in 2004,2005 or even 2006.
I was influenced by bloggers like VHB and Garth [Turner] not to buy, thinking it was a bubble. I have lost all confidence Vancouver real estate is a bubble. Not on the westside where the Asians like to buy and the builders and flippers buy so they can resell to the Asians. My invested equity from sold house can no way keep up with price appreciation of Vancouver real estate, not with fixed income interest rates this low. Now just to buy back what I had I can’t afford. I can buy above 1 mil but not 1.5 and above.
The place I am renting now was just brought earlier this year as an investment by a Chinese family for 1.6 million. Sure my rent they receive doesn’t justify the cost per month to own on a monthly bases but it has appreciated $100K already. The landlord can easily sell and there will be a bidding war. Check out the dump V858532, 5069 Ash St, ask was 1.49 million. Sold in 7 day over asking 1.528 million. Why does the sold price have numbers 28 in it. One guess, you are right, Chinese buyers. it was open house Saturday Nov 18, multiple offers Monday, sold Wednesday Nov 22. The house is practically a tear down and that part of Ash St is awful, narrow and full of parked cars.
You have to believe the incredible pressure I get from my family to buy. They are ashamed of me. Seriously they don’t mention to friends and relatives I am renting. Asians, Chinese have to buy, it is low class to rent.
To rent a nicer home on the westside may cost less than buying but eviction is real. Happened three times already to us, not because we are bad renters, we are great renters. But twice after one year lease, landlords claim place back for own use. Not fun having to look for new place and moving after only one year, just settled in. Not fun especially with young children and changing of schools. So I do eventually want to buy for stability, we want to live in a house, not a build for rent condo. At the rate of Vancouver price appreciation I am severely depressed I will never be able to buy what I once had again. The bulls are right, I am priced out for ever.”

**postscript – We are fully aware that this poster may be a fabrication by a bull poster, an emotional sketch making a case against being bearish. The handle, the pat phrases, blaming the bear bloggers, etc.
Regardless, there are likely some individuals in this situation (although very few trade out of primary residences during a bubble expecting to buy back in cheaper later). And the numbers are in the right ballpark. So, we dealt with the anecdote as though it came from an actual individual. ‘Chinese renter’, if you’re reading this and you are an actual individual, apologies for the voiced whiff of doubt. Drop us an e-mail. And keep us informed of your future circumstances. -vreaa

23 responses to “[Probably Fabricated Market Timer Emotional Capitulation Anecdote] – “I sold my westside home for around $950K in 2004. Now I can’t afford to buy back. You have to believe the incredible pressure I get from my family to buy. They are ashamed of me. I am severely depressed I will never be able to buy what I once had again. The bulls are right, I am priced out for ever.”

  1. I’d say to Chinese Renter that she(?) should give it until April before giving in. But I’m not her, so that’s just meaningless hot air, perhaps.

  2. This is obviously a fake post. There is no such thing as a “Chinese renter” since bulls claims it’s against the culture for Chinese to rent.

    Also, prices recovering from the 90s. I though real-estate never goes down. Why would it ever need to recover?

  3. Definitely no fakery here, but I can echo some of the sentiments of the entry. I too am a mental short, I’m long past tired of waiting for the chart to return to a norm, and I’m getting more po’d by the day.

  4. Yep, totally fake and manipulative.

  5. Fake ancedote; Garth Turner wasn’t doing his ‘sell sell sell’ spiel back in 2004 when the poster claims they were induced to sell.

  6. You are providing a platform for some people to spread disinformation

  7. I know someone anecdotally, a Chinese realtor no less, who did the same thing in 2004 and was trumpeting that he had got all his family members to sell as well. I do not know if he got back in the market.

    I think this is a good point to make, and kudos to you for posting it. I have been watching friends buy since 2003 and every time they did so I thought they were buying at the top. I was already in and would-have/could-have/should-have bought another property as well but I too was caught up in the fundamentals and expecting an imminent correction.

    Even if the bears are eventually ‘right’. The lesson here is that it does not pay to be a bear. Even if your thesis is correct you have to get your timing exactly right. Twice! You have to sell and re-buy (hard to do in a falling/correcting market) at very close to the peak and trough to get this trade right (in addition to transaction costs).

    For this individual, we are talking about 7 years of emotional capital. That is expensive. Even if we do go back to 2004 prices (big if, but possible), this family will have endured 7+ years of doubt and anxiety.

    You will argue that the RE bubble is the cause of this anxiety and will counter that cash is always a depreciating asset and is the biggest bubble of all.

  8. It’s fine to understand and acknowledge intellectually that the fundamentals are flawed, but we have to realize that the average person either doesn’t know this or doesn’t care about the fundamentals. Keeping this in mind, it’s ok to participate in the bubble (in fact, you’ll miss great potential returns if you don’t) but you have to be prepared to bail or lose some money if the bubble starts to deflate. Also keep in mind any bubble will generally last much longer than people think it will. So we have the best of both worlds; we know it’s a bubble (giving us an advantage over those who are ignorant) while at the same time profiting from it. I have learned there is no point in trying to outsmart myself forcasting any bubble collapse, we may as well take advantage of it while we can.

    • Crash -> Thanks for the comment, but I’d have to respectfully disagree regarding “taking advantage” via “bubble participation”.

      The vast majority of participants in any bubble will lose their paper gains; in many cases more. Late-comers will be slaughtered. By definition, when even a small percentage of participants try to exit, the bubble will implode.
      Speak to participants who owned Nortel over $100 in the early 2000s or who owned RE in the US in 2001-2006. The vast majority were barbequed when those bubbles collapsed.
      [Some players do make money (some of the developers/realtors; akin to the stock brokers), provided they don’t over-partake in their own wares.]

      Anyway, point is, it is far from simple to participate in a sane and safe fashion.

  9. One of Vancouver’s wealthiest South Asian property investors [the wealthiest, actually] once told me, “I never went broke selling too soon.”… [at the time, ‘Nemesis’ was illustrating an article/biopic for MacLeans]…

    • And players with that approach MAY make money… they’ve had plenty of time to cash out, after all. Interestingly, many don’t. There are far more stories of people selling and scaling up into more RE than there are of people downsizing or cashing out.

  10. http://www.cbc.ca/video/#/News/1221258968/ID=1682739589

    Laurence Cannon is delighted by the demand by rich chinese to immigrate to Canada. “We’re quite encouraged by that because it’s an excellent contribution, and that adds to the ‘people-to-people’ relations that are extremely important between our two countries”.

    CBC Reporter: “17,000 Chinese investors are waiting to come to Canada”

  11. VREAA,

    Another of the fear and greed crowd posting away. With so many empty open houses what are they to do?

  12. VREAA:
    Don’t fight the system; use it to your advantage… it took me a long time to figure this out. Knowing it’s a bubble gives you the advantage over the deniers. The people who got burned with Nortel thought it could never end, but those who knew it was a bubble made money. Those who didn’t buy R/E in 2004-05-06-07 lost because they knew it was a bubble but didn’t play along. I do think though, there’s no upside to R/E or the stock markets at this point, unless you short them. There’s a different paradigm since 2008 and it’s not “business as usual”. There will be many opportunities to make alot of money in the years ahead.

  13. Crash -> We agree completely regarding downside risk being far greater than upside in both stocks and RE at present…
    But, I still think you’re making ‘playing the bubble’ sound far too easy.
    Sure, in retrospect, it now seems like it was a no-brainer to buy in “2004-05-06-07”, however, I’d submit that analysis at the time already revealed a bubble that could’ve turned at any time.
    RE isn’t like stocks where you can attempt momentum plays using stops. When RE turns, sales volume can dry up completely, and prices can gap down (witness 2008), leaving any mo’ players high and dry.
    People who bought RE in 2006, 2007 have made profits (provided they have sold, of course) out of shear luck, not out of “using the system to their advantage”.
    By what metrics could you determine that 2006 or 2007 were safe times to “play the bubble”?

    Further, how many Nortel players “knew it was a bubble”? .. very, very few… most who were long thought it was a ‘new paradigm’ (different this time, internet to the universe, running out of land, etc etc).
    [Interestingly, you’ll find a good number of people who now say they “knew” Nortel was a “bubble” but they got burnt anyway. We’ve discussed this phenomenon elsewhere. They prefer to tell the story that they ‘knew’ there was a bubble but lost anyway, rather than admitting they were gullible sheep.]

  14. It depends how much risks and leverage you cab bear (pun intended) – while I have previously thought there was a US bubble and was proven correct: west-side homes are not, and ‘most likely’ never, be in a bubble – outright of a gigantic crash in China the values will keep (with occasional gentle dips).

    Know the above and you can make money – know the above and you won’t run around being bitter about no crashes.

    The Vancouver condo market is a different kettle of fish – but it unlikely to see the crashes experienced in the US.

    Canada will never change its immigrant laws and the money will keep pouring in – live with it!

    • Nancy -> “west-side homes are not, and ‘most likely’ never, be in a bubble”; “the money will keep pouring in” -> both are assumptions with which we disagree… this is the real world… markets breathe in and out.. “live with it”!

    • For Vancouver to “always go up” and be “different here” would make it a market unlike any other anywhere. The counter argument to that is that Vancouver is a “world city” like NY, Paris, London, SFO etc. Sorry, but it’s just not. I have spent time in all of the above and lived in NYC. Vancouver is a wannabee! As for hosting the winter Olympics; so did Lillehammer, Nagano, SLC and oh yeah Calgary, another world city—GMAFB (first letters stand for ‘give me…’).

      I grant that immigration and the Chinese cultural attachment to home ownership may have an effect on the market but they are not the market. Further it puts our market at risk from outside forces.

      Sorry Nancy, but we are Icarus and that shiny RE future is the sun. You know the rest of the story—or do you?

  15. VHB and Garth Turner were not even blogging in 2004. What a bunch of bull this is. Phoney!

  16. Let’s be very clear about this anecdote. Whether ficticious or not it’s certainly plausible, but the emotions elicited by this purportedly bearish poster are no different from those who are bullish. This guy was a greedy bugger: he wanted to get something for nothing by timing the market. He was unlucky and now deeply regrets his decision. Market bulls should keep that in mind because, at the core, they aren’t too different.

  17. Garth Turner’s real-estate blog started in 2008.

  18. This anecdote is of interest regardless of whether it’s fabricated or not:
    1. There are likely individuals in this position
    2. For the market milieu to be such that a bullish participant feels moved to fabricate a story like this is in itself noteworthy.
    What would move them to do this?
    Malice? (with Hubris?)
    Fear?

  19. To be fair to the internal logic of the ‘anecdote’, there really isn’t a chronological inconsistency. They say they sold in 2004, but then didn’t buy back in the years thereafter because of the influence of bearish opinion.

    This is all moot as we seem to have consensus that this anecdote is very likely fabricated. I have edited the title to reflect that, for the record.

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