Westside Couple Do An ‘Isaac Newton’ – “This afternoon we are putting in an offer on a 1979 boxy Vancouver Special in the same neighbourhood as where we sold. I can’t believe we are doing this, never did I think I would get caught in this frenzy of bidding wars. I’m scared and confused about our decision.”

Anna’s story as told by Garth Turner at greaterfool.ca 20 Apr 2011
“Two years ago Anna and her husband decided to sell their house on the west side of Vancouver. “At the time it seemed like a good idea,” she says, “because interest rates were forecast to rise and we were seeing a housing recovery here after the global recession. Our goal was sell high and buy low, anticipating a decline in the market.” The five-year-old house went for $1.2 million. They were ecstatic. That was $1.1 million more than they had the day before. But joy has turned into gut-wrenching, debilitating stress.
The same house today sells for $1.4 million. Meanwhile Anna, her husband and 15-month-old daughter have been living in a 500 square foot suite for $1,100 a month – with $1.2 million sitting in cash in the bank. Idling. Coiled. Waiting to pounce. In their minds only one asset class exists – a house.
“We are getting very claustrophobic. My husband is getting anxious and wants to re-enter the housing market.  I want to wait.  However I am also very scared because it seems the market keeps rising.  There seems to be no end in sight for increased prices.”
The ‘buy now, or buy never’ fear has etched their minds and strained their lives. The clear logic they felt before – sell high, buy low – has been replaced with an icy, pervasive terror that real estate will rise forever, and a confused couple with only $1.2 million in cash will be locked eternally in a basement suite. Deprived. Wanting.
Yesterday Anna wrote: “This afternoon we are putting in an offer on a 1979 boxy Vancouver Special listed for $1,328,000, in the same neighbourhood as where we sold. We already have the inspection lined up before the offers are presented.  I can’t believe we are doing this, never did I think I would get caught in this frenzy of bidding wars.  I’m scared and confused about our decision.  Not able to sleep, so here I am writing my thoughts to you.  I’m really confused what to do. And how long will we have to wait before the market comes down.  Any ideas?   We are already at a loss of $200,000,000 and can’t afford any bigger loss. Anna.”

Isaac Newton held shares early in the South Sea Company Bubble. In April 1720, seeing and understanding the nature of the bubble, he sold his £7,000 holding of shares. The bubble continued to inflate. Newton couldn’t resist, he bought back in, heavily. The bubble collapsed. When all was said and done, he had lost £20,000.
Anna and her husband made a wise decision two years ago. They are about to reverse that. They are buying out of fear of being ‘priced out forever’. They are, also, speculating on ongoing rising prices, even though most would not label their buying ‘speculative’.  -vreaa

18 responses to “Westside Couple Do An ‘Isaac Newton’ – “This afternoon we are putting in an offer on a 1979 boxy Vancouver Special in the same neighbourhood as where we sold. I can’t believe we are doing this, never did I think I would get caught in this frenzy of bidding wars. I’m scared and confused about our decision.”

  1. pricedoutfornow

    They will surely regret their decision. Seems like all they really need to do is 1) stop watching real estate so closely and 2) find a bigger place! I wouldn’t even live in a 500 square foot place by myself, let alone two other people. There are lots of nice places to rent in Vancouver, why are they in a crummy basement suite? No wonder she’s so depressed.

    And I disagree with her comment “we’ve already lost $200k”-no you haven’t, you have to look at the money in the bank not, “what I could have made by holding on”. If that were really true, then we’re ALL losing millions by not buying low and selling high.

    • With 1.2 million in the bank you would think that even with employment problems they could use the interest to rent better digs. Why is the choice so often presented as basements or ownership?

      • That was my thought. Take it to a financial advisor, invest it conservatively, use the interest to rent a big house on the west side, nicer than what they can afford to buy.

        Never buy out of fear. Never ever buy in a moment of “peak” fear.

        I sold my silver stocks too early a couple of weeks ago, just to watch them go screaming upwards. But I won’t buy back in out of fear. Only if there is a correction which makes me feel comfortable about it.

        [Smart Snats. -ed.]

      • Reply to Snats below:

        Markets are driven in today’s society mostly by fear. Buying silver has become almost a political statement. If you just want to speculate, that’s fine, but buying silver (and by silver I mean the physical type you can hold) you are really buying an insurance policy. An insurance policy against fiat currencies collapsing under their own over extended bloatedness. Buy silver because you think that the entire financial system is due for a come-uppins or don’t buy silver at all. That is, unless you just want to speculate…

      • Eli, why not do both? 😉

  2. it’s never wise to sell your principal residence. What motivated the couple to sell was greed, not stability. They deserve ever ounce of this

    • Nicely put!
      Vancouver has become a mecca for greedy charlatans who want to make money by not working a days hard work in life. That is the charlatan mentality

  3. Anna and her family have managed to mix up a large part of their lifestyle into the modern-day South Sea Bubble. Newton, to his credit, was merely playing with spoils from his “fortune”.

    What this anecdote shows is something much more pervasive and dangerous than some stock trading scheme, and something with consequences that will extend for decades.

  4. 500 square foot suite for $1,100 a month seems excessive even in Vancouver. They probably didn’t know how to look for rentals.

    “a confused couple with only $1.2 million in cash will be locked eternally in a basement suite.” – They actually had $1.2 million in cash? No mortgage on the previous house? If so, then they shouldn’t be stressed that much. On the other hand, they could get a lot more for that money anywhere else in North America.

  5. Attention anyone with a brain:

    Read this:

    http://www.vancouversun.com/news/real+estate+protectionism+misguided/4652756/story.html

    Written by your friend and mine, Cam Good, and posed at the Sun’s site as “news.” Absolute, utter garbage. This, IMO, crosses the line farther than any other mainstream media propoganda piece to date. Please check it out for yourself and, if you feel strongly enough about it, do like I did and complain to the Sun’s Patricia Graham.

    • Its written like an opinion piece, which isn’t a problem in itself. But, you’re right, its wrongly in the “news” section. Hopefully, its way at the back.

  6. On the flip side, didn’t they do exactly what Garth has been preaching to everyone – SELL!!!

    He is forgetting the human side of things and the fact that your timing has to be perfect, twice (on the sell and the buy).

    He is just as culpable as the MSM if you ask me.

  7. Why sell within months (and likely hitting the first and only bid she got) after the what some say was the worst financial collapse in several generations? I’m also not sure why she felt rates were on the verge of spiking upwards at a time when policy makers were (and still are) flooding the markets with unprecedented amounts of stimulus. I wish her the best of luck with her offer on that eventual teardown. There are lots of seriously cashed up people looking for somewhere to park their soon to be worthless suitcases full of fiat money (on top of the 1000’s of clueless folks with delusions of grandeur still looking to get into the game with no money down). I don’t think $1.3M subject to an inspection is going to cut it and I bet they step up to the plate, over bid on the property, possibly take on a whole pile of debt to ultimately wind up with less of a home than they had previously. If they don’t go ahead with it, I guess they’ll be forced to deal with the problem of having to squat in their 500 sq ft shoebox for several more months/years while that bank account of theirs generates $2-3K (and soon to be more) a month in interest. Uh, yeah…a nice to problem to have.

    This is nothing more than your typical fear and greed at play here and you all know how that game of “whipsaw” ends.

  8. I think an undeniable fact is that the motivation for young families to buy real estate is quite different from the greed of speculators. Couples with young children are motivated to buy a home because it’s an important milestone for getting on with their lives. I know three couples with children who have bought homes who should know better than to participate in this ridiculous market, however the priority of parents to provide a stable and secure home setting for their children blinds them from the financial peril that lies in their paths. These couples are well heeled and have family backing to finance their homes or are wealthy enough to do it themselves. They are likely following the rule of thumb that less than or equal to 40% of their take home income should be spent on housing expenses.

  9. “When the US sneezes Canada catches a cold” But not quite yet..we got the virus but haven’t felt the symptoms yet. I think a large market correction is coming. I’m talking 30-40+ % Its gonna shock people, and just like the US, nobody saw it coming. Even the US hasn’t hit bottom yet, what makes Canada think we can escape the same fate? Even China hasn’t hit it’s own RE crisis yet. What happens when broke Chinese investors start pulling out of the Vancouver market to cover their own losses back home?

  10. curious lurker

    I don’t think Anna and her husband are wise at all.
    If they really sold 2 years ago, then they sold at the bottom of the mini-crash of 2008. IIRC prices hit bottom spring of 2009 or somewhere there abouts.

    Anna is the lemming who sold because they saw the property market crashing.
    It’s likely they sold at the bottom of that mini crash.

    The fact that she is buying now if anything is a signal that this is the absolute top of the market in her neighbourhood. Hey, she got scared and sold at the bottom of the 2009 trough, so it makes sense that now she’s gonna buy at the top.

    buy high, sell low. that’s the motto of the un-wise investor. I think this fits Anna pretty well.

    If she just wisened up, she wouldn’t buy now, and she’d see that in a few years time, she’ll look brilliant for having sold in 2009.

  11. This “buy now or be priced out forever” terror gripped the hot markets in the U.S. but it never comes up now. The mantra is only “you were an idiot for buying. What were you thinking?”

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