“He half-heartedly lamented that he had bought at the peak. But he also said it’s all relative, if his house goes down so do all the others, so it makes no difference if prices go down.”

“On a business trip with a colleague from Victoria, who I knew purchased last year at the peak of the market. I mentioned how Vancouver prices were coming down, and that the Victoria market had already dropped. He agreed, and half heartedly lamented that he had bought at the peak. But in the next breath, he said it’s all relative, because if his house goes down so do all the others, so it makes no difference if prices go down.
Amazing – so highly educated but failed to realize that with his 10% down, he would be underwater if he went to move or buy up.
This “its all relative” mantra is really prevalent, even my own father believes this.”

Told Yous at VCI 27 Jun 2012 4:52pm

Illogical post-hoc rationalizations will abound.
– vreaa

13 responses to ““He half-heartedly lamented that he had bought at the peak. But he also said it’s all relative, if his house goes down so do all the others, so it makes no difference if prices go down.”

  1. but, but… not everyone owns 😀

  2. There is a lot of denial going on right now.

    It’s just a stage. Eventually reality will set in. There will be brief forays of grieving, and then rage.

    And… unfortunately… calls for the government to “do something about it.”

    …at least if the US experience is anything to go on.

  3. It’s a pretty simple exercise to follow through: if you’re levered 70% and prices drop 10% you are now levered about 80%.

    Or…
    You put $150K down on a $500K property.
    The property increases to $550K (+10%)
    You now have $200K to use for a subsequent purchase.

    The property drops to $450K (-10%)
    You now have $100K to use for a subsequent purchase.

    So yeah it’s all relative, but not as much with the LTV ratio, something which in aggregate banks will care about to manage their risk exposure.

  4. the intellect is most inspired when pain is most intense.
    ..expect Plenty of healthy evolution.

    on another note:
    in direct regard to the post, E.G covers Denial, Anger, Bargaining…the first three steps of grief, with the last two steps, Depression and Acceptance a little further off, perhaps.

  5. In other news, the media is trumpeting yet another false recovery in US housing today. As I keep telling anyone who’ll listen to me (which is nobody, ever, on any subject), the US market is already recovered. It has recovered sanity, balance, and affordability. I don’t see anyone cheering on an increase in the price of cars, even though most of us own one or more of those too. Why do we cheer on housing “recoveries”?

  6. I guess he was educated in the wrong way.

  7. John Wesley Harding

    This guy probably wont even be able to move sideways (change of neighborhood for work) or downsize.

    A price decline and seller commission eats up your principle. Thats going to be your downpayment on your next 25 year loan

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