“I took a big gamble and bought a house in the Oakridge area a few years ago for around 700K, on limited income. I sold it last year because I knew I got lucky and didn’t want to push my luck.”

“I took a big gamble when we bought a house in the Oakridge area a few years ago for around 700K on limited income and sold it last year because I knew I got lucky and didn’t want to push my luck. Now we’re renting a condo in Vancouver.”
- Dashgall at VREAA 14 Dec 2012 10:45am

This is an example of speculative behaviour being bailed out by luck. Despite that, ‘Dashgall’ does deserve some respect, not for the initial bet (which was, indeed, a rash gamble), but (1) for having the insight to sell rather than “push (his/her) luck”, and (2) [special points for this one] for being able to admit that the profit was the result of luck, rather than attributing it to one’s own new-found investment genius (the commoner explanation used in this scenario).
Only a very small percentage of market participants will end up having sold in even the vague vicinity of the top. The majority will remain invested in the RE market one way or another, and ride their paper-gains down as the market collapses.
- vreaa

38 responses to ““I took a big gamble and bought a house in the Oakridge area a few years ago for around 700K, on limited income. I sold it last year because I knew I got lucky and didn’t want to push my luck.”

  1. As it must be, for every seller at the ‘top’ there is a buyer. After the ‘top’ there are many more who would like to sell but cannot, and many more still who bought at lower prices but ‘sold’ by way of mortgage equity withdrawal.

    Zerodown made a great comment recently in response to “the market is about supply and demand” shitshow comment. He said really markets are about “demand and demand”. Hoy!

  2. But what to do with the cash? Still living in Vancouver is exposure to the rocky road that’s coming for all of us.

  3. “Making money is easy. Any idiot can make money, it’s keeping it that’s the hard part.” … pfffft!

  4. Dashgall had the prescience and the financial and personal situation that allowed him to make that move- good for him! Especially clever (and maybe tough) was the move to rent.

    It occurs to me that locals that have bought in the last few years will have the toughest time adjusting to this (falling) market. If you’ve grown up in Vancouver and have seen almost non stop gains in RE prices, and the elevated absolute prices, you’re going to have a tough time accepting that RE might fall, fall in a big way, and stay that way for several years.
    You might know that other regions in Canada are less expensive (many much less), but “it’s different here” has been repeated over and over.
    It’s hard to get your head around the fact that a 200%-300% premium for living in Vancouver is just not supported by wages or rents.
    And those that remember the 2008-2009 dip/rebound and so attempt to wait the market out for another year or two will be toasted even darker.
    Besides, if you sell, then what? Move away from your job, relatives, friends?
    You could rent, but that would be “throwing your money away” according to the same relatives and friends.
    When I lived in Vancouver, locals always told me that prices are high because of “limited land” or “foreign buyers” or “that’s just the way it is.”. There was an absolute certainty, a matter of fact tone of voice, like
    when recalling ones home phone number.
    Again congrats Dashgall. You could be buying the same type residence for far less within a couple of years.

    Cyril, if one has to be in Vancouver, the best position to be in is to be renting with a cash stash in hand. And if BC’s economy really tanks because of fundamental RE shifts, it’s nice to have airfare to somewhere else.

  5. He deserves respect for each part of the process. You thought the initial bet “…was, indeed, a rash gamble…”, but that’s your opinion, which wasn’t widely held outside the echo chamber. Buying a few years ago may or may not have been a big gamble, but if “a few years ago” was after 2008 it was pretty clear that the gamble was minimal (again, you may disagree, but the cards on the table tell a different story). Low interest rates, quantitative easing, governments inflating their way out of debt, offshore buyers squirreling away money – none of that pointed to a crash in Vancouver prices.

    In other words, if someone doesn’t buy your narrative, follows his own interpretation of events and makes a profit, is he still wrong? Probably not.

    This doesn’t mean you should buy Vancouver real estate now and watch it go up. However, increased supply and lower demand hasn’t brought prices down substantially. We’re flat-lining, and will continue to do so for the foreseeable future. We will revert to fundamentals someway, someday, just not today.

    • Yes, housing crashes do not happen overnight. We will not revert to fundamentals today. But perhaps tomorrow? ;)
      Or are you saying that we have reached a permanently high plateau?

    • Rob ->
      Thanks for the comment.
      1. Referring to the bear narrative as having occurred in “the echo chamber” is perjorative. One could just as easily argue that the far more powerful ‘echo chamber’ effect (self-perpetuating echoed opinions) occurred in the form of the bullish narrative, in the mainstream.
      2. Talking of “cards on the table”, do you, or have you ever played Texas-Holdem? If so, consider this scenario that serves to shed light on this anecdote, and your opinion thereof: A player holding a pair of 7′s goes all in before the flop. He finds he is facing a player holding AA. He hits a 7 on the river and wins the hand. In retrospect, to the superficial observer, he looks like a genius; he won the hand against odds (in this case, BTW, about 20:80 odds). But was his move wise? No, it was “a rash gamble”, not a smart percentage play. In retrospect you may choose to argue this was a good move, that he’s a smart player. But experienced players would disagree; they know that he was simply lucky. What happens to gamblers like this? They get wiped out… not necessarily in this hand or the next, but in the medium or long term. You can bet on it.
      3. We all have our own narratives for the market, I think we pretty well know and respect the differences. You don’t think buying was a “rash gamble”, I do; you think buying after 2008 was only a “minimal” gamble, I disagree. You still believe in ongoing relative strength for the Vancouver market (“flatlining for the foreseeable future”), I disagree, and see this as a high risk market. And given that many players are leveraged to the hilt, with more than their entire net-worth in local RE, there are, in my opinion many “rash gamblers” about.

    • Real Estate Tsunami

      Rob, please remind us again what the fundamentals are.
      Thank you.

    • That’s the first time I’ve heard a rapidly falling market described as a “flat line”.

    • Prices are ‘flat’? Care to back that up? No you wouldn’t.

    • “Increased supply and lower demand hasn’t brought down prices.”

      So, the most fundamental law of economics no longer applies? Vancouver really IS different!

    • Rob’s comment is just another that will look extremely silly in hindsight. It’s unfortunate he’s a vocal realtor instead of just doing the heads-down paperwork he should be — because he’s the one clouding Vancouverite minds day in and day out with his righteousness to perpetuate the insanity in his own self interest. Thanks Rob.

  6. Well said Berniebee!!

  7. It is in the interest of politicians to generate a new housing bubble. In the US powerful investment groups have been purchasing large stocks of distressed property homes. China is ramping up even more cheap credit to the market.

    As unhealthy as the RE bubble runs have been to the globe, sadly the indicators are that another one is upcoming.

    Citizens have short memories and there will be legions of dumb RE buyers this time as well.

    When the bubble pops there is a large transfer of wealth from middle & low income earners, to the rich and the extremely rich.

    The wealthy will make money on the upside and downside of the bubble.

    I cashed out 100% gain on a west side home in under 10 years – I did not expect Central Bank to back the bubble in 2008; when they did, I simply cashed out and will forever sit on RE sidelines.

  8. This is an example of speculative behaviour being bailed out by luck.

    The window of luck is closing as the absorption rate declines. Speculators seem complacent and willing to pay their mortgage for one more season — then they'll capitulate. It's not easy to take a voluntary loss, especially when it's not expected.

  9. 4SlicesofCheese

    I wonder, this guy is one out of how many?

  10. Canada (and Australia) have official reserve currency status now. What does this mean for Real Estate? Bit of background http://en.wikipedia.org/wiki/Triffin_dilemma

  11. [NoteToEd: No particular reason. No subtext. Just for fun.]

  12. VREAA

    “One could just as easily argue that the far more powerful ‘echo chamber’ effect (self-perpetuating echoed opinions) occurred in the form of the bullish narrative, in the mainstream.”

    Of course you could. As you probably know, I don’t think the bull/bear narrative is a good one, and really never have. Just because I’m not buying the typical bear narrative does not make me a bull.

    “Talking of “cards on the table”, do you, or have you ever played Texas-Holdem?” Of course I have. Two points: first, poker has a lot more constants than real estate, and so the interpretations are pretty standard. However, as you know if you play cards, you can’t win at hold ‘em if you strictly play the odds. You have to steal pots in order to win. So, if the guy lucked out, pure and simple, then he’s not a genius. Let’s face it: we’re both missing way too much information to determine whether this guy buying a few years ago was the equivalent of a pair of 7s (wait, we’re missing too much info to even pass judgement on the pair of 7s – how much is all in, who was he playing, where was he sitting…maybe the guy was a genius, all things considered. Are you going to say that it’s always wrong to go all in with that pair? Really?)

    “You still believe in ongoing relative strength for the Vancouver market (“flatlining for the foreseeable future”), I disagree,…” Understood. However, I think I made this call earlier in the year and you said “we’ll see”. So far I’ve been right. Low interest rates are the big factor, imho. Hard to see what’s going to force large volume selling when rates are this low. We saw the second highest inventory of the last ten years throughout 2012, and while sales were way off we didn’t see much damage to prices (don’t assume I’m leading the cheer on that – but am I wrong?)

    RET:

    150 x rent or less, breaks even with 45% or less down. That work for you? There are more, but you’re not being sincere, are you?

    YVRHSG and KC:

    Nov 2012 median prices for Bby apartments:361K 2011? $355. Coq. detached? $725k now, $700k last year. MR detached? $475,500 now, $470,900 last year. MR apartments, $259,950 now, $248,950 last Nov. North Van apts -$375 now, $350 last year. Richmond detached $1,070,000 now, $948,500 last Nov. Van East detached $869,000 now, $$851,000 12 months ago, attached $598,000 now, $585,000 12 months ago, apts, $339,800 now, $320,000 last Nov. Westside attached $908,500 now, $778,500 last Nov. apts. $468,500 now, $465,000 last Nov.

    Prices have clearly dropped in other areas as well, but to describe this market as rapidly falling is just inaccurate.

    Dos Equis:
    “I cashed out 100% gain on a west side home in under 10 years – I did not expect Central Bank to back the bubble in 2008; when they did, I simply cashed out and will forever sit on RE sidelines.”

    Tough to lose money selling at a profit. BTW, is it cheaper for you to rent now, or buy? We both know the answer to that, right? Good for you. (Mind you, 100% gain in ten years is what you’d get if you bought all cash, no? With leverage you did way, way more I’d wager). Tough for me to imagine this market will go higher.

    • “but to describe this market as rapidly falling is just inaccurate”

      Who said anything about ‘rapidly’? You. You’re going from ‘flat-lining’ to ‘prices have clearly dropped in other areas as well’.

      The region will be around -4% YOY in mid-winter for same-sales. That is not what I would characterize as ‘flat-lining’. In real terms that’s -6%. When prices fall at -10% YOY or more I’ll call it ‘rapid’. I am not predicting this as most likely but am also not calling it unlikely.

    • Real Estate Tsunami

      Rob,
      Let’s just wait a couple of months.
      Most pundits now agree that the spring of 13 will define the direction of Re prices in the Lower Mainland.
      I, for one see a REAL ESTATE TSUNAMI coming, but then again I could be wrong.

  13. Rob -> “Hard to see what’s going to force large volume selling when rates are this low.”

    Answer: Falling prices.
    Falling prices are going to force selling.
    The premise that a very significant percentage of market participants have used for buying/holding will have been lost. (They were only buying/holding at these stratospheric levels based on the idea that prices would continue to gain about 7% per annum going forward).
    Rising interest rates are not necessary for this market to make a very significant descent.
    —-

  14. VYR Housing Analyst:

    You asked: “Who said anything about ‘rapidly’? You.” (with the “you” being pointed at me). It was actually said by KC.

    “KC | 15 December 2012 at 4:44 pm | Reply

    That’s the first time I’ve heard a rapidly falling market described as a “flat line”.

    You also say (in regard to me) “You’re going from ‘flat-lining’ to ‘prices have clearly dropped in other areas as well’.

    Not really. Up in some areas, down in others, in combination I see that as a stagnating, flat-lining market.

    10% YoY isn’t rapid, in my opinion (having seen 40%+ declines YoY before, and 20+% increases YoY recently). 10% wouldn’t get us to fundamentals, either. (Don’t read this as me saying you should invest in real estate in the LM right now because it always goes up. It’s very over-priced right now, although you can still trade profitably).

    VREAA:

    I’d love to hear that listing presentation. How’s it go? Something like this:
    “Mr. Seller, prices are falling, you’re leveraged to the hilt, but interest rates are still low and you’re still able to pay the mortgage. Your dream of making windfall profits as people did last decade are simply not going to come to pass. Therefore, you should sell now, at a loss, and reach into your pocket to get enough money to clear title. How does that sound?

    What? You prefer to just hold and pay the mortgage and wait this out? But…that’s what most potential sellers did all through 2012, and look where it got them!”

    To force large volume selling we need something other than falling prices, especially when people are leveraged. Look at ’82 for an example.

    Now, should governments actually stimulate enough inflation to reduce their effective debt load, and at the same time somehow get enough growth to avoid stagflation, we might see interest rates go up. Without that whip, however, it’s tough to see how falling prices (should they really materialize) motivate anyone to sell except people who have been long enough in the market to sell at a profit (remember, if you bought in 1980 and sold at the bottom in ’82 you were still ahead, even after a 40%-50% drop in the market).

    I can’t see how falling prices on their own will do the trick. Can you explain?

    Ray:

    ” he’s the one clouding Vancouverite minds day in and day out with his righteousness to perpetuate the insanity in his own self interest. ”

    Really? Like, when I say that we’re over-priced, detached from fundamentals, that it’s cheaper to rent than to own, that the market can’t keep going up, and that investing here isn’t wise?

    I can see your point. That’s obviously cheer-leading for…something, I guess. ;-)

    • “Not really. Up in some areas, down in others, in combination I see that as a stagnating, flat-lining market.”

      Then you are stating that -4% YOY is “flat-lining” or you are selectively applying your observations that contradict the statistics. If that’s your definition so be it.

      ‘Flat-lining’, to use the medical vernacular, is more apropos describing sales.

      • In medical vernacular… “FlatLining” is either Code3, “Rapido!” – or you’re dead time… aka: aggressive defib is always preferable to ‘the paperwork’ and notification:NOK…

        Never mind…

        43 eh?…

        [NoteToEd: California ranch, eh.... hmmm.]

  15. YVR – You said it will be 4% – YoY, not that it is already (“The region will be around -4% YOY in mid-winter for same-sales.”), unless I’ve misunderstood you. I’m curious what area your looking at, and of course, I’m not looking at same-sales (we’re obviously looking at different stats), so that could explain the dif between what you’re seeing and what I’m seeing. I’m not characterizing -4% as a flat line. If that’s what we end up getting then fair enough, the flat line call was off, but not by much. 4% down is impressive in that it’s so small. Look at the comparitive inventory numbers here: http://www.robchipman.net/inventory-by-month/ I’m pretty bloody surprised we didn’t see way bigger price drops. We’ve had the second highest inventory this year since….well, since ever, and that’s friggin’ high. All year long people we’re saying “Sellers haven’t adjusted to the new reality”. It’s December now and it looks a lot like sellers never got the memo. Hanging around 20k inventory in the REBGV alone and all we get is a flat-line or -4%? That’s a story in itself, and I haven’t seen any explanation of why aside from interest rates. You got any explanation? 2008 saw slightly higher inventory, lower effective rates, and a much bigger retreat. It’s gotta make you wonder.

    Sales are another whole story. Below ten year average. Here’s a funny thing. Well priced nice listings sell quickly within days of listing last very close to list. Well priced inferior listings sell slowly (4 months +) but also sell very close to list. Not what you’d expect, but it’s what I’m seeing, at least in some places. If this wasn’t Vancouver, where we’re spoiled, that would be normal, but I find it a bit weird here.

    • Rob -> “Hanging around 20k inventory in the REBGV alone and all we get is a flat-line or -4%? That’s a story in itself, and I haven’t seen any explanation of why aside from interest rates. You got any explanation?”

      Explanation: Volume leads price.
      Sales volumes have plummeted; prices will follow. That’s how most markets behave.

  16. Real Estate Tsunami

    Robby,
    You’re rambling on and on.
    Obviously you are a expert in RE in the Lower Mainland.
    Please cut to the chase. RE prices going up or down?

    • Rob stated above: “We’re flat-lining, and will continue to do so for the foreseeable future.”
      He’s not anticipating price drops of any substance.

  17. Real Estate Tsunami

    Well, Rob then see you in Spring 2013.
    See who’s right.

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