Tag Archives: Fear

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

Private Moment: Vancouver RE; World Events – “The Contrast Is Astonishing”

We’re sure ‘painted turtle’ [vancouvercondo.info 15 Mar 2011 9:46am] is not alone in having this kind of experience in recent days“I am sitting in a coffee shop right now. The TV shows the nuclear troubles in Japan, stocks going down, and turmoil in the Middle East. Right below the TV set, 4 men talking real estate: the lower mainland will continue to see price increase, forever, an express train will be built to Squamish and Mission, I am going to buy a rental property there, etc… The contrast is astonishing.”

Animal Spirits, Primitive Superstitions – “Address numbers could hold key to fortune”

From CBC news article (online and video), 9 Mar 2011 [hat-tip Nemesis] –

“Leah Hendry now with how changing your house number, could help you get lucky. An increasing number of Vancouver homeowners are changing the numbers in their property addresses — to attract either good luck or Chinese homebuyers. For $676 you can apply to change your address.”

“The number four may seem innocuous, but for some cultures the word sounds similar to the word for death. “In Chinese, it is pronounced as sssss, and the Chinese [word for] death is zssss,” said Vancouver realtor Alec Zhang. “That is why people do not like the four.” A number ending in four is especially avoided, he said.”

Linda Wener had her home on the market for five weeks before it sold for well below her asking price. Her house number was 3364. “I just never even thought of it,” said Wener. “Somebody said it was ‘bad.’ I said, ‘It’s what it is.'”

The number could have been a factor in how the sale went. “If you keep this number, it may reduce your house value by two, three, even five per cent. If you can change the number to 3468 or 3466, that would be a perfect number for Chinese buyers. “

Vancouver realtor Wayne Hamill says spending $676 to change his house number was a good investment. “8s tend to get a little more attention than houses that don’t, they get a lot more attention than houses with 4s in them”

“We’ve had 8 (address change requests) just in the first week of March.” [That’s gotta be a good sign! -ed.]

Comment: We’ll call this what it is: Primitive superstition; magical thinking; false belief.
Just the kind of lunacy one would expect to make the news and alter behaviour when the herd is running crazy. Animal spirits are pulsing.
Next up: Exorcise your basement. -vreaa

Exquisite Malevolence – Vancouver RE Bull Uses ‘It’s A Wonderful Life’ Quotes To Torture Bears On Xmas Day

For at least five years, there has been fluctuating online animosity between Vancouver RE bulls and bears. The intensity ebbs and flows. High emotion is an inevitable component in a market as distorted as ours.
The Christmas Day post below, initiating a thread at at a largely bullish local blog, reaches such an exquisite point of malevolence that even other bulls admonish the poster.
Archived here to record the sentiment; it will also be referenced in the ongoing ‘Bull Hubris’ sidebar collection.

eyesthebye at RE Talks 25 Dec 2010 11:59pm
“It’s A Wonderful Life
Thought these quotes were appropriate – given the holiday season and on topic for this site.

– “They had to wait and save their money before they even ought to think of a decent home. Wait! Wait for what? Until their children grow up and leave them? Until they’re so old and broken-down that they . . .”
– “Fifteen years ago, a half-dozen houses stuck here and there. There’s the old cemetery, squirrels, buttercups, daisies. Dozens of the prettiest little homes you ever saw. Ninety per cent owned by suckers who used to pay rent to you.”
– “You know, George, I feel that in a small way we are doing something important. Satisfying a fundamental urge. It’s deep in the race for a man to want his own roof and walls and fireplace…”
Hope you bears fulfill your fundamental urge for the coming year..
Merry Christmas and all the best for 2011.”
image above was inserted into the post here]

geezer responds 26 Dec 2010 2:39am
“Keep up the petty and inappropriate gloating ETB, you are going to look sooooo dumb if the market has a major correction. How will you feel if [the bears are] right? I am beginning to understand [their] hostility to bullish sentiment, it is probably caused by people like you.
What if your old house drops to $100k below your purchase price and mortgage rates hit 12%, then you discover you need a new roof or foundations, or both? Any one of those events is well within the bounds of possibility.
I’m a long term bull on Vancouver but I’ve lived through huge price reversals before, if you believe in karma you are begging for a collapse.”

Mainstream Crash Concern Rising – “A Softer Demand Environment For Housing Will Be Unleashed”

You drive over this patch of road daily, oblivious of the risk, until bingo!… who could have known? [Sinkhole photo from Vancouver Sun 12 Dec 2010]
I’m sure you all get the metaphor.
Well, a growing number in the mainstream are coming around to ‘getting it’, too.
The following extracts from articles in the G&M 12 Dec 2010; G&M 13 Dec 2010a

The ratio of household credit market debt-to-personal disposable income hit a record 148.1 per cent in the third quarter.
Bank of Canada Governor Mark Carney said last week that the growth of household debt, which has outpaced incomes, has deepened the vulnerability of the household sector.
The ratio of debt to assets is the second-highest in the G7.
“The trend is still that debt accumulation is faster than disposable income – and that is a worrisome trend over the long haul,” said Pascal Gauthier, senior economist at TD Bank Group. “We should look at this before we reach extreme levels, but the question is, what are extreme levels?”
78 per cent of respondents said they think they have the capacity to borrow even more.

Home ownership rate in Canada is at a record high of about 70 per cent – that’s a bit more than at the peak in the United States.
Home prices are also at record levels and the market is overvalued.

Economists Derek Holt and Gorica Djeric want the central bank chief to update markets on the outlook for housing:
“We still subscribe to the view that house prices face downside risks although the exact timing is uncertain.”
“In our view, low rates for a long time translate into concerns about transferring even greater volumes of homebuyers out of the future into the present.”
“[In future] a softer demand environment for housing will be unleashed.”

Interesting mix of euphemism and metaphor.
You don’t ‘unleash’ ‘softer demand’, you unleash the ‘hounds of hell’.
We’re not heading for a soft landing, we’re heading for a crash.
More are doing the math and realizing this. -vreaa

And from a second G&M article today (G&M 13 Dec 2010b) –
The Bank of Canada has kept borrowing rates low for longer than many economists had expected, offering a steady stream of fuel to the housing market and consumer spending. But in the process, Canadian debt levels have risen to troubling heights.
Gordon Nixon, chief executive officer of the Royal Bank of Canada, the country’s largest bank, said “We are clearly at the limit”; “You do not want significant growth in consumer debt.”
The average debt per household, including mortgage and credit card debt, hit a high this year of $96,100.
Fairfax Financial CEO Prem Watsa is among the influential voices pointing to the impact of soaring debt on the broader economy. Not only are Canadians overleveraged, primarily with mortgage debt, low interest rates have prompted speculative buying that is artificially inflating housing prices, he said.

In February, 2010, Finance Minister Jim Flaherty announced measures designed to make it harder for mortgage borrowers to get in over their head.
But those measures fell short of what some bankers wanted, namely a significant reduction in the maximum allowable amortization period of new mortgages or a substantial broad increase in down payments.

[ Yeah, as we wished for and predicted HERE. -vreaa]

[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

Overextended Owners – “There are now three housewives commiserating about how they don’t know how much longer they can hold on.”

buffates at vancouvercondo.info 21 Sep 2010 10:24am“A while ago [4 May 2010] I posted about my wife’s friend who confessed that she was crying every night about their home budget and how the house was killing them. Well, apparently she found some company. There are now three housewives commiserating about how they don’t know how much longer they can hold on. This is the case and two of those families have a tenant! Roof, furnace, plumbing, tenant vacancy. Any of these very common issues would bury these people. Did I mention they already have a line of credit and credit cards maxed out?”