GRE tunnel with both endpoints in the same subnet

[Doran Mori]

gre0: flags=9011<UP,POINTOPOINT,LINK0,MULTICAST> mtu 1476
        priority: 0
        groups: gre
        physical address inet 192.168.1.2 --> 192.168.1.1
        inet 10.1.32.2 --> 10.1.32.1 netmask 0xffffffff

ping replies are not seen, sniffing gre0 interface shows icmp requests
dmesg shows:
arpresolve: 192.168.1.1: route without link local address

If I change the endpoints so they aren't in the same subnet it works.

I ask why?

dmo