If we had a loonie for every person who believed, “You can never lose money in real estate.”  Unfortunately, many well-meaning older folks ignorantly aided and abetted younger folks into a massive housing bubble. Many are doing the same thing now with corporate securities markets back at historic highs.

The masses are increasingly realizing and regretting capital allocation mistakes that they’ve made, and, as usual, many are looking for others to blame. Many co-signors are in a particular world of pain, as Ron Butler explains in the segment below.

Back in 2020, 2021, 2022 Canada had the highest numbers of Co-signer Mortgages in its history, at one point over 25% of Mortgage applications for Purchases had Co-signers, FOMO, Multiple Bids & desperation to buy caused many parents to sign on to Mortgages to help their adult kids buy homes. 5 years later some of those parents want OFF those mortgages And it ain’t easy! Ron explains. Here is a direct video link.

Remedies from here include cutting losses or throwing more good money after bad. Neither is appealing; however, lasting financial enlightenment can be achieved by those who are willing to admit, repent, and reform their behaviours.

At all education and wealth levels, it is common for humans to believe that recent price trends, no matter how extreme and irrational, will continue indefinitely. And yet, everything is a cycle.

In the immortal words of Bob Farrell (his 10 market rules are summarized below):  There are no new eras; markets tend to return to the mean over time, and the public buys most at the top and least at the bottom.

So far, since the cycle peak in February 2022, Canadian home sale prices have fallen about 18% nationally, and many lay people and would-be experts are proclaiming a bottom. But with for-sale listings leaping and prices just back to May 2021 levels, still some 8x the median household income, history suggests that more mean reversion is coming.

In Bob Farrell’s timeless observation: “Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.”

Would-be sellers are learning once more that real estate (especially when it’s richly valued) tends to be an illiquid asset, while debt requires monthly payments.

Real estate, the most widely held and leveraged asset class, has led the harshest economic downturns historically. On the upside, the few who have cash, value discipline and patience tend to reap extraordinary buying opportunities in the end.