Housing market, meet the stock market.

You two have a lot in common, though plenty of people believe you're worlds apart. They think the housing market is a very smart place to invest, while stocks are treacherous. They're half right. Stocks do have a nasty side, but so does residential real estate.

We may be seeing it emerge in the latest resale housing numbers. Sales across Canada fell 12 per cent on a year-over-year basis in November, and prices dipped almost 1 per cent. Vancouver sales were down 29 per cent, and prices fell 1.7 per cent; Toronto sales fell 16 per cent, while prices moved 1.6 per cent higher.

Story continues below advertisement

There's no consensus on what's ahead for real estate – forecasts for price declines of 10 to 25 per cent are floating around, and yet there's also a view that low interest rates could pump some life back into housing as the spring buying season begins. But our mission here is not to say where the housing market is going. Rather, it's to wise people up to the fact that house prices in Canada have fallen hard before, and taken years to rebound.

Data from the Canadian Real Estate Association show home prices have fallen six times on a calendar year basis over the past 30 years. In Calgary and Vancouver, they've fallen in nine years; in Toronto, five years. The S&P/TSX composite index, the benchmark for Canada's stock market, has fallen 10 times since 1980 with dividends factored in.

No question, stocks are a rougher ride. The S&P/TSX composite index lost about one-third of its value in 2008, while the housing market's worst fall on a national basis in the past 30 years was the 4.6 per cent decline in the mid 1990s. U.S. housing prices fell about 40 per cent over a period of a few years late last decade, but that's not a likely outcome here because mortgage lending is done on a much sounder basis in Canada than it was in the United States in the prerecession period.

Canadian housing market slumps tend to be comparatively mild, but they can last for years. After reaching the $158,000 mark in 1994, national average prices didn't hit that level again until 1999. In Toronto, prices peaked at $254,197 in 1989 and didn't see that level again for more than 12 years.

None of this matters to people who own homes they'll live in for many years to come and thus shouldn't care much about the current value. You might feel differently if you're a baby boomer who plans to sell the family home soon to help finance your retirement. The same applies if you bought recently and expect rising prices to carry you into a bigger home in a few years.

Today, only long-time home owners will remember periods when house prices fell. Toronto hasn't seen a down year for housing since 1995. The national market has had just one down year since 1998, and it was a mere blip. After falling 0.7 per cent nationally in 2008, prices rose about 5 per cent the following year.

After many years of gains, the housing market of today is reminiscent of the stock market after the big runup of the 1990s. It's obvious in retrospect that stocks were vulnerable to a decline then, notably technology stocks. But at the time, there was plenty of investing commentary explaining why the market deserved to be where it was.

Story continues below advertisement

The same thing is happening in the real estate market. In expensive cities like Toronto and Vancouver, it's argued that houses are a good investment because factors like immigration and the allure of living in a sophisticated city will keep prices rising. But there's a counterargument for all of these points.

Take immigration, for example. It's certainly a support for housing, but some observers say it's not enough to soak up all the houses being built these days. Urban charm can support high prices, but the situation in Vancouver and Toronto suggests there are limits.

Stocks have risen a bit more than 9 per cent annually since 1980 (including dividends), and houses about 5.6 per cent. But the rough periods along the way can deliver a psychological jolt if you're not prepared for them. Lots of investors had too much exposure to stocks heading into the crashes of 2001-02 and 2008-09 because they believed past performance would be repeated.

These people set themselves back financially by over-emphasizing a risky asset – stocks. You can make the same mistake with housing.

For more personal finance coverage, follow me on Twitter (@rcarrick) and Facebook (Rob Carrick).