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February 23, 2026 | CIBC: Housing Downturn Worse Than Thought and Bad News For Economy
Danielle Park
A Bank of Canada study estimated that for every dollar increase in home values, spending rose by 5.7 cents. A New Zealand study found that the housing wealth effect had an even greater impact in reducing spending when home prices were falling than when they were rising.
Prices in Canada have fallen more than 20% nationally since February 2022. And since housing activity accelerated by monetary and fiscal policies drove an unhealthy majority of Canada’s GDP growth between 2015 and 2022, the downside of declining prices and activity is also oversized.
The extreme price overshoot earlier this decade didn’t just give homeowners a psychological boost; it also enabled them to borrow more against the value of their homes. Now that debt is weighing heavily as prices fall and loan-to-value ratios rise. For many, the home equity ATM they had relied on is now fully closed.
As I have been noting for the past 5 years, housing-related downturns tend to be multi-year cycles that’ve historically led to the harshest economic contractions. The housing downturn unfolding packs a larger economic impact for Canada than tarrifs.
Recently, more analysts and industry experts have been sounding this alarm. CIBC economists published a report last week noting that “the decline in homebuilding and falling home prices have ‘clear negative’ implications for the economy — and it’s likely to get worse before it gets better”:
Canada’s housing correction drags on, data showed us yesterday, but with the sector representing a bigger chunk of our GDP than most other G7 countries, what does that mean for the economy?
CIBC economists Benjamin Tal and Katherine Judge looked at this question in a report out yesterday, and concluded that not only is the economic impact “not trivial,” the damage is deeper than some official statistics would suggest.
The segment below discusses the CIBC report and Canadian housing trends further.
CIBC Warns Canada’s Housing Correction Is Worse Than the Data Shows (Starts, Condos & the Wealth Effect). Here is a direct video link.
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Danielle Park February 23rd, 2026
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