{"id":315004,"date":"2026-02-23T15:58:00","date_gmt":"2026-02-23T20:58:00","guid":{"rendered":"https:\/\/wahi.com\/ca\/en\/?p=315004"},"modified":"2026-02-23T17:00:24","modified_gmt":"2026-02-23T22:00:24","slug":"the-effects-of-canadas-housing-correction-on-the-economy","status":"publish","type":"post","link":"https:\/\/wahi.com\/ca\/en\/learning-centre\/real-estate-101\/buy\/canadian-housing-market-economic-effects\/","title":{"rendered":"The Effects of Canada\u2019s Housing Correction on the Economy"},"content":{"rendered":"

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text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” text_font_size_tablet=”21px” text_font_size_phone=”16px” text_font_size_last_edited=”on|desktop” header_2_font_size_tablet=”36px” header_2_font_size_phone=”25px” header_2_font_size_last_edited=”on|phone” locked=”off” global_colors_info=”{}”]<\/p>\n

Canada\u2019s housing downturn has several major knock-on effects for the country\u2019s economy, including some that you may not have considered before.<\/span><\/p>\n

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By Josh Sherman<\/a> | 3 minute read<\/p>\n

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A new report from CIBC Economics<\/a> lists several major implications of a sluggish real estate market for the Canadian economy. <\/span><\/p>\n

 <\/p>\n

It\u2019s no secret that the slowdown is impacting homebuilding \u2014 as well as employment within that sector and others \u2014 but the CIBC report, entitled \u201cCanadian housing \u2014 Anatomy of a correction,\u201d also notes harder-to-pin-down economic symptoms of a housing downturn.<\/p>\n

 <\/p>\n

For instance, there\u2019s the so-called negative wealth effect. Put simply, the negative wealth effect is the idea that, when home values are declining, households spend less because they have less wealth \u2014 at least on paper. How much less they spend is tough to say, though CIBC, citing two separate research papers, suggests the average Canadian household will spend between $3,600 and $5,000 less annually in response to plunging home prices.\u00a0
<\/span><\/p>\n

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\u201cWhile the economic impact of rising prices is behind us, the impact of falling prices has started to show up, and will be more apparent in the future,\u201d write Benjamin Tal, CIBC\u2019s deputy chief economist, and his colleague, Senior Economist Katherine Judge. \u201cThe negative wealth effect, although hard to quantify, is hurting consumer sentiment.\u201d<\/span><\/p>\n

 <\/p>\n

Fast-rising Canadian real estate values had previously encouraged homeowners to borrow more against their existing equity. As a result, \u201cit is reasonable to expect a further increase in delinquency rates in the coming quarters,\u201d note the CIBC economists (though neither is raising the alarm on this posing a major threat to the economy).\u00a0<\/span><\/p>\n

 <\/p>\n

Although the knock-on economic effects of a weaker housing market are often negative, there are some potentially beneficial implications, too. \u201cLower home prices means improved affordability for homebuyers \u2014 mostly first-time buyers,\u201d the report reads.<\/span><\/p>\n

 <\/p>\n

Since cresting in early 2022, the average price of a Canadian home has fallen by about $110,000, which trims $22,000 off of a 20% downpayment on a typical house, according to the report\u2019s estimate. Over that time period, the overall average downpayment has already decreased by $37,000, and that may partly negate the reduced spending resulting from the negative wealth effect. <\/span><\/p>\n

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