The housing market feels stuck right now. And according to a recent CIBC report, the numbers we're seeing might actually be hiding just how stuck it really is.

Benjamin Tal, CIBC's deputy chief economist, put it plainly: "The way to describe the housing market at this point is that houses are still too expensive to buy, not expensive enough to build. So the market is, in a way, broken."

That's not just a catchy line. It's a real problem that's starting to ripple through the entire Canadian economy.

‍

The Numbers Look Better Than Reality

Here's where things get interesting. The Canada Mortgage and Housing Corporation reported housing starts rose 5.6 per cent in 2025, reaching 259,028 units. On the surface, that sounds encouraging. More construction means more supply, right?

Not quite.

Tal argues those figures mask what's actually happening on the ground. The issue comes down to how housing starts get counted. CMHC marks a housing start when concrete has been poured over the entire footing of a building. It makes sense as a measurement point because it shows a project has moved past planning and excavation.

But there's a lag. A significant one.

For large multi-family projects, foundation work can take well over a year before concrete actually hits dirt. "The housing starts that you're seeing now reflect what happened in October of 2024 as opposed to what's happening now," Tal explained.

Translation? The reported increase in housing starts is telling us about decisions builders made more than a year ago. Not what they're doing today.

‍

The Picture in Toronto and Vancouver

CIBC's analysis gets even more sobering when you zoom in on specific markets.

The report estimates that construction currently underway in the Greater Toronto Area could be as much as 50 per cent lower than current figures suggest. In Vancouver, it could be 30 per cent lower.

Think about that for a second. The two markets that desperately need more housing might be building far less than the official numbers indicate.

"I think that we are in the early stages of this correction when it comes to the impact on the economy," Tal said.

‍

Why Builders Aren't Building

So why aren't developers breaking ground at the pace Canada needs?

The math doesn't work.

Home prices climbed dramatically during the pandemic thanks to ultra-low interest rates. But they've fallen more recently as economic uncertainty kept buyers on the sidelines. The condo market took the hardest hit, with prices nationally about 35 per cent below trendline.

Lower property values discourage building activity if developers don't see a clear path to profit. You can't justify the cost of construction if you can't sell units at a price that makes business sense.

Meanwhile, the Canada Real Estate Association expects home sales to climb 5.1 per cent this year to approximately 494,512 transactions after trade uncertainty slowed the market in 2025. That's growth, sure. But it's not the kind of robust demand that makes builders confident about launching new projects.

‍

What This Means for the Broader Economy

Housing makes up a significant chunk of Canada's GDP. And after two decades of rising prices and heightened real estate investment, that share has only grown.

When construction slows, the economic impact spreads.

There's also a wealth effect to consider. When property values fall, homeowners feel less wealthy. That perception pushes more households to save rather than spend.

And it's not just psychology. When home values drop or stagnate, homeowners facing a higher loan-to-value ratio on their mortgage find it harder to tap home equity for additional loans like a line of credit. That limits their ability to borrow and spend.

CIBC's research suggests that the negative wealth effect from falling prices is greater than the boost from rising prices, potentially leading to a hit of roughly $5,000 per household.

Both factors put downward pressure on consumer spending, which is already under strain in many Canadian households.

‍

A Silver Lining for First-Time Buyers?

Lower home prices aren't all bad news.

For first-time buyers who've been locked out of the market, falling prices could finally create an opening. CIBC's report notes that more entry-level buyers entering the market could help offset some of the economic slowdown.

If you've been saving and waiting for the right moment, this might be it. Prices have come down from their pandemic peaks, and while interest rates remain a consideration, the overall affordability picture has improved in many markets.

But Tal warns that falling values aren't a long-term fix for housing affordability.

‍

What Actually Needs to Happen

The cost of building a home needs to fall. And fast.

Tal pointed to the federal government's GST rebate on some newly built homes as a step in the right direction. But he emphasized that municipalities need to move faster to reduce the development charges that drive up the final cost of each unit.

"The reality is, quite frankly, we know what to do. There have been many committees, many research reports," he said. "It's time not for research. It is not time for reports anymore. It's time for action."

High development charges, zoning restrictions, and lengthy approval processes all add costs that developers pass on to buyers. Streamlining those processes and reducing fees could restore the business case for new construction without relying on skyrocketing home prices.

In Surrey alone, 44,300 approved units lack building permits, highlighting how many projects are stalled despite having approvals.

‍

What This Means If You're Buying or Selling Right Now

The market is in a strange spot. Prices have softened but remain high by historical standards. Inventory is tight in many areas, but buyer demand isn't strong enough to push prices higher.

If you're selling, you need realistic expectations. The bidding wars and over-asking offers of a few years ago aren't the norm right now. Properties are taking longer to sell, and pricing strategy matters more than ever.

If you're buying, you have more negotiating power than you've had in years. But you also need to be strategic about location, property type, and your financing. The market isn't collapsing, but it's not racing ahead either.

And if you're thinking about new construction, pay attention to what's actually being built in your area. Those housing start numbers might not reflect current reality.

‍

The Bottom Line

Canada's housing market is sending mixed signals. Official statistics suggest things are holding steady or even improving. But dig deeper, and the picture looks more fragile.

Construction is slowing more than the numbers show. Builders don't see a path to profitability at current price levels. And homeowners are pulling back on spending as property values soften.

For buyers, that creates opportunity. For sellers, it means patience and strategy. For the broader economy, it's a warning sign that deserves attention.

The market isn't broken beyond repair. But fixing it will take more than reports and committee meetings. It'll take real action on the costs that make building new homes so expensive in the first place.

Until then, expect the market to stay stuck in this uncomfortable middle ground. Not cheap enough to buy easily. Not expensive enough to build confidently.

Just... stuck.

‍

Understanding where the market is headed matters whether you're buying, selling, or just trying to make sense of it all. At Coldwell Banker Horizon Realty, we help you navigate these complex conditions with local expertise and straight talk about what's actually happening in your market.