CIBC economists Benjamin Tal and Katherine Judge have issued a stark warning about Canada's housing market, describing a paradoxical situation where prices remain too high for buyers yet insufficient to sustain construction. Their analysis reveals that while nominal prices have retreated from pandemic peaks, the market faces a deeper structural crisis that threatens both affordability and supply.

The economists argue that the industry's economic model is fundamentally broken, particularly in the high-rise segment where delivery costs have outpaced market viability. Tal and Judge emphasize that official housing starts data, which represent decisions made 12-18 months ago, mask a much sharper current downturn in real-time activity. This lagging indicator creates a false sense of stability while developers struggle with unprofitable projects.

The CIBC team warns of a brewing crisis as residential construction workers migrate toward the infrastructure sector, creating a structural labor shortage that will worsen when demand eventually recovers. With household consumption expected to face headwinds from the negative wealth effect of falling home values, the economists conclude that improved affordability for first-time buyers remains insufficient to resolve the broader crisis. Tal and Judge urge policymakers to address the unsustainably high cost of homebuilding across Canada.