Here's why Canada's housing supply crisis is far worse than the US

A new report from the Canada Mortgage and Housing Corporation (CMHC) has put a hard number on what two decades of regulatory inertia and geographic constraints have cost Canadians, and the comparison with the United States is damning.

Using modelling drawn from Organisation for Economic Co-operation and Development (OECD) research, CMHC chief economist Mathieu Laberge found that Canada's housing stock would be approximately 30% larger today and home prices roughly 10% lower had the country's residential construction industry matched the responsiveness of American builders between 2006 and 2024.

Why Canada can't build at the pace the market demands

Three structural forces explain the gap. First, municipal zoning and land-use rules are far more restrictive in Canada than in many American cities.

In many US metropolitan areas, fewer zoning and land-use constraints make it significantly easier for builders to increase supply when demand rises.

In Canada, tighter regulations, particularly in major urban centres, have slowed development and limited the number of homes built. 

Geography is the second barrier. Cities like Vancouver and Montreal are bounded by mountains and waterways that physically restrict outward expansion, constraints that simply do not exist to the same degree across most US markets.

The third factor is demographic: Canada's comparatively small network of large cities leaves households with fewer comparable alternatives when seeking work, reducing the competitive pressure that, in the US pushes developers to respond quickly when demand spikes. 

The toll of regulatory drag is measurable. A separate CMHC study, published in February 2026, found that when a city's land-use rules become 10% more restrictive, house prices rise by approximately 14%. That's a compounding penalty that has accumulated across two decades of municipal inaction on housing approvals.

Vancouver and Toronto, the country's most constrained markets, recorded rezoning approval rates of just 47%. 

Taxation makes the economics even harder

Regulation is not the only obstacle. Taxation accounts for roughly 36% of the cost of a new home in Canada, with development charges, HST and land-transfer taxes making up the largest share.

University of Ottawa economist Mike Moffatt, described the situation as "a cost-of-delivery crisis," one in which it is "simply too expensive, by policy design, to build homes that middle-class families can afford, even before land and profit are considered."

CIBC deputy chief economist Benjamin Tal has been blunter still. "The market is broken, the market is frozen," he said. "It's too expensive to buy, not expensive enough to build."

The Carney government has pledged a response: Build Canada Homes will deploy approximately $25 billion in public financing for prefab and affordable housing alongside $10 billion in low-rate capital, while a 10-year, $51-billion Build Communities Strong Fund targets roads, water and transit infrastructure. GST relief on new homes under $1 million for first-time buyers is also in place.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

Bank of Canada urges calm amid Canada's technical recession label

The Bank of Canada moved quickly to temper recession fears on Monday, with senior deputy governor Carolyn Rogers cautioning parliamentary lawmakers against drawing conclusions from two consecutive quarters of economic contraction.

Statistics Canada confirmed on May 29, 2026 that real gross domestic product declined at an annualized rate of 0.1% in the first quarter. That's the second consecutive quarterly contraction after a downwardly revised 1.0% decline in Q4 2025.

By one standard definition, that sequence meets the threshold for a recession. Rogers, however, pushed back firmly on any rush to apply that label in full.

"Two quarters of annualized contraction in GDP does meet one definition of a recession. But simply the fact that you have to put the term 'technical' in front of it sort of tells you that you need to really look past that one indicator," Rogers told the parliamentary committee.

For mortgage brokers navigating a market already shaped by economic anxiety, the Bank's message is timely.

According to the Ownright Operators Report, which surveyed 1,015 real estate professionals across Canada between March 27 and April 29, 2026, 40% of respondents cited broader economic anxiety, including recession fears, as the primary reason buyers and sellers were holding back, outranking interest rates and employment concerns. 

What the data actually shows

The Q1 2026 result fell short of consensus expectations. A surge in imports, roughly half driven by gold purchases, was the primary drag, partially offset by a build-up in business inventories.

Business capital investment fell 0.7%, its fifth consecutive quarterly decline, while investment in residential structures contracted 2.0% and resale housing activity dropped 9.9% during the quarter. 

However, a flash estimate for April, cited by Rogers before the committee, pointed to a 0.4% rebound in industry-based GDP.

"I think we need to be careful not to put too much weight in any one indicator," she said.

Read more: What Canada's GDP miss means for the next BoC rate call

Implications for the June 10 rate decision

Economists have largely avoided applying the recession label in full.

Derek Holt, vice president and head of capital markets economics at Bank of Nova Scotia, wrote in a note to investors that "normally you need an extended period of contraction in readings like jobs and industrial output to call a recession. We don't have that at this point and there is a higher bar to calling recession on these readings than a handful of months."

Sal Guatieri, senior economist and director at BMO Capital Markets, previously told Canadian Mortgage Professional that the Bank of Canada appeared to be "on hold for the foreseeable future," but cautioned: "If the trade war ends up causing further harm to our economy, the Bank may need to cut rates."

Meanwhile, Toronto mortgage broker Drew Donaldson previously noted in CMP that a weaker economy could eventually lead to lower rates and bond yields, potentially supporting housing activity for qualified buyers despite near-term volatility. 

Rogers confirmed the Bank will incorporate both the GDP figures and the forthcoming May labour force survey into its June 10 deliberations, a rate call now carrying considerable weight for brokers advising clients on timing and product selection.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

What Canada's GDP miss means for the next BoC rate call

Canada slipped into a technical recession in the first quarter of 2026, with Statistics Canada confirming on May 29, 2026 that real gross domestic product contracted at an annualized rate of 0.1%.

The latest figure fell dramatically short of consensus expectations for 1.5% growth and set up a closely watched Bank of Canada rate decision on June 10.

The Q1 decline follows a downwardly revised contraction of 1.0% in Q4 2025, revised lower from the initial estimate of -0.6%. It means the economy has now contracted in three of the last four quarters.

On a year-over-year basis, real GDP was also down 0.1% in the first quarter. 

BMO chief economist Douglas Porter, writing in a research note released Friday, described the result plainly: "There's no sense sugar-coating this sour result, as the economy has clearly been struggling to grow since the start of the trade war."

The Q1 weakness was driven primarily by a surprise 2.4% decline in government spending, which provided a consistent floor under growth in prior quarters, alongside a 3.2% contraction in business investment — its fifth straight quarterly fall — and a near-8% drop in residential investment.

Consumer spending held up at 1.5%, though Porter noted this segment "is now dealing with the energy shock."

What the data means for rate policy

On the rate outlook, Canada's major bank economists broadly align on a June 10 hold.

Andrew Hencic, director and senior economist at TD Economics, argued in a May 29, 2026 research note that the headline miss likely overstates the true weakness.

"The disappointing first quarter figure likely overstates the weakness in the economy as net trade remains noisy and materially subtracted from first quarter growth," Hencic wrote.

He pointed to a strong April flash estimate, a projected 0.4% monthly rebound, as evidence that Q2 should see a bounce-back.

His conclusion was direct: "Our view remains that as the economy continues to operate below capacity, and if the inflation shock fades, the Bank of Canada will remain on the sidelines."

CIBC economist Katherine Judge echoed that view, concluding that the positive momentum implied by the April reading would keep the Governing Council on hold. 

Porter was equally direct on rate-hike talk: the economy, he argued, "is in no condition to deal with higher rates." 

A bounce-back that depends on trade

The Q2 outlook hinges on forces largely outside the Bank's control. Porter acknowledged that a trade deal or lower energy prices would support a rebound, but cautioned that "we can't necessarily rely on either just yet."

Exports fell 4.1% year-over-year, a direct casualty of United States tariff pressure, while business investment continued its retreat as firms held back capital spending pending greater clarity on the trade relationship.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

What the new Fed chair means for Canada

Kevin Warsh was sworn in as the 11th chair of the Federal Reserve on May 22, 2026, replacing Jerome Powell after an eight-year tenure.

For Canadian mortgage brokers, the leadership change carries real implications, even though the Fed sets no policy in Ottawa.

The Fed's approach to interest rates directly influences US Treasury yields, which in turn shape Government of Canada bond yields and, by extension, Canadian fixed mortgage rates.

That transmission channel makes Warsh's every move relevant to brokers advising clients on rate-sensitive decisions here at home.

What kind of Fed chair will Warsh be?

Warsh was viewed by some observers as a surprisingly hawkish pick, having repeatedly highlighted the inflation risks posed by lower interest rates, yet Trump will likely still expect his new chair to pursue rate cuts, potentially complicating the outlook for the Bank of Canada. 

Odeta Kushi, deputy chief economist at First American, told Mortgage Professional America that leadership changes are unlikely to materially alter the Fed's policy direction overnight.

"Although the chair influences communication and risk framing, policy is ultimately set by a committee where the chair holds just one vote," she said. 

Doug Porter, chief economist at Bank of Montreal (BMO) in Toronto, made a similar point when speaking to Canadian Mortgage Professional earlier this year.

"What I find interesting is that financial markets, which know darn well what's going on here, are really not pricing in anything unusual for the rest of the year," he said. 

"So despite all the noise around the Fed, the market’s still pretty comfortable that nothing really unusual is going to transpire for US interest rates this year, because I think the view is that the governance structures there will not allow a new Fed chair to just rule the roost and do whatever they want."

What this means for Canadian fixed mortgage rates

For the millions of Canadians navigating the mortgage market in 2026, conditions remain difficult.

Five-year bond yields have risen by 0.35 to 0.40 percentage points since the Iran conflict began, and most forecasts now place bond yields in the 3.0% to 3.5% range through 2026, with an upward bias. 

Read more: Bond yields hit their highest level this year

A large divergence between Fed and Bank of Canada policy could also put pressure on the loonie — something brokers should monitor closely when advising clients locked into or considering variable-rate products. \

The Bank of Canada held its overnight rate at 2.25% at its April 29, 2026 rate announcement, with its next decision scheduled for June 10, 2026.

The broker's bottom line

Brokers should resist framing the Warsh appointment as an automatic tailwind for lower rates.

While Warsh is seen as more willing to cut rates than Powell, major economic obstacles — including 3.8% US inflation, elevated energy prices, tariffs, and resistance from other FOMC members — make a quick reduction in mortgage rates unlikely, with most analysts suggesting rate drops won't materialise until late 2026 or 2027 at the earliest. 

For clients navigating renewal decisions in a high-rate environment, the Warsh era is one of watchful waiting, not yet a reason to lock in, hold off, or pivot strategy.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

New report predicts BoC rate holds, warns of rocky summer ahead

Canada's economy entered 2026 on surprisingly firm footing. But elevated oil prices, mounting trade uncertainty and a slumping Quebec labour market are now darkening the horizon. Mortgage professionals will feel the effects on their clients' borrowing decisions before the summer is out.

That is the central message of Desjardins Group's latest economic outlook, which keeps the Bank of Canada on hold while warning that the path ahead is considerably more fraught than it appeared at the start of the year.

The report, which covers both the Canadian and global economy, captures a moment of fragile resilience that belies a string of accumulating risks.

Oil shock offers a mixed blessing for Canada

The persistence of conflict in Iran, which has spread throughout the Persian Gulf region according to the Desjardins report, has kept crude oil prices hovering around US$100 per barrel and is expected to hold them elevated over the coming months.

For Canada, a net energy exporter, this dynamic cuts both ways.

On the positive side, Desjardins expects elevated oil prices to lift business investment and net exports, particularly in the energy sector, providing a modest boost to federal revenues and supporting activity in Alberta and other resource-heavy provinces.

Added to that, fiscal measures including a temporary fuel tax cut and the expansion of the Goods and Services Tax (GST)/ Harmonized Sales Tax (HST) credit — scheduled to roll out on June 5, 2026 — are expected to cushion the blow to household consumption from higher energy prices, according to the report.But the same oil shock is feeding inflationary pressure that complicates the Bank of Canada's ability to act. The Bank of Canada is likely finished moving rates for the rest of 2026, according to Dr. Sherry Cooper, chief economist at Dominion Lending Centres Group (DLCG).

She argued that April's consumer price index jump was essentially conflict-driven noise the central bank can look through.

Desjardins reaches a similar conclusion, noting in its May 2026 report that the upcoming Canada–United States–Mexico Agreement (CUSMA) joint review represents a notable headwind that should keep the Bank on hold in the near term. 

On April 29, 2026, the Bank of Canada confirmed it is holding its overnight rate at 2.25%, with the next rate decision scheduled for June 10, 2026. 

Quebec's labour market raises regional red flags

While the national outlook is cautious, Desjardins' May 2026 report singles out Quebec as a province facing distinct and compounding pressures.

The firm cut its 2026 real GDP growth forecast for Quebec from 0.8% to 0.6%, citing a run of softer data over the past month.

Quebec's labour market is, by Desjardins' account, in a slump. April's employment figures showed the province recorded the steepest employment decline in the country, with full-time jobs posting the greatest losses.

Quebec accounted for a drop of 43,000 jobs last month. That's nearly the entire national decline, with that province also bearing most of the cumulative loss of 112,000 positions recorded across Canada this year.

This compounds a slowdown that was already evident before the Middle East conflict began, with real GDP in January sitting 0.7% lower than it was 12 months earlier.

CUSMA review looms as the summer's defining risk

Desjardins frames the CUSMA joint review as among the most significant economic events of the year, and one that has a direct bearing on the Bank of Canada's rate path.

The review introduces the kind of structural uncertainty — across industries from energy and agriculture to manufacturing — that tends to delay both business investment and household borrowing decisions.

Desjardins, for its part, anticipated a longer-than-consensus period of high oil prices and, as a result, says its outlook for the Bank of Canada and the US Federal Reserve remains largely unchanged from earlier in the year.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!