Canada’s national housing agency just published its latest piece of fan fiction. Canada Mortgage and Housing Corporation (CMHC) has released its 2025 Housing Outlook, the agency’s forecast of various risk scenarios. The agency’s worst case scenario includes American tariffs delivering a devastating economic blow. The agency somehow sees this producing higher home prices, an immigration boom, and less risk for GDP than last year. To entertain the agency’s outlook as an honest attempt at reality, one needs to be on something so strong it would spark another border control issue.
Forecasting The Base, Highs, and Lows
Forecasting is tricky and involves complex variables that can change rapidly. Since reality doesn’t always play out as planned, analysts provide multiple forecasts for a different set of assumptions. They are generally divided into a base case assumption and alternative scenarios for an optimistic or pessimistic outlook.
A base case forecast is one that analysts believe will be the most realistic outcome. We like to refer to it as the Goldilocks’ economy—not too hot, not too cold, but just right. Unremarkable but stable and reliable, kind of like a soccer dad. Not the subject of your wildest dreams, but enough to make you feel lucky.
The optimistic scenario is the best-case scenario, where everything goes right. The economy is booming, unemployment is low, they bring back Crystal Pepsi, and everything is phenomenal. The CMHC called it a high-growth model this year.
The pessimistic scenario is the worst case, assuming nothing goes according to plan. It’s a Ziggy economy—it doesn’t matter how much effort gets put in; everything goes wrong. The economy is in the gutter, unemployment rises, and there’s a recession. Imagine ordering at Tim Hortons but all day, every day for months. That’s how it feels, and the CMHC called it the low-growth model this year.
Today we’re going to focus on the low-growth model. Not because we’re Negative Nellies, but because the CMHC has made a bizarre forecast. Even if we mastered quantum physics and searched the multiverse, there’s no version of reality where this is an honest attempt at a real forecast.
Tariffs, Inflation, and Immigration—Oh My
The agency’s low growth model makes 3 key assumptions—tariffs, inflation, and immigration. The Americans hit us with export tariffs, triggering a recession (which was already largely expected). The agency initially sees tariffs pushing inflation higher, and the central bank lowering rates. America’s tighter border also shifts immigration, resulting in Canada seeing higher immigration than anticipated.
Let’s start with the assumption of rate cuts. The central bank’s primary goal is controlling inflation, and credit liquidity. Bad economies typically mean less demand and falling inflation. Rates are cut to boost inflation and thus demand, but if inflation is already elevated—cutting rates reinforces a temporary inflation bump and makes it into permanent price increases.
Higher prices, rising unemployment, and falling GDP is a dangerous combination called stagflation. The Bank of Canada deserves some criticism, but it’s nowhere close to Weimar or Zimbabwe. The CMHC’s only assumption is that the central bank worries about mortgage payments and home buying.
Canada recently underwent an immigration boom, which wasn’t a great situation for anyone. To help the country deal with the excessive population growth, it has put a two-year freeze on immigration to allow the economy to stabilize. The CMHC believes in an economy being devastated, policymakers will go, “what the heck? Let’s try the destabilization thing again!”
For some reason, the CMHC believes that falling GDP and rising unemployment make Canada the immigration dream. We’re ignoring that immigration slows during economic downturns, and Canada saw that trend begin before the caps. But whatever. We’re not doing math, so why not?
Speaking of not doing math, the CMHC has a unique tariff model. Its low growth model shows GDP contracting 0.5% in 2025 due to the tariff shock. That’s about a fifth of what banks have come up with, including the Bank of Canada (BoC).
GDP would be followed by 1.7% growth in 2026, a rate similar to the high growth scenario in 2025. That’s a heck of a swing. Especially since that would mean the US is replaced as Canada’s primary trade partner. Most banks and the BoC see GDP falling another 3.5%-4% next year if tariffs hit.
The slow economy will slow housing construction in the first year, but don’t worry. By 2026, since the economy rebounds in a boom, and we reverse the immigration taper, pent-up demand will reach a boiling point. All those unemployed immigrants are chomping at the bit to buy a home, sending prices soaring to the highest growth in years.
Canadian Real Estate Prices To Rise With Tariffs, & Unemployment
Even in the CMHC’s nightmare scenario, home prices beat inflation—they have to. At least that’s what they hope since they insure the mortgages on these homes. The average sale price is forecast at 2.6% to reach $704,900 in 2025. That’s double the growth rate observed in 2024. Prices would then see a more modest 0.6% in 2026, before making up for lost time with a 5.4% surge in 2027. If real estate investors are lucky, maybe Canada will lose all of its trade partners. Then perhaps the average home price will hit one million Arctic Pesos.
A little suspicious of this forecast? You should be. Remember the impact of those devastating tariffs on GDP? Last year, with no clear risk to the economy, the 2024 pessimistic forecast saw a contraction 2x the size of the one forecast in 2025 if tariffs hit. Tariffs and unemployment are less risky than a normal year. Cool…
The absurd forecast is the latest sign of the CMHC transformation over the past few years. It went from a public agency that voiced concerns about affordability to one that began to drum up business for housing developments. This first became evident when it misled by publicly claiming building more homes brings prices down, while internal chats show they believed that home prices need to rise to build more. A concept always acknowledged in the appraisal industry, though the opposite is often stated by less scrupulous organizations in their forecasts. No one in particular, obvs.