Canada's housing market could see a dramatic drop in home prices if the Canada Mortgage and Housing Corporation (CMHC)'s latest prediction becomes reality.

CMHC chief executive Evan Siddall said earlier this week that average home prices could drop between nine per cent and 18 per cent over the coming 12 months, and that mortgage deferrals could jump from 12 per cent to 20 per cent by September.

#ICYMI, our CEO @ewsiddall spoke to #FINA to respond to Parliamentarians on the #housing market in #covid19pandemic. Approx. 12% of #mortgages have been deferred – could be up to 20% by September.
Read his remarks: https://t.co/quF2BxS3b5

— CMHC (@CMHC_ca) May 20, 2020

He said that if the Canadian economy does not recovery sufficiently from the effects of the pandemic, as much as one-fifth of all mortgages could be in arrears.

"The resulting combination of higher mortgage debt, declining house prices and increased unemployment is cause for concern for Canada’s longer-term financial stability," said Siddall.

"A team is at work within CMHC to help manage a growing debt 'deferral clif' that looms in the fall, when some unemployed people will need to start paying their mortgages again."

The prediction stems from the six-month mortgage deferral period that began in March when the pandemic, as well as the subsequent closures and job losses, hit Canadians.

Since then, mortgage deferrals have been issued by banks to more than 740,000 homeowners that, according to National Bank of Canada, could create a "scenario where the rate of residential mortgage delinquencies could materially surpass the highest levels ever recorded."

CMHC predicts 9% to 18% housing price drop. pic.twitter.com/eaokznNj3J

— pierrepoilievre (@PierrePoilievre) May 19, 2020

Some say the prediction is dire, though, given the uncertainty of the present situation and data that shows the pandemic will not have a dramatic impact on housing prices.

Others say it's reasonable given the decline in home sales already witnessed in several housing markets and the CHMC's previous prediction that housing prices will not recover for at least two years.

If the predictions are true, the CMHC said that it may need to "change our underwriting policies in light of these market conditions," including shifting standards for borrowers who have less than a 20 per cent down payment on a property and require home insurance.

Could 5% down payments get harder to come by, or disappear altogether?

Many will be wondering that after seeing the CEO of CMHC's testimony today.

What he said: https://t.co/QLbSQELCqQ

— RateSpy.com 🇨🇦 (@RateSpy) May 20, 2020

"Our support for homeownership cannot be unlimited. Homeownership is like blood pressure: you can have too much of it," said Siddall.