Andrii Yalanskyi via Getty Images A

As Canadians' home values grew and grew in recent years, many people became intoxicated with the idea that they were now paper millionaires. Even as their children complained they would never be able to buy a house, many older Canadians with comfy suburban homes cheered on the housing boom — and went shopping. Watch: This is Canada's most expensive condo (story continues below)

Economists have a term for this behaviour: it's called the "wealth effect," and it means that when people feel richer, they spend more — even if they don't necessarily have a cent more to spend than they did before. "If your house is suddenly worth 20 per cent more, even if you don't have more money, you feel richer," said Jocelyn Paquet, an economist at National Bank Financial (NBF). You're being irrational In many cases, the wealth effect is not rational. An increase in your equity doesn't actually make you "richer" on a day-to-day basis. Your stock portfolio may have soared, but it's all stuck in a retirement plan until you turn 65. The value of your house has doubled, but so has the value of everyone else's house, so you're no better off if you sell your home and need to buy a new one. But what really does change is the debt people carry. It's no coincidence that, as house prices rose faster than incomes over the past 15 years, the amount of household debt in Canada soared to nearly $1.70 per dollar of disposable income, from around $1.10 in the early 2000s. And here's the thing: Those equity gains can disappear when a housing (or stock) market cools ... but the debt remains. Being saddled with a whole bunch of debt and not much wealth makes people feel, well, not very rich. Earlier on HuffPost Canada: U.S. vs. Canada Real Estate: Who Won And Who Lost

Vancouver Condos Boom, Toronto Suburbs Swoon In 'Fickle' Housing Market

Toronto's Tech Boom Will Keep Real Estate Frenzy Going: Forecast And now, with Canada's housing market moving into cooling mode, this debt-fuelled "wealth effect" could quickly come to an end, economists at NBF said in a client note this week. "We're not there yet, but the present trend has caught our attention," Paquet and fellow economist Stefane Marion wrote. "If things don't stabilize soon, an eroding wealth effect for consumers will become a headwind to growth in 2019." The National Bank's index of house prices, released Thursday, showed that of 26 Canadian metro areas covered, 40 per cent have seen falling house prices in the past six months. And all but five of them —Montreal and the Ontario cities of Kingston, Kitchener, St. Catharines and Windsor — have seen prices fall from their peak.

National Bank Financial Home prices are past their peak in 21 of 26 Canadian cities.