Canada Housing Is Back! 3 Stocks to Buy Now

Canada housing has shown signs of a rebound, which should push investors to consider stocks like Genworth MI Canada Inc. (TSX:MIC) today.

Community homes

Image source: Getty Images

If there’s one thing investors should have learned over the past decade, it’s to never count out the Canada housing market. Back in early June, I’d discussed whether new lending rules would poke a hole in the real estate rebound. The CMHC banned the use of borrowed funds on a down payment starting July 1. Moreover, the housing authority will also require better credit scores from borrowers.

Many Canadians may have thought that the economic downturn would present an opportunity to jump into a cooler market. However, the Canada housing rebound has materialized faster than even its biggest boosters could have anticipated.

Why Canada housing has bounced back quickly

Canada housing looked very strong to start 2020. Sales were ramping up in major cities, and prices had steadily increased since they took a hit during the correction in 2017. The COVID-19 pandemic had virtually shuttered housing activity across the country. However, the reopening has seen activity ramp up to start the summer.

Inventories have remained low in major metropolitan areas in Quebec and Ontario. Zoocasa, a top real brokerage and online service, has said that these remain sellers’ markets. Consistently low supply and high demand has continued to underpin housing in these provinces. This was one of the reasons I’d suggested investors should jump into housing stocks in late June.

Two alternative lenders to buy in July

Home Capital Group is a top alternative lender in Canada. The company was on the verge of ruin in the spring of 2017 before receiving much-needed support from Warren Buffett. Shares of Home Capital have dropped 40% so far in 2020. However, the Canada housing stock is up 38% over the past three months.

In Q1 2020, Home Capital reported mortgage origination of $1.62 billion — flat from Q4 2019. Adjusted net income fell 22.2% to $29.9 million, or $0.56 per share. Home Capital stock last possessed a price-to-earnings (P/E) ratio of 8.3 and a price-to-book (P/B) value of 0.6. This puts Home Capital in favourable value territory. Moreover, it boasts a fantastic balance sheet.

Equitable Group is another alternative lender worth watching right now. Its shares have dropped 35% so far this year. The stock is up 40% over the past three months. In the first quarter of 2020, the company saw adjusted diluted earnings per share fall 38% to $1.70. However, the board of directors maintained its quarterly dividend of $0.37 per share. This represents a 2.1% yield.

Shares of Equitable Group possess a very favourable P/E ratio of 6.3 and a P/B value of 0.8. Coupled with its dividend, this is a Canada housing stock that looks like a great value pick today.

My top Canada housing stock for the rest of 2020

Genworth MI Canada (TSX:MIC) operates as a private residential mortgage insurer in Canada. Its stock has increased 21% over a three-month span. Shares are still down 33% in 2020. This Canada housing stock offers stability and a rock-solid dividend.

In Q1 2020, Genworth reported net operating income of $117 million. This was up 4% from the previous quarter. The larger transactional mortgage originations market drove growth in its new insurance written. Genworth stock last had a P/E ratio of 6.7 and a P/B value of 0.8. This indicates that its shares are undervalued today.

Meanwhile, Genworth also announced a quarterly dividend of $0.54 per share. This represents a tasty 6.7% yield. Genworth has delivered dividend growth for 11 consecutive years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.

More on Dividend Stocks

stock analysis
Dividend Stocks

1 Dividend Superstar I’d Buy Over TD Bank Stock

TD (TSX:TD) stock may look undervalued, but there are reasons for the price drop. Meanwhile, this dividend superstar has more…

Read more »

A steel grain silo storage tank with solar panel in a yellow canola field in bloom in Alberta, Canada.
Dividend Stocks

Down by 26.77%: Now Might Be the Perfect Time to Buy Nutrien Stock

This TSX stock has seen share prices fall by over 26% from its 52-week highs, but it might be the…

Read more »

Woman has an idea
Dividend Stocks

2 No-Brainer Stocks to Buy Now With $7,000

Two relatively cheap cash cows are no-brainer buys for investors with $7,000 to invest.

Read more »

dividends grow over time
Dividend Stocks

Buy This High-Yield Dividend Stock in July 2024

Buy this high-yielding dividend stock to lock in inflated yield into your portfolio to generate solid passive income for years.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

Where Will Dollarama Stock Be in 3 Years?

Dollarama stock has done incredibly well during economic uncertainty, but what about when the markets recover in the next three…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

TFSA – 2 Canadian Stocks to Buy and Hold for Tax-Free Gains

Canadian stocks like Brookfield Corp (TSX:BN) can make wise TFSA holdings.

Read more »

Doctor talking to a patient in the corridor of a hospital.
Dividend Stocks

3 Things You Need to Know if You Buy NorthWest REIT Today

This REIT holds a super high dividend yield at 7.2%, but before you invest here is exactly what investors need…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How to Turn Your TFSA Into a Gold Mine Starting With $10,000

High-yield dividend stocks can turn a $10K investment in a TFSA into a gold mine over time.

Read more »