Canadians: Are We Headed Toward a Housing Market Crash?

The Canadian housing market has surged in key areas this summer, which is great news for stocks like Genworth MI Canada Inc. (TSX:MIC).

Community homes

Image source: Getty Images

The COVID-19 pandemic has wreaked havoc across many Canadian sectors. In the spring, some analysts and economists were worried that this would spill over into the housing market. Canada’s housing market had come back with a vengeance in 2019 and early 2020, and there were fears that the pandemic could derail this progress. Back in May, I’d discussed why the pandemic was unlikely to spur a housing market crash.

Today, I want to take a second look at Canada’s housing market. According to a recent report by RE/MAX, home prices will hold steady into late 2020. However, the knock-on effects of the pandemic are expected to take a toll on the housing market broadly in 2021.

Why the housing market could stay robust into 2021

That same RE/MAX report expects housing market prices to grow another 4.6% in the third and fourth quarter of 2020. In July, I’d suggested that investors should jump on this momentum with TSX stocks that have links to the housing space.

Equitable Group is one of the largest alternative lenders in Canada. Its shares have increased 7.7% over the past three months as of close on September 14. However, the stock is down 22% year over year. In Q2 2020, the company delivered adjusted diluted earnings per share of $2.86 — up 68% from the first quarter. However, this was still down 10% from Q2 2019. Meanwhile, its Retail and Commercial loan principal outstanding achieved double-digit growth over the prior year.

There has been some debate over the state of supply in Canada in recent years. Joshua Gordon, an assistant professor in the Simon Fraser University School of Public Policy, recently argued in an op-ed that this narrative has been overstated. However, what is not up for debate is soaring demand in Canada’s metropolitan areas. This could underpin the housing market into 2021 and beyond.

This is my favourite housing stock to snatch up right now

Genworth MI Canada (TSX:MIC) is the largest private residential mortgage insurer in Canada. Shares of Genworth have climbed 5.9% over the past three months. However, the stock is down 26% in 2020.

In the second quarter of 2020, the company saw total premiums written rise 99% quarter over quarter to $227 million. Housing market activity has continued to surge into the third quarter. This is great news for Genworth. Better yet, new and more stringent lending rules have failed to stymie this momentum. This means that Genworth is seeing more business and better-quality loans.

Higher mortgage originations should propel Genworth in the second half of this fiscal year. Beyond the promising state of the housing market, Genworth is a top dividend option. It has delivered dividend growth for 11 consecutive years. Genworth last announced a quarterly dividend of $0.54 per share, which represents a tasty 6% yield. Moreover, shares of Genworth last possessed a price-to-earnings ratio of 7.6 and a price-to-book value of 0.8. This puts the stock in very attractive value territory. It looks like a screaming buy in mid-September.

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

Profit dial turned up to maximum
Dividend Stocks

My Top No-Brainer, High-Yield Dividend Stock to Buy in 2024

This Canadian company is an obvious choice for investors looking for dependable, high-yield income stock.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

Here Are My Top 5 Undervalued Stocks to Buy Right Now

These five top stocks have performed so well, and yet remain completely undervalued for investors to consider today.

Read more »

Dividend Stocks

Passive Income: 2 REITs to Play Lower Rates

Forget buying an investment property. REITs can provide just as good or better returns with zero management involved. Here are…

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

Grab This 8.5 Percent Dividend Yield Before it’s Gone!

After witnessing 14% value erosion so far in 2024, the annual yield of this Canadian dividend stock looks even more…

Read more »

Payday ringed on a calendar
Dividend Stocks

This 7.7% Dividend Stock Pays Cash Every Month

Freehold Royalties is a TSX dividend stock that offers you a monthly payout and an attractive yield of 7.7%.

Read more »

Dividend Stocks

2 Stocks to Buy Right Now With $2,000

If you have $2,000 that you don't need for a long time, consider these two TSX stocks that could deliver…

Read more »

Top TSX Stocks

3 Stocks to Buy While They Are on Sale

Looking for some of the best stocks to buy? Here are a handful of options that can provide growth and…

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

TFSA investors can rely on these Canadian dividend stocks to earn tax-free regular passive income for decades.

Read more »