The Housing Market Could Drop Very, Very Quickly Before 2021!

Invest in Alimentation Couche-Tard to protect your capital from the effects of a housing market crash that could happen very soon.

| More on:
Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House

Image source: Getty Images

The Canadian housing market is continuously a confusing part of the economy. The high-risk real estate segment has managed to elude the price corrections that analysts and experts have been predicting for years. For the third year in a row, Toronto has been named among the at-risk housing price bubbles worldwide.

According to the latest UBS Global Real Estate Bubble Index, Toronto is the third most at-risk housing bubble behind Munich and Frankfurt. It is the only North American city among the cities which are most vulnerable to a major correction.

Unlike the previous years that Toronto has been in the UBS report, this year could finally be the time that the bubble bursts and sends housing prices crashing down in Toronto and the rest of the country.

Increasing prices

The Toronto Regional Real Estate Board (TRREB) released data to support the troubling situation. Based on TRREB’s data, the average selling price of homes in the Greater Toronto Area (GTA) has reached alarming levels. In August 2020, the average selling price of residential real estate in GTA reached $1,000,000 with a 20% year over year increase.

Detached properties have even higher average prices touching the $1.2 million mark. Canadian housing outside GTA is also becoming expensive. Royal LePage predicted that median housing prices in the country could rise to $700,000 by the end of the year.

Rising debt levels

Mortgage debt is generally a good debt in better financial circumstances. Taking on a debt that will result in you owning something that has immense long-term value makes sense. However, the Canadian debt load has significantly grown over the years. The total debt for Canadians is growing alarmingly faster than the gross domestic product (GDP).

The economy is barely beginning to recover from the effects of the pandemic. The mortgage debt to GDP ratio a decade ago was 59.02%. The ratio in Q2 2020 was 84.28%. This is an unprecedented level that indicates a housing market crash could happen at any time.

Protecting yourself from a housing crash

A significant price correction could have a ripple effect that could well send entire stock market crashing. You need to consider making defensive money moves to protect yourself from the effects of a housing crash. I would advise considering a stock like Alimentation Couche-Tard (TSX:ATD.B) to protect your capital in case a market crash happens.

Alimentation is a multinational convenience store operator with more than 14,000 locations worldwide. It is an essential business that can continue generating revenue despite a faltering economy. Additionally, its international exposure can offset any losses from domestic operations to protect its revenue.

The company has enjoyed significant success over the last few years through its aggressive expansion strategy. The company sports a solid balance sheet that it is using to continue funding acquisitions and growth.

Foolish takeaway

Canadians are alarmingly over-leveraged in 2020. The worsening debt crisis, along with the housing bubble, could finally send the housing market reeling from decades-long high prices. It is crucial to protect your capital by considering defensive investments that can weather the incoming storm.

I think that stocks like Alimentation Couche-Tard could provide you with sufficient protection from the headwinds of a housing market crash.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends ALIMENTATION COUCHE-TARD INC.

More on Dividend Stocks

investment research
Dividend Stocks

Young Investors: Create Cash Flow With This Top Dividend Stock

If you're a young investor looking for cash flow, you need a strong dividend stock and solid banking program designed…

Read more »

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

3 Superb Dividend Stocks I’m Ready to Buy

The market is full of great options for income-seeking investors. Here are three superb dividend stocks to buy now.

Read more »

Payday ringed on a calendar
Dividend Stocks

Gen Z Investors: Create a Stable Passive-Income Stream of $188/Month for Retirement

This passive-income stock is perfect for Gen Z investors who don't have much to invest but want to see stable,…

Read more »

exchange-traded funds
Dividend Stocks

2 ETF Bargains You Shouldn’t Miss in 2022

Index ETFs are only discounted when there is a market-wide slump, which is rarer than sector-specific dips, so you should…

Read more »

House Key And Keychain On Wooden Table
Dividend Stocks

2 Real Estate Stocks to Add Growth to Your Portfolio

The right real estate investments, whether they are properties or real estate stocks, usually offer a decent mix of income…

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

2 Canadian Energy Stocks With Ridiculously Fast-Growing Dividends

Canadian energy stocks are gushing cash and there's plenty left for shareholders. Here are two stocks for ridiculously fast-growing dividends

Read more »

retirees and finances
Dividend Stocks

Retirees: 2 Top TSX Dividend Stocks to Buy for TFSA Passive Income

These industry leaders pay attractive dividends for a portfolio focused on passive income.

Read more »

Canadian stocks are rising
Dividend Stocks

2 High-Quality Real Estate Plays to Buy for High-Yielding Dividends

Take advantage of the housing market cooldown by investing in these two quality REITs.

Read more »