Here’s Why I’m Betting Against a Canada Housing Crash This Year

The Canada housing market looks stronger than ever. Investors should target stocks like Genworth MI Canada Inc. (TSX:MIC) today.

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

Image source: Getty Images

Towards the end of 2020, I’d discussed the state of the Canada housing market ahead of the new year. At the time, I’d explained why I was unconvinced that this hot market would cool in 2021. I’m still bullish on the Canadian real estate space in the middle of January. Today, I want to discuss why I’m betting against a crash or even a small correction this year.

Canada housing: The pandemic has boosted demand

By the spring of 2020, it had become apparent that the COVID-19 pandemic would be a radically destabilizing force on a social, economic, and political level. There have been calls for a Canada housing crash for over a decade now. Naturally, the pandemic brought the bears out of the woodwork. The pandemic would finally prick the housing bubble!

Sales did take a hit during the initial weeks of the spring 2020 lockdown. However, the Canada housing market bounced back in a big way during the summer. Rather than cool the market, the pandemic seemed to spur demand in major metropolitan areas. This has been especially true for detached homes.

A survey from Nanos Research Group showed that over 50% of Canadian respondents believe home prices will rise over the next six months. This kind of optimism has not been seen in a decade.

Why you should be bullish for 2021

Experts were split on the Canada housing market ahead of the new year. However, bullish sentiment has started to take hold. Royal Bank Economics recently projected that the national benchmark price will grow by 8.4% in 2021 and reach $669,000 this year. This benchmark rose by 8.5% in 2020, nearly five times the growth rate of the previous year. Royal Bank predicts that low rates and tight demand-supply conditions will continue to underpin the Canada housing market in 2021.

The Canadian population was stagnant in the second half of 2020 due to the pandemic. Immigration targets are set to increase to 400,000 annually in the years ahead. We can expect a return to population growth once the pandemic is in the rear-view mirror. This will fuel a housing market dealing with low supply.

Two Canada housing stocks to consider today

Canada’s housing market looks poised to put together another banner year in 2021. Investors should turn their attention to stocks linked to the Canada housing market.

Genworth MI Canada (TSX:MIC) is still one of my favourite housing and dividend stocks. It is the largest private residential mortgage insurer in the country. That means it is positioned to benefit from improved housing activity. Its shares have climbed 30% over the past three months as of close on January 14.

This stock has delivered dividend growth for 11 consecutive years. It currently offers a quarterly dividend of $0.54 per share. That represents a solid 4.9% yield. Better yet, Genworth stock boasts a favourable price-to-earnings (P/E) ratio of nine and a price-to-book (P/B) value of one.

Equitable Group (TSX:EQB) is the second Canada housing stock that investors should consider right now. It is one of the top alternative lenders in the country. Like Genworth, a strong housing market bodes well for this company. Its stock has increased 36% over the last three months.

In Q3 2020, Equitable Group’s adjusted earnings per share rose 30% year over year to $4.13. Meanwhile, it declared a quarterly dividend of $0.37 per share. That represents a modest 1.3% yield. Shares of Equitable Group possess an attractive P/E ratio of nine and a P/B value of 1.2.

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 owns shares of ROYAL BANK OF CANADA.

More on Investing

Tired or stressed businessman sitting on the walkway in panic digital stock market financial background
Stocks for Beginners

Buying These 2 Stocks Is a Good Way to Hedge Against a Falling Market

Investors looking to hedge against a stock downturn should consider these two stocks as viable long-term picks.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

How I’d Invest $1000 in February to Make Easy Passive Income

Looking to earn some extra passive income in February but don't have much cash? Build an easy portfolio with these…

Read more »

The sun sets behind a high voltage telecom tower.
Energy Stocks

2 Utilities Stocks With Sought-After Stability

Here's why Fortis and Hydro One are two top utilities stocks long-term investors may want to consider right now.

Read more »

clock time
Tech Stocks

3 Top ‘Future’ Stocks to Hold for the Rest of This Decade

Canadian growth stocks like Constellation Software are starting to look appealing.

Read more »

Coworkers standing near a wall

Is Restaurant Brands International Stock Worth Buying in February 2023?

After an impressive rally, does restaurant stock QSR have more room to grow, or is it already fairly valued?

Read more »

financial freedom sign

Millionaire by 40: Top 4 Ways to Hit Your 1st Million

Canadians who want to hit the millionaire milestone by the time they hit 40 may want to target growth stocks…

Read more »

Dollar symbol and Canadian flag on keyboard
Stocks for Beginners

2 Canadian Stocks I’ll Be Buying Hand Over Fist in 2023

There are some great Canadian stocks on sale right now. Here's a duo of companies I'm buying that you may…

Read more »

Women's fashion boutique Aritzia is a top stock to buy in September 2022.
Stocks for Beginners

Has ATZ Stock Bottomed Out?

Has ATZ stock finally bottomed out after losing nearly 10% of its value in 2022? Let’s find out.

Read more »