Canada Housing Stocks Are Hurting: Is it Time to Buy?

Canada housing stocks like Equitable Group Inc. (TSX:EQB) are reeling, as the domestic real estate sector is taking a hit in the spring.

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The Canada housing market has attracted international attention in the first part of this decade. Real estates prices continued to soar in the face of the COVID-19 pandemic. However, recent developments appear to have taken some wind out of the sales of this space. Today, I want to take a snapshot of the sector and discuss whether it is worth buying some of the top Canada housing stocks on the dip. Let’s jump in.

Canada housing has been shaken by new restrictions and rising interest rates

Back in March, I’d discussed whether interest rate hikes would have a negative impact on the Canada housing market. On May 4, the Toronto Regional Real Estate Board (TRREB) revealed that home sales in April had plunged 41% in the year-over-year period. Sales fell 27% from the previous month. The report suggested that increased mortgage rates had a significant impact on the willingness of buyers to pull the trigger.

Two alternative lending stocks to consider in this environment

It is looking increasingly likely that Canada housing reached its top in the late winter and early spring of 2022. However, that does not mean that investors should be quick to avoid alternative lending stocks with links to this sector.

Equitable Group (TSX:EQB) is a Toronto-based alternative lender. Its shares have plunged 21% in 2022 as of close on May 4. This has pushed the stock into the red for the year-over-year period.

Investors can expect to see its first-quarter 2022 results on May 18. In 2021, the company delivered annual earnings growth of 31% to $292 million. Meanwhile, single-family alternative loans increased 30% to $14.4 billion. Shares of this Canada housing stock currently possess a very favourable price-to-earnings (P/E) ratio of 6.7. It last had an RSI of 25, which puts Equitable Group in technically oversold territory.

Home Capital (TSX:HCG) is another alternative lender, which is worth watching in this choppy market. Shares of Home Capital have dropped 25% in the year-to-date period. The stock is down 13% from the same time in 2021.

The company unveiled its first-quarter 2022 results on May 4. Net income dropped 1.9% from the previous year to $44.7 million, or $1.02 per diluted share. Meanwhile, mortgage originations rose marginally to $2.76 billion. This Canada housing stock last had a very attractive P/E ratio of 6.1. It possesses an RSI of 23, which also puts Home Capital in oversold levels.

One more Canada housing stock that is worth your attention right now

Bridgemarq Real Estate (TSX:BRE) is the third and final Canada housing stock I’d look to snatch up in early May. This Toronto-based company provides services to residential real estate brokers and REALTORS across Canada. Its shares have dropped 11% in the year-to-date period.

It released its final batch of 2021 earnings on March 8, 2022. Revenue rose to $50.2 million compared to $40.3 million in the previous year. Meanwhile, distributable cash flow was reported at $21.3 million — up from $13.9 million in 2020. Shares of Bridgemarq are trading in favourable value territory compared to its industry peers. Better yet, it offers a monthly dividend of $0.113 per share. That represents a monster 9.3% yield.

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. The Motley Fool recommends EQUITABLE GROUP INC.

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