Canada markets closed
  • S&P/TSX

    20,197.61
    +15.69 (+0.08%)
     
  • S&P 500

    3,901.36
    +0.57 (+0.01%)
     
  • DOW

    31,261.90
    +8.77 (+0.03%)
     
  • CAD/USD

    0.7790
    -0.0009 (-0.12%)
     
  • CRUDE OIL

    110.35
    +0.46 (+0.42%)
     
  • BTC-CAD

    37,855.51
    +151.38 (+0.40%)
     
  • CMC Crypto 200

    650.34
    -23.03 (-3.42%)
     
  • GOLD FUTURES

    1,845.10
    +3.90 (+0.21%)
     
  • RUSSELL 2000

    1,773.27
    -2.96 (-0.17%)
     
  • 10-Yr Bond

    2.7870
    -0.0680 (-2.38%)
     
  • NASDAQ

    11,354.62
    -33.88 (-0.30%)
     
  • VOLATILITY

    29.43
    +0.08 (+0.27%)
     
  • FTSE

    7,389.98
    +87.24 (+1.19%)
     
  • NIKKEI 225

    26,739.03
    +336.19 (+1.27%)
     
  • CAD/EUR

    0.7372
    +0.0007 (+0.10%)
     

Housing Market: Will the Canadian Housing Market Decline?

·3 min read
House Key And Keychain On Wooden Table

Canada’s housing market has been on overdrive this year after already going through a record-breaking year. There were several predictions for a major decline in housing prices, including an 18% decline predicted by the Canada Mortgage and Housing Corp. (CMHC).

The resilient housing market completely discredited the naysayers.

“The housing market is on fire, and there doesn’t seem to be anything to put out the fire.” These are the words of Sal Guatieri, a senior economist at the Bank of Montreal. Robert Kavcic, another senior economist at the bank, is warning that Canada is “playing with fire” right now, indicating that the housing bubble could burst soon.

Rapid growth due to unusual reasons

The Deputy Governor at the Bank of Canada has said that the institution has noted the rapid rise in housing prices in recent months. Lawrence Schembri attributes this rise to “unusual factors” resulting from the pandemic.

Many Canadians have been forced to stay and work at home due to the pandemic, and they want larger living spaces to accommodate their needs. However, many homeowners are reluctant to put their properties on the market. The lack of supply and relentless demand has rapidly developed the housing market into a bubble – a bubble that continues to negate logic.

Short-sellers continue losing

Short-sellers targeting businesses connected to property and household debt, particularly Canadian banks, to bet on a housing market crash are currently losing money. Marc Cohodes is a high-profile short-seller who had short bets on Home Capital before realizing short bets do not bode well with Canadian banks.

The Big Five Canadian banks are national entities with the kind of economic moats that are wide enough to weather the harsh conditions. Jonathan Cooper from MacDonald Realty Vancouver said that he is aware of the short-sellers betting against the real estate market in the city. He is convinced that the short-sellers will continue to lose because the market will not crash.

Buy-and-hold stock to consider

The Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is one of the prime targets for short-sellers hoping for a major market crash. The financial institution’s spokesperson told CBC News that the bank restricted short-selling and options trading for some securities across North America. Presumably, this is a precautionary measure to prevent another situation like the GameStop saga earlier this year.

TD is not a likely losing bet for income investors. It is the only financial institution that reported both top and bottom line growth during the financial crisis in 3008. The Canadian financial institution has a prolific 164-year dividend payment streak. It is easily a stock that many investors consider to be a safe and reliable buy-and-hold-forever investment.

Foolish takeaway

The Canadian housing market does not seem like it will crash despite all the challenges it faces. Short-sellers have wanted the Canadian housing market crash to occur for several years to no avail. It remains to be seen whether a significant correction might occur. However, TD could be a viable investment for you to consider despite a housing crash.

The post Housing Market: Will the Canadian Housing Market Decline? appeared first on The Motley Fool Canada.

More reading

Fool contributor Adam Othman has no position in any of the stocks mentioned. David Gardner owns shares of GameStop.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2021

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting