Market decline

Will the Canadian housing market decline?

The Canadian housing market has been stretched this year after already going through a record year. Several predictions pointed to a significant drop in house prices, including an 18% drop predicted by the Canada Mortgage and Housing Corporation (CMHC).

The resilient real estate market has 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, senior economist at the Bank of Montreal. Robert Kavcic, another senior economist at the bank, warns Canada is “playing with fire” right now, indicating that the housing bubble could burst soon.

Rapid growth for unusual reasons

The deputy governor of the Bank of Canada said the institution has noted the rapid rise in house prices in recent months. Lawrence Schembri attributes the increase to “unusual factors” resulting from the pandemic.

Many Canadians have been forced to stay and work from home due to the pandemic, and they want larger living spaces to meet their needs. However, many homeowners are reluctant to put their property on the market. Lack of supply and relentless demand quickly turned the housing market into a bubble – a bubble that continues to deny logic.

Short sellers keep losing

Short sellers targeting real estate and household debt related companies, especially Canadian banks, to bet on a real estate crash are currently losing money. Marc Cohodes is a high profile short seller who made short bets on Home Capital before realizing that short bets did not bode well for Canadian banks.

The Big Five Canadian banks are national entities with the kind of economic gaps wide enough to withstand tough conditions. Jonathan Cooper of MacDonald Realty Vancouver said he was aware of short sellers betting against the city’s real estate market. He is convinced that the short sellers will continue to lose because the market will not collapse.

Buy and hold stocks to consider

The Toronto-Dominion Bank (TSX: TD) (NYSE: TD) is a prime target for short sellers hoping for a major stock market crash. The spokesperson for the financial institution said Radio-Canada News that the bank has restricted short selling and option trading for certain securities in North America. Presumably, this is a precautionary measure to prevent another situation like the GameStop saga earlier this year.

TD is probably not a losing bet for income investors. It is the only financial institution that recorded both growth in sales and bottom line during the financial crisis of 3008. The Canadian financial institution has a prolific 164-year dividend payout streak. It’s easily a stock that many investors see as a safe bet and reliable investment to buy and hold forever.

Stupid takeaways

The Canadian housing market does not look set to collapse despite all the challenges it faces. Short sellers have wanted the Canadian real estate crash to happen for several years to no avail. It remains to be seen if a significant correction could occur. However, TD Bank could be a viable investment to consider despite a real estate crash.


This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .


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