A Healing Housing Market Should Boost This Stock

Canada Mortgage and Housing Corporation revealed on April 8 that the annual pace of housing starts increased in March after a significant pullback in February.

However, the 192,527 units still came below economist expectations. This construction data suggests that the downward trend is stabilizing. To add to that, the industry is working to keep supply at low levels and will continue to do so into the next decade.

Home Capital Group (TSX:HCG) is a Toronto-based alternative lender. Shares rose 2.07% on April 11. The stock has climbed 13.9% in 2019 so far. In 2018 the company reported a 15.2% increase in mortgage originations to $5.44 billion.

Net income grew to $132.6 billion or $1.66 per share compared to a profit of $7.5 billion or $0.10 per share in 2017. Of course, Home Capital suffered a catastrophic 2017 which saw the company nearly collapse.

That does not mean that its return to strength is not impressive. Home Capital has retained a strong capital position since receiving an injection of liquidity from public and private investment in 2017 and 2018. The company is expected to release its first-quarter results on May 8.

The housing market has not returned to its early-2017 form, but we sit in a much more balanced environment today. The decision from the Bank of Canada to pause rate hikes should give consumers and lenders alike some time to breathe.

Home Capital is a pricey option in an expensive market, but it is worth looking for entry points ahead of its next earnings release.