an index that tracks housing

is there an index that tracks the housing market?

 

URE - Proshares Ultra Real Estate

 

Yes, not out though, Macroshares is going to offer them.


UMM

DMM


They are releasing some very interesting ETFs.

 

URE is far from what Macroshares will be offering sometime in the near future.


URE is an ETF with a basket of stocks.


The Macroshares ETFS will be tied to the S&P/Case-Shiller Composite 10 Home Price Index.

 

You have to define what you mean with "housing market".

Here are two ETFs that could work:

- XHB: Homebuilding companies
- IYR: REITs (companies that own residential and commercial real estate and rent it out)

Another idea is HTR, a closed-end mortgage fund. Not an ETF though.

 

Anybody know how liquid the underlying futures are? Somehow these ETFs/Macroshares need a liquid underlying, hard to arb against physical real estate

 

ITB

 

Like all of the MacroShares, these products work like a teeter-totter. The funds can only be offered in pairs, with equal number of Up and Down shares. If home prices go up, assets are shifted from the Down Macro to the Up Macro, and vice-versa. This paired structure is what allows the MacroShares to be tied to illiquid markets like housing—the only asset they hold is Treasuries, and those Treasuries are simply shifted from one fund to another depending on the price point of the index.

Because they hold Treasuries, the new funds also provide income: both the Up and Down Macros earn interest income, which should add about 4% to annual returns at current interest rates.

There are a few quirks. Like all Macros, the funds are limited in how far they can move. Because they work like a teeter-totter, the down fund can only fall 100% (reflecting a 50% drop in house prices) while the up fund can only rise 100% (reflecting a 50% rise in home prices). After that, the funds will be liquidated and investors will be paid based on the net asset value.

The funds also have a 10-year term: after 10 years, the funds will be liquidated.

It's also important to understand where the funds will trade vis-à-vis the index. The S&P Case-Shiller indexes are reported monthly with a two-month lag; that is, the June index price reflects home prices for the three months ending in April. The funds' net asset values will be based on this lagging index price.