Contracts/Instruments for Shorting Real Estate?

Discussion in 'Trading' started by One, Aug 25, 2002.

  1. One



    Are there liquid contracts or instruments (cash, indices, futures...) for shorting real estate in the US? If so, are there any that allow me to specify types of holdings and or geographic regions? Thanks in advance.

  2. Short the REIT's if you want a real estate play.
  3. One


    Thanks for the quick reply. Though I am an experienced trader, other than reading a few articles here and there I am not too familiar with the REIT market. A couple of follow ups for you or any one else that can respond:

    -is there a source for the mechanics of the REIT market where I can get up to speed quickly (e.g., how are they settled, are they easily borrowed...)?

    -one reason that I hesitated on looking into REITs was that I understood them not to be a 100% property value play but include a management income play (about which I am not as interested). Are there any pure property value plays (commercial or residential) that you know of?

    -I also hesitated because I did not wish to evaluate specific properties held by specific REITs, but perhaps a large, well diversified trust might do. Alternatively, are there any indices (for example the Morgan Stanly REIT index or others) that are tradable?

    -Are options traded on REITS or and of the other realestate markets that you know of.

    Thank you again.

  4. 1) like any other stock;

    2) depends, all a little different;

    3) don't know;

    4) even though our primary business is options, I am not sure.
  5. You may want to look at stocks that have high degree of correlation with the housing market. Stocks like the home builders, or GSE's like Fannie Mae/Feddie Mac, Title insurers, large lenders etc...Many of these are in strong uptrends right now. If housing does drop, these would likely go down also. Some symbols.....


    GSE's: FNM FRE

    Lenders/Title Insurers: CCR NCEN MTG PMI FNF MBIA RDN FAF

    P.S Also iShares for the US real estate market, IYR
  6. One


    Thanks for your comments. I will be using some combination of the instruments you mentioned when I can determine which is best correlated with what I am hedging.

  7. Here is a link to a list of REITS

    The previous replys to your questions are very good.

    I think in particular, the mortgage insurance plays could be very telling - I think they would be a "canary in the coal mine". I don't know how there could be a real estate bust without these stocks getting hit (unless of course, I am wrong).

    While I do tend to believe in the "housing bubble" stuff, I do think once component of the discussion is speculators who are mad that they missed shorting the tech bubble (which seems so obvious in hindsight), and want to be on the next bandwagon - that doesnt mean that the subject isnt valid, it just means you have to be cautious about what is driving the discussion.
  8. One


    Good point and thanks for the link. My primary motivation in posting was to identify a hedge for real estate I own. Under current circumstances I am willing to forego further appreciation for preservation of capital. On the other hand, as I looked into some of the REIT's and FNM, I noticed that their may be trading opportunities as well. The responses were doubly useful.

  9. nitro


    In what time frame?

    If this is in the short to intermedidate time frame, IMHO, you are gonna get crushed.

    #10     Sep 8, 2002