Hedge Against Home Value

Is there an ETF to hedge against falling real estate prices?

Another avenue on how to do this? Thanks

 

sell a REIT short or buy REIT puts.

 

There is a residential real estate etf (REZ), but the volume is pretty low. It more or less tracks REIT's in general, so as the previous poster said, you could short a highly liquid REIT ETF like VNQ or RWR.

 

how well would you think it tracks? What index could i correlate it against?

 

how much is your house worth today? Is it free and clear? At what point do you want your hedge to kick in? And that point can either be time or price.

For instance, if your house is worth 750k and you figure you will be all right if you sell it for at least 500k in ten years then you have something to calculate against.

 

HGX is a good hedging vehicle. Monthly options (no weeklies). The 200 bear synthetic in Mar2016 is trading at twenty cents under the index at mid. So, 0.20 in edge-loss if you're filled on your index short at mid. Assume maybe 0.40 additional to get someone interested. So say $0.60 (0.3%) in -edge to short "futures" on HGX. Obviously the edge loss will increase the further you go out on duration.

 

House is worth $330,000. Currently have a mortgage on it for $219,000. Bought the house for $319,000. I'd like to be able to sell the house for what I bought it for withing 5-10 years.

 

Well, you're pretty conservative with your needs/wants, so I don't think hedging is necessary considering your goals. I don't think you'll feel too comfortable taking hedge losses. You're not going to cover in the tangible asset.

 

good, so at his point you have 100k of equity you would like to protect, that's a start, and you would like the hedge to kick in at house worth of about 319k in 5 to ten years. So you have about 10k to spend on the hedge. hmmm, so the question is, what is the best way to use 10k?

In otherwords you would be willing to spend 10k on 100k worth of puts at a strike of 319 with a 5 to ten year expiration.

 

All real estate is local. Trying to protect the investment in your home with an ETF is a waste of your time and money.

The best way to protect the value in a home is to buy right in the first place.

Good luck!