hedge your house?

Discussion in 'Economics' started by marketsurfer, May 27, 2008.

  1. hedging against further housing declines seems like a good move for some people.

  2. By "this", are you refering to the CME real estate contracts? I can tell you all of the reasons to avoid them.
    1) The contracts are very illiquid.
    2) The illiquidity is reflected in wide bid/ask spreads and small size.
    3) The index calculation methodology seems subjective.
    4) There deferred months are priced at large discounts to the front month. That isn't good for short-hedgers.
    5) The "opportunity" would be to buy the Fall/deferred contracts and hope for stabilization in prices so that the futures can converge up to the spot index when housing sales are expected to pick up.

  3. not trading, but using these contracts to hedge your personal home against declines. Yes, i concur the 2 month lag and other items you mention are major negatives. are there other ways to hedge real estate exposure?

    thanks, surf
  4. http://www.tradingmarkets.com/.site/eminis/commentary/guestcommentary/-77000.cfm

    How about hedgestreet housing hedgelets, anyone have experience using these to actually hedge?

  5. I thought hedgestreet.com had no volume AND no open inerest. Besides, it's for undercapitalized pikers. Avoid it.
  6. ProFunds has a mutual fund which is short RE, or you could short RE ETF.

  7. can you provide a bit more data on this ETF-- symbol, data page?

  8. I don't know of a specific short RE ETF, but surely there is one... they've got them for about everything. Or, you could short a RE ETF.... like IYR?

    The symbol for ProFunds mutual fund which is short RE is SRPIX.

  9. http://www.tradingmarkets.com/.site/eminis/commentary/guestcommentary/-77000.cfm

    Decent theory Surfer, but me thinks the actual execution of a hedge would be very difficult to pull off in real life. how many contracts does it take, questions like this come to my mind.

    thanks for the idea, however.

    #10     May 28, 2008