Who belies in the Housing Bubble? http://www.slate.com/id/2130596/ How many of you think that it is good idea to protect the Home Equity through Selling Housing futures or buying Puts on this contract? http://www.cme.com/housing/
(1) On a localized and overall basis, there's definitely a "housing bubble" waiting to deflate. The areas with the greatest price appreciation should experience the most downside. When you look at mortgage statistics, home equity payouts, investment property participation, the number of real estate agents et al, you've got to believe that the "bubble" is really really big. (2) Regarding the new contracts at the CME, I hope those catch on well. My big concern is that it'll be tough to put a precise value on them. They might trade with a wide bid-ask spread at first. Nobody will feel comfortable "stepping out" to do trades. From a speculative perspective, I believe it's best to spread the high-growth markets against the slower-growth markets with those contracts. From a hedging perspective, the contracts are still tough to use because the contract may not correlate well with your neighborhood. You could short-sell the Chicago contract to "protect" your Lincoln Park equity. What if your property loses 10% of it's value but the futures only go down 2% ? How do you adjust? The contracts will have to work out their growing pains. We'll see what happens.