So I'm a bit surprised that we don't see instruments advertised for
retail investors who want to hedge on home purchases. This situation
seems tailor made for a bit of insurance. Buyers who feel that real
estate is priced irrationally ought to be able to buy an instrument to
buffer a precipitous fall in value that may occur over the next five
Such instruments doubtless exist for large investors, but has any
vendor packaged them for retail investors? A real estate boom is just
the right time to deliver a 'bit of insurance'.
So if this hasn't happened yet, why not?
meta: jfaughnan, jgfaughnan, real estate, investment, derivatives,
hedging, hedge, put, option, insurance, investment, finance
>It's often claimed that we've moved from a partially deflated equities
>bubble to a still expanding residential real estate bubble. This is a
>challenging time for anyone considering real estate purchases; one
>hates to buy an asset that may depreciate by as much as 30% over the
>next five years.
In Japan, it fell 70% in three years.
>True, the risk is low if one can hold for at least 10
>years, but that's hardly a guarantee.
In Japan, it is still down by more than half from the peak, after 12
-- Roy L
I think Yale's Shiller has gotten some finance house(s) to start offering RE
One "sort of a" hedge would be one against increases in interest rates, I
japan with its declining population and savings culture, is prone to
deflation. it is unlikely USA will, or can, have japan-like deflation at
zero interest rates. not with 4 million new immigrants lining up to buy a
piece of the rock, and an almost 0% savings rate.
more likely in the USA is a hyperinflation, which of course ends with a
"But when we sat at the table in the kitchen upstairs and got into the
details with the owner, it transpired that this was something of a
'distress sale'. He had to sell, and he had to sell right now, actually
within the next couple of weeks. He named his price - 18,000,000 yen
[~$180,000], just under half of what he had paid for the place when it
was built in 1995"
'course, I was paying Y110,000/mo for an apartment during that period,
so eating Y18,000,000 over 6 years isn't that different from having to
rent a house in Japan.
Cash? Fungible tchotckies? Power tools? Rehabbing repos can be fun
and (reaonably) profitable...
> I think Yale's Shiller has gotten some finance house(s) to start
Brad DeLong made the same suggestion. I did email Prof Shiller but have
not heard back -- he's probably a bit busy for that sort of thing :-).
I'll try to track down the companies.
Did you try google?
Here's one page I found: