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EV_Ares Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Nov-28-07 11:16 AM
Original message
Time to Hedge Your Home?
Housing prices continue to slide, and analysts see more declines ahead. Should you hedge against a housing crash by betting on a futures market?
by Pallavi Gogoi

In the housing market, the bad news just keeps coming. Nov. 27 gave us the latest release of one leading index which shows that home prices are falling at their steepest rate in 21 years. And there may be much worse ahead: Futures traders are betting that home prices will fall more than 20% in markets such as San Francisco and Miami over the next year.

The latest batch of data was released by Standard & Poor's for its S&P/Case-Shiller home price indexes. The national index of home prices showed a drop of 4.5% from the third quarter of 2006 and the third quarter of this year, and a decline of 1.7% between the second quarter of this year and the third quarter. The 1.7% slide is the largest since the index was first created. "There is no real positive news in today's data," says Robert Shiller, chief economist at MacroMarkets. Shiller developed the index in conjunction with Professor Karl Case and Standard & Poor's (which, like BusinessWeek, is part of The McGraw-Hill Companies (MHP).

Double-Digit Declines
How bad the housing slump will get is certainly open to debate. But some investors are betting that things are going to get much worse before they get better. Futures contracts traded on the Chicago Mercantile Exchange (CME) show that traders expect double-digit declines in nine out of the 10 biggest housing markets in the U. S. The only exception is Chicago, where prices are still expected to fall by 5.6% over the next year.

Link to article: http://www.businessweek.com/bwdaily/dnflash/content/nov...
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demnan Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Nov-28-07 11:25 AM
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1. Interesting concept
One positive note for existing home owners who've been in their homes a few years is that refinancing won't penalize as much as it did a few years ago. You could actually refinance lower and because you have equity lower your payments easier than a few years ago - that's if your credit is still good.
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Warren Stupidity Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Nov-28-07 11:51 AM
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2. Uh, hmmm..., no wait, that is fucking insane.
Short your residence? What? Yo! You freaking live there. If the housing market is down, stay put until it isn't. If you have to sell, oh well... it was only paper money anyway. If you are actually upside down on your house, you made a very bad investment that I rather doubt further speculation is going to rectify.
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EV_Ares Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Nov-28-07 11:56 AM
Response to Reply #2
3. Agree, my opinion. To me a house is where you live and supportf
Edited on Wed Nov-28-07 11:57 AM by EV_Ares
your family. You live there until you decide to move or the company transfers you or you buy another home. To me, not something to play around with or gamble. I might consider it if it was just me and thought it would work out ok. However, that is me and I am probably not the biggest risk taker, it comes down to doing what you feel comfortable with, the same way you do the stock market.
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AlCzervik Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Nov-28-07 12:00 PM
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4. our house is our home and not a place that i ever look at as a place to make a financial killing.
i sold house houses for 3 years and saw so many people buying because they figured they'd make money. when we sell i'll be happy to walk away with my down payment. We have a plain old boring 15 year fixed that we are 7 1/2 years into and we've never borrowed against it---ever and i hope we never have to, we have been lucky in that respect and i appreciate that.
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