Monday, July 17, 2006

Another Housing Price Play

I read this weekend in The Real Deal that the Chicago Mercantile Exchange has created a housing futures market. If making the investment in your home isn't nerve racking enough, now you can take short positions in your local housing market.
I don't know enough to even begin to explain this method of hedging against the real estate market here in New York, but according to investors that are purchasing the contracts, prices are down 4.2% overall, or they will be in the future. These contracts are pegging where housing prices will be 3 or 6 months in the future.
I'm going to try to learn something by going to the Chicago Mercantile Exchange and reading through the materials they have there. Of course, I'm not suggesting that consumers utilize this tool as a hedge against the value fluctuations of their home, it's just interesting how quickly the family manse has become a mature investment vehicle. Everything has changed it seems. The secondary mortgage market dictates the mortgage terms to the homebuyer, the media tells us what our home is worth, and now we can buy futures on a publicly traded exchange to hedge the increase or decrease of the value.
Hooray for the American Dream...I think.

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