How to Short a House
One of the comments that came up repeatedly on the Housing is Not a Bubble column was the assertion that "You cannot short a house." As in the stock market, the lack of "informed short selling pressure" removed a source of supply that theoretically) would dampen price rises.
Only now, it turns out to be no longer true.
Michael Covel, author of Trend Following, points us to Hedge Street, where you can select distinct cities to short median home prices on a regional basis:
Chicago
Los Angeles
Miami
New York
San Diego
San Francisco
These new Housing Price "Hedgelets" are benchmarked against the National Association of Realtors reported median sales price of existing single-family homes in the cities mentioned above. There's also a hedge which can be put on on 1-yr ARM or 30-yr FRM Mortgage.
So now you can sell a region of Homes short . . . just not individual houses.
Thursday, June 02, 2005 | 09:54 AM | Permalink
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Comments
The hedgelet requires you to trust the NAR figures - I would rather not risk my money on Realtors laying it out like it is. My bet would be there's a bias in their figures, and that they go up easy while being sticky on the way back down. Remember that foreclosures are not reflected in their numbers until sold by the new holder, and reflect back to the S&L crisis as to how long REO stays unsold.
Posted by: fatbear | Jun 2, 2005 11:26:39 AM
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