hedge against falling house price

[actonwang]

hi,

is there ETF or way to hedge against falling house price?
there seems to be some ETF as WMM/UMM but they are no longer available.

thanks
Acton

 

[igemonster]

hi,

is there ETF or way to hedge against falling house price?
there seems to be some ETF as WMM/UMM but they are no longer available.

thanks
Acton

I am very keen to know an answer to the same question, too! Anyone any ideas :?:

 

[anley]

This is a question that's often asked and yes it is possible but the majority of people shouldn't attempt it as they expect the impossible, ie if house prices fall they'll make money and if house prices rise they'll make money.

That's impossible so what will probably happen is you hedge your downside risk but then house prices go higher. As they rise you'll make no money, in fact you'll have to pay money to your broker because of your short trade. However, you'll be making money via your house price rising. Net result you'll be pissed off you aren't making any money and are actually paying it out.......

 

[tar]

hi,

is there ETF or way to hedge against falling house price?
there seems to be some ETF as WMM/UMM but they are no longer available.

thanks
Acton

make a bet on UK house prices with Igindex :cheesy:

 

[anley]

Another point to remember is how liquid are you?

For example, say your home is worth £300k and you want to hedge all of it.

But prices don't fall, instead they rise by 20% over the next 2 years. This means your short property trade will be offside by around £60,000 and that money (hard cash) has to be deposited with your broker. Not many can do that.

Here's another scenario.

You hedge your downside risk but then prices start creeping up and you get influenced by all the bullish property talk. So you take off your hedge and lose say £15,000 cash but your house has risen by around £15,000. But then property starts to slump.........

Net result is a £15,000 cash loss plus your property is now going down in value and you have no hedge.

See how complicated this can all get?

My advice. Forget about trying to hedge and realise your home is a place to live in. So what if it goes down, so what if it goes up. Got to take the rough with the smooth otherwise rent.

 

[igemonster]

Another point to remember is how liquid are you?

For example, say your home is worth £300k and you want to hedge all of it.

But prices don't fall, instead they rise by 20% over the next 2 years. This means your short property trade will be offside by around £60,000 and that money (hard cash) has to be deposited with your broker. Not many can do that.

Here's another scenario.

You hedge your downside risk but then prices start creeping up and you get influenced by all the bullish property talk. So you take off your hedge and lose say £15,000 cash but your house has risen by around £15,000. But then property starts to slump.........

Net result is a £15,000 cash loss plus your property is now going down in value and you have no hedge.

See how complicated this can all get?

My advice. Forget about trying to hedge and realise your home is a place to live in. So what if it goes down, so what if it goes up. Got to take the rough with the smooth otherwise rent.

thanks all to answers. sure I realise a hedge is a hedge ie giving up both up- and downside.
reg the 60K =20%*300K... sure you put something down as a margin in the first place (which can easily be 20% for example). so I would first need to lose all of that money before going into red, assuming I don't get out of the hedge halfway. But conceptually that's right, you may have to come up with cash if you are leveraging your bet...