Hedge your house?
(Updated May 5, 2006: added Robert J. Shiller link.)
(Updated May 1, 2006: added HedgeStreet, car hedging. Original post date April 13, 2006)
The Chicago Mercantile Exchange now lets you trade futures and options on housing prices. (BusinessWeek article, via Chris. F. Masse.)
And the Chicago Board Options Exchange is planning to offer similar contracts on a different housing price index.
Of course the exchanges have these products targeted to homebuilders and other companies affected by bubble uncertainty, but individuals could use some hedging, too. A company called HedgeStreet is offering that, and also lets customers hedge gasoline and natural gas prices. Minimum to open an account is $100.
Robert J. Shiller predicts , "I believe there is a very good chance that many of these futures markets will soon be predicting substantial price declines in some US cities over the next year."
What bubble-area homeowners need is a smart mortgage broker who can include options for managing your bubble exposure as part of the loan package. The house buying paperwork is complicated enough that one more transaction shouldn't matter.
You could also hedge a vehicle's fuel consumption for the time you plan to drive it at the time of purchase. Might be a chance for dealers to earn a commission or even a flat new customer finders' fee for a household hedging firm.
--
Don Marti
<dmarti@zgp.org>
