LegendKiller

http://money.cnn.com/2006/03/22/real...rket/index.htm


Unf unf! Finally, a way that speculators can level out the market. Hopefully it will be liquid enough that it will make a difference. I am researching more info.

Interesting that it was driven primarily from the guy I always quote, Shiller, who wrote Irrational Exuberance.

clutchy

so do you think this is a good thing or a bad thing. Market speculation on houses makes me really nervous.

but since you're pissed about exhorbitant prices i would assume you see this as a positive?

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LK was treated unfairly

thanks X

LegendKiller

The biggest problem with houses has been the inability of somebody to take a contrarian point of view. For stocks, you can short sell, same with commodities. However, with houses, the best you could do was leave the market, not bet it would fall.

You have to remember that the market is a collection of people who have differing opinions. Some take a contrarian POV. Some take a value or growth. However, all have the ability to buy or sell, provided there is liquidity to do so.

If somebody has the ability to sell short a product they think will decrease, it will add liquidity to the market. This in turn will get people to think that the fundamentals are out of line with prices. The added supply will decrease the market.

While this could reflect more volitility, at least until fundamentals are aligned with price, in the long run it will add to fundamental/price alignment and a higher degree of efficiency in the market.

That is, if it becomes more widely accepted and is a liquid market where sellers can meet buyers easily.

clutchy

well i hope it works.

Merlin

The nice thing about this is if you are saving to buy a house you can lock in the purchasing power of your dollars. Save a tousand dollars and use the futures to make sure the market does not run away from you. Could make it wasier for people to get into their first houses.

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LegendKiller

Good point, I was (obviously) only looking at it from a balance POV, not hedging protection.

Way Easier?

Interesting combo.

I'll file that right along with Sturable (sturdy/durable), Kocial (Socially Kosher), and Ginormous.

Merlin

Oops. That's what happens when they put the darn w and e keys so close together. I'll have to learn to type one of these days.

zippyjuan

This would not effect the prices of houses since the hedge only is a bet on which way the prices will go. They do not own anything. Not like a REIT (Real Estate Investment Trust) fund that holds mortgages and property. This sounds like a bunch of guys sitting around saying something like:
Hey dude, what do you think the price of your house will be in say six months? You paid what, $300,000 for it? Could be up to like $400,000 by then!
No way. That's crazy. Maybe more like $350,000.
Wanna bet? I bet you $50 that it goes to $400,000.
OK- you're on! You know you're gonna lose like you always do! I'll be glad to take your $50!

There are futures markets on lots of things- even the weather.

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Merlin

Yup, on pretty much any risk you are exposed to and would like to manage.