There’s a new way to bet on real estate:
On Tuesday, the Chicago Mercantile Exchange and Tradition Financial Services, together with Fiserv Case Shiller Weiss and Standard & Poor’s, announced the launch of S&P CME Housing Futures and Options.These derivatives will enable investors to take a position on the direction of home prices either for the nation as a whole or for 10 major cities to start, including New York, Los Angeles and Chicago.
Mortgage bankers will be able to hedge against falling markets, but even ordinary consumers may get into the act:
- By direct investment: Investors could buy futures in housing prices and profit if home prices continue to increase (if the investor goes long) or if they fall (if the investor goes short).
- By locking in home equity: Home owners intending to sell within a year or two can go short in home price futures. If the price of their house drops, that can recapture the loss on the investment.