Derivatives can provide a hedge against falling home values
The biggest problem with real estate, and even Dolan concedes this, is that sentiment tends to be either bullish or bearish. Over the last 15 years, housing prices shot straight up and then shot straight down. Whether, it's gold or commodities or bonds, there has to be a debate or differences of opinion which way prices will go. Real estate futures have not lent themselves to that kind of trading.
So, why is Dolan in this space?
"There was very little work that was done in terms of market expectations of home prices," Dolan said. "I wanted to see if I could help frame the debate around where home prices are headed."
When Dolan started looking at Case-Shiller futures, contracts had virtually been abandoned. "The market focused on other things; there (were) no orderly bid-ask spreads; (and there was) limited attention to the product," he said. "I took it on as unpaid project. That's the role I continue to have."
And, Dolan remains hopeful.
"Real estate is typically the biggest asset in people's portfolios," he said. "As we have seen, prices can move dramatically. For those that continue to own but are concerned about price declines, hedging futures may make sense. For those looking to buy a house down the road, or who want to incrementally add exposure to a publicly priced benchmark real estate index, they can lock in forward home-price levels today."
Steve Bergsman is a freelance writer in Arizona and author of several books. His latest book, "Growing Up Levittown: In a Time of Conformity, Controversy and Cultural Crisis," is now available for sale on Amazon.com.
|Contact Steve Bergsman:|
|Letter to the Editor|
What's Your Home Worth?
Zillow Group’s game of ‘chicken’