“Investors have figured out all kinds of different hedges to deal with the risk of decline in their paper assets. But they haven’t done much to hedge against the possibility of price declines in their own homes, The Wall Street Journal reports.
Home prices have plunged for the past four years, and the end may not be in sight. “A 30-year decline in home prices (adjusted for inflation) is certainly a possibility,” Yale University economist Robert Shiller tells the newspaper.
So there is certainly reason to hedge, and several organizations have made efforts to provide hedging mechanisms. Home HeadQuarters, a nonprofit organization, offers insurance against home-price decreases in Syracuse, N.Y.
The insurance costs just 1.5 percent of the protected value and lasts up to 30 years. But the group has sold only 150 insurance plans since 2003.
The Chicago Mercantile Exchange offers futures contracts on home prices in 10 metropolitan areas, including Boston, Miami and Las Vegas, inspired by Shiller’s work. But trading is negligible….”
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