Hedging Against Declining Home Values
As you may be aware, there exists a futures market for the Case-Shiller house price indices.
More on the subject can be seen at MacroMarkets.
I look forward to the time when there are products available to help smaller investors purchase simple forms of price insurance. Clearly, the futures markets have a role to play.
My concern has to do with counterparty risk. With all of the turmoil in the financial/banking systems, how does an investor purchase insurance against an event that would be correlated with a broad financial collapse?
Don’t we need futures markets with non-paper settlement policies in cases of counterparty failure or market failure?
Would the purchase of insurance that pays you a fixed amount in the case where your home price (or that of your city/MSA) falls 50% really just buy you very little protection?