CFDP 1648

Derivatives Markets for Home Prices

Author(s): 

Publication Date: March 2008

Pages: 27

Abstract: 

The establishment recently of risk management vehicles for home prices is described. The potential value of such vehicles, once they become established, is seen in consideration of the inefficiency of the market for single family homes. Institutional changes that might derive from the establishment of these new markets are described. An important reason for these beginnings of real estate derivative markets is the advance in home price index construction methods, notably the repeat sales method, that have appeared over the last twenty years. Psychological barriers to the full success of such markets are discussed.

Keywords: 

Home price index, Housing futures, Real estate futures, Real estate derivatives, Home equity insurance, Repeat sales indices, Hedging demand

JEL Classification Codes:  R31, G13