Best hedge against housing bubble ?

Question

Shorting REITS?,shorting banks, purchasing delinquent taxes?

Nathan Gesner · Answer

The best hedge is to have a solid financial base. If you're living paycheck-to-paycheck and investing in real estate, you're ripe for some major losses. Get your personal financial life in order, eliminate all debt, don't over-leverage on your investments, and maintain a reserve.

Lionel Li · Answer

The best hedge against a housing bubble? Have liquid funds to buy more houses during the bubble burst and descent, that's if you can predict when the bubble will pop. If your predictions/timing is wrong, you've just lost to inflation + opportunity cost x that many months/years.

That's why I don't try to time the market, as long as I have enough reserves to cover my running costs, bubble or no bubble..it makes no difference to me. If the numbers make sense for the deals I'll keep buying. It's those that sell during the dip or have their properties foreclosed on that actually lose because the market will come back.

Alexander Felice · Answer

what housing bubble???

it's hard to hedge against a specfic industy in momentum, especially when you don't know what the potential mechanism for failure will be  to short against. (literally the reason you asked this question)

@Nathan G. said it best really, you want to protect yourself to weather the storm, it won't last forever.

I find it quite unlikely the national RE market will collapse like in 2008, so shorting the whole RE market seems less effective.

Account Closed · Answer

Yeah, again being safe is not the same as a hedge, completely different conversation. During the last real estate crash I lost about 200K in real estate equity, fortunately I had it to lose, and was able to invest in foreclosed properties near the bottom of the market and more than made up for the loss during the recovery. Had I had 1/3 of that 200K lost real estate equity been invested in gold it, would have completely hedged against housing price meltdown.

Account Closed · Answer

Nathan, all good risk management suggestions. My question though was related to asset classes that move in the opposite or at least a different direction than housing. Government and quality corporate bonds, and gold are all traditional hedges against recession, however not specific to housing. Shorting home builders, would be a more housing specific hedge.

Sam Shueh · Answer

This is the kind of question that your CPA who often are financial planners can answer better.

Account Closed · Answer

I spent a fair amount of time on the phone with people in FL in 2005 that thought housing could collapse. I think we are headed for a major market correction over the next few years, just a matter of time. At some point I am going to liquidate the most volatile parts of my portfolio, and buy gold, unless I come up with a better plan.

Account Closed · Answer

From what I could tell a lot of investors lost jobs, so ate their rental income rather using it to pay mortgages and taxes. Many also had the income to make payments and choose to spend the money because they owed more than the value of the property. Interestingly I own a condo in a large association and none of their foreclosures or delinquent assessments were from investors.

Best hedge against housing bubble ?

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