Monday, September 1, 2008
Hedging against house prices
There were any number of people in 2005/2006 saying that these house price rises simply couldn't go on, that we were in an unsustainable bubble. But there was no way for such people to actually influence the market. You can bet on houses going up by buying one. But currently there's no good way to bet on their falling. You can't go short houses. But as we know from stories like Galton's Ox and Surowiecki's Wisdom of Crowds, you only end up with a realistic estimation if all of the crowd can have their say. In housing we could only hear, in the market itself, the voices of the bulls. The bears couldn't make themselves heard.