New Stocks Allow You to Bet on the Housing Market

• July 9th 2009

by Will Smith

If you thought speculating on the housing market died in 2006, think again. Bubble Meter reports (via Fortune) on new securities that allow you to invest in the direction of home prices in the top ten urban markets. The securities are exchange traded products, or ETPs, which trade like stocks on the New York Stock Exchange. Think housing prices are finally headed back up? Buy $500 worth of UMM (Up Metro Market). Bears, put your money in DMM (Down Metro Market).

UMM is trading at $13.35 right now, DMM at $36.84.

At first blush these products seem like a scheme to capitalize on the nation’s obsession with housing prices. But the fact that Yale economist and co-creator of the famed Case-Shiller index Robert Shiller is behind them adds a strong dash of credibility.

The concept is also something of an affront to the view that home price speculation is an evil that fueled the housing bubble in the first place. But Shiller asserts that the stocks actually enable people to hedge their investment in housing, thereby protecting them from swings in home prices. From Forbes:

“Shiller thinks they will have real practical value for homeowners. If you buy the DMM and the price goes down, the money you make on the investment will offset your lost home value. If prices go up, you lose money on the DMM, but your house will be worth more.”

What do you think of UMM and DMM — tools that encourage irresponsible speculation, or legitimate investment vehicles for savvy home buyers?

This article originally published at https://dc.urbanturf.com/articles/blog/new_stocks_allow_you_to_bet_on_the_housing_market/1117.