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I asked a similar question about hedging against specific market housing inflation. We had some discussion but no vehicle exists. In my case Case-Shiller does have a Phoenix housing index but there is no way to trade it as far as I can tell. Sorry I cannot answer your question but I do find it amazing that with all gimmicks Wall St thought of to make money, simple insurance type policies like this do not exist.
Having said that, you should be able to pay a point or so to the mortgage broker to lock a rate at some level with a float down built into the loan. So this may cost you a few thousand dollars but if rates are really moving higher and you plan to be in the house for a long time it may be worth it.
LAO
2010 Dec 7, 2:14pm
A little soon to expect mortgage interest hikes... The govt will do everything in its power to keep rates low for a year or two more minimum... Expect to see 3% rates before 5% again. Mark this post!
...there seems to be a clear runaway in bond markets.
LOL. What, rates stopped falling, and now they're as high as.... um.... they were earlier in the year?
Shock. Horror. It must be a "runaway" implosion of the bond market.
Â¥
2010 Dec 7, 4:24pm
3% on the 10 year was resistance on the way down so if we blow through it on the way up we're looking for a new resistance level of 3.6%.
Mark,
What I mean by the runaway in bond market is that this is the first time worries about US budget deficit are spooking investors and Fed seems to have lost control of the yield curve. Despite Fed purchasing bonds aggressively, yields have soared. The tax cut announcement with two year extension was already known but market is just waiting for any excuse to selloff bonds.
Anyway, I had bought some short treasury ETFs but they are not as responsive to rate rises and not completely correlational. I also own simple SP500 index fund and typically stocks and bonds go against each other so hopefully that will provide some hedge as well. Anyway, if not much I can do then not much I can do about rates. But if fears about deficit take hold than rates will shoot.
LA Renter, thanks for your hopeful comment. I am not so hopeful though. I think mortgage rates are going to 6% and will cross 5% for sure.
Hi everyone,
With mortgage interest rates soaring every day, there seems to be a clear runaway in bond markets. I am looking to buy my first home and expect it will take 2-3 months. Can someone please suggest a way to hedge against interest rate hikes? Buy ultra short treasury ETFs? Is there a way to invest money so that you make more money the higher mortgage rates go? I want the hedge for the next 2-3 months timeframe and plan to sell when I lock my rates and buy a place.
Thanks.
#housing