How hedge interest rates?

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Subject Author Date How hedge interest rates? sinister 04-06-2008  Re: How hedge interest rates? Rich Carreiro 04-06-2008  Re: How hedge interest rates? Elle 04-06-2008  Re: How hedge interest rates? PeterL 04-07-2008  Re: How hedge interest rates? Gil Faver 04-07-2008  Re: How hedge interest rates? Ron Peterson 04-07-2008  Re: How hedge interest rates? jIM 04-07-2008
Posted by sinister on April 6, 2008, 9:15 am How can an individual investor hedge against interest rate risk? I might buy a house in the next year. My read of the situation is that home prices will decline if rates increase, and the effect will be stronger in tighter, pricier markets with little undeveloped land (like the one I might buy into). Are there any ways for an individual investor to hedge against interest rates increasing? Yes, I know that the simplest thing for me to do would be not to buy, but my wife's getting impatient with renting. (Also, the risk of home values declining isn't so bad if one intends not to move for a long time, but I could see that we might move in five years, which normally isn't so bad, but wouldn't be so great if rates increased a 150--200 bp (in terms of effect on sales price of the home we'd buy).) -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by Rich Carreiro on April 6, 2008, 11:57 am > How can an individual investor hedge against interest rate risk? > > I might buy a house in the next year. My read of the situation is that home > prices will decline if rates increase, and the effect will be stronger in > tighter, pricier markets with little undeveloped land (like the one I might > buy into). > > Are there any ways for an individual investor to hedge against interest > rates increasing? You could sell short zero-coupon bonds of the appropriate maturity. You might be able to buy puts on appropriate interest rate indexes or puts on appropriate interest rate index futures. Or depending where you live, you might be able to sell a Case-Schiller housing price index future for your metro area and so hedge the price change directly. -- Rich Carreiro rlc-news@rlcarr.com -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by Elle on April 6, 2008, 1:57 pm > Yes, I know that the simplest thing for me to do would be > not to buy, Another simple thing to do is increase your downpayment. -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by PeterL on April 7, 2008, 5:25 am > How can an individual investor hedge against interest rate risk? > > I might buy a house in the next year.  My read of the situation is that home > prices will decline if rates increase, and the effect will be stronger in > tighter, pricier markets with little undeveloped land (like the one I might > buy into). > > Are there any ways for an individual investor to hedge against interest > rates increasing? > > Yes, I know that the simplest thing for me to do would be not to buy, but my > wife's getting impatient with renting.  (Also, the risk of home values > declining isn't so bad if one intends not to move for a long time, but I > could see that we might move in five years, which normally isn't so bad, but > wouldn't be so great if rates increased a 150--200 bp (in terms of effect on > sales price of the home we'd buy).) > Yes there are ways to hedge against interest rate increases. But for an individual you are going against professionals. It's more likely for you to lose than to win, much more likely. When you are talking about the price of a house that you live in currently, getting a fixed rate mortgage is your best way. Short term fluctuations in the price of your house don't matter to you individually. -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by Gil Faver on April 7, 2008, 12:49 pm > > Yes there are ways to hedge against interest rate increases. But for > an individual you are going against professionals. It's more likely > for you to lose than to win, much more likely. why do you say this? Don't you think there are professionals that think interest rates will be going up? Maybe I don't understand what you are getting at here. -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Similar Threads Posted Has the Fed Already Lowered Interest Rates? 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