4 ms·

> You can’t literally buy stock in a city, but buying a house is the closest thing imaginable. Maybe not accessible for the retail investor, but can't this be

by gnode 9y ago

> You can’t literally buy stock in a city, but buying a house is the closest thing imaginable. Maybe not accessible for the retail investor, but can't this be done by buying collateralized debt obligations? If you could be issued a CDO based on urban mortgages in particular, then you could profit from the rise of urban house prices.

gervase 9y ago
I could be wrong, but my understanding is that these are rarely packed on a geographic basis, and more on a risk (or owner?) profile basis, which kind of breaks the "buying stock in a city" metaphor.
- gnode 9y ago
  My understanding is that they group the owners together, then issue CDOs such that some are paid before others. Those which are paid last have the highest risk, but the largest rate of return. If you believe house prices are safer than the rest of the market does, you'd buy the high return high risk CDOs. It's also my understanding that they aren't issued on a geographical basis (beyond the country or state level). However, that's not to say they can't be, if investors take interest in distinguishing rural and urban mortgages.
- gowld 9y ago
  market-specific residential REIT: https://www.reit.com/what-reit/reit-sectors https://www.reit.com/what-reit/reit-sectors
ThrustVectoring 9y ago
That instrument would be far more useful on the short side - someone with a house in SF likely wants to limit their exposure to idiosyncratic SF-only housing price risk.
- gnode 9y ago
  It works both ways. This is essentially what happened in The Big Short, although for profit, rather than hedging. You can purchase naked credit default swap options, whereby the issuer with insure debt which you don't own against default. This comes with some obvious criticism, much like taking out insurance for someone else's house.
  - ThrustVectoring 9y ago
    Also, probably the mechanism of choice would be likely be opening up a cash-settled futures market on a housing price index.
- closeparen 9y ago
  It could be reasonable to save up for a down payment in an investment vehicle that moves with the size of the down payment needed.
lkbm 9y ago
In addition to this, the recent tax bill actually created "Opportunity Zones", which are intended to allow for "Qualified Opportunity Funds" -- investment funds so you can invest in distressed communities. I don't know a lot about them, but they were discussed in the most recent Freakanomics podcast[0]. I don't think any such funds exist yet, but seems like the hope is that they'll become a way to "buy stock" in (some) cities -- from the sound of it, available to regular retail investors. [0] http://freakonomics.com/podcast/awesome-terrible-tax-cuts-part-1/ http://freakonomics.com/podcast/awesome-terrible-tax-cuts-pa...

by gnode 9y ago

gervase 9y ago

I could be wrong, but my understanding is that these are rarely packed on a geographic basis, and more on a risk (or owner?) profile basis, which kind of breaks the "buying stock in a city" metaphor.

gnode 9y ago
My understanding is that they group the owners together, then issue CDOs such that some are paid before others. Those which are paid last have the highest risk, but the largest rate of return. If you believe house prices are safer than the rest of the market does, you'd buy the high return high risk CDOs. It's also my understanding that they aren't issued on a geographical basis (beyond the country or state level). However, that's not to say they can't be, if investors take interest in distinguishing rural and urban mortgages.
gowld 9y ago
market-specific residential REIT: https://www.reit.com/what-reit/reit-sectors https://www.reit.com/what-reit/reit-sectors

ThrustVectoring 9y ago

That instrument would be far more useful on the short side - someone with a house in SF likely wants to limit their exposure to idiosyncratic SF-only housing price risk.

gnode 9y ago
It works both ways. This is essentially what happened in The Big Short, although for profit, rather than hedging. You can purchase naked credit default swap options, whereby the issuer with insure debt which you don't own against default. This comes with some obvious criticism, much like taking out insurance for someone else's house.
- ThrustVectoring 9y ago
  Also, probably the mechanism of choice would be likely be opening up a cash-settled futures market on a housing price index.
closeparen 9y ago
It could be reasonable to save up for a down payment in an investment vehicle that moves with the size of the down payment needed.

lkbm 9y ago

In addition to this, the recent tax bill actually created "Opportunity Zones", which are intended to allow for "Qualified Opportunity Funds" -- investment funds so you can invest in distressed communities. I don't know a lot about them, but they were discussed in the most recent Freakanomics podcast[0]. I don't think any such funds exist yet, but seems like the hope is that they'll become a way to "buy stock" in (some) cities -- from the sound of it, available to regular retail investors. [0] http://freakonomics.com/podcast/awesome-terrible-tax-cuts-part-1/ http://freakonomics.com/podcast/awesome-terrible-tax-cuts-pa...