Can you hedge real estate?

newwurldmn · Dec 28, 2023

destriero said:
DTLA commercial properties taking a 50% haircut in 13 years. Union Bank Plaza sold for 208 in 2010 and sold for 104 this year. AON prop took a 45% haircut in 9Y.

offices are toast.

industrial is going strong.

zdreg · Dec 28, 2023

MarkBrown said:
this is so funny cause i summed him up about a week ago and completely blocked his whining little bitch ass.

Here is another winner newwurldmn. Did Santa deliver you a bag of coal?

murray t turtle · Dec 28, 2023

newwurldmn said:
I own a decent amount of industrial real estate in farm areas.

The value of the land is strictly dependent on there being a buyer for that land. That buyer will buy that land because it fits their operational needs (for example it allows them to expand their operations). At that point the global real estate market is irrelevant.

Banks value the property on cash flow. This is why landlords don’t lower rents to fill vacancies, not based on some indexed pricing of land.

%%
Good rebuke; RE is so local based .
Some commercial buyers use RE options, may make sense in some ways;
but when i bought properties[commercial + residential+ land] i would rather risk- reward with cash or conservative bank loans. Plenty of ways to manage risk on RE.
Local banks value RE several other different ways also , but its noted on appraisals.
Amazing local lack of inventory on homes, my mid south county + surrounding counties.
NOT really, even much commercial property for sale. Healthy economy here.

schizo · Dec 28, 2023

long said:
How would you use futures and options to hedge against a real estate crisis? You could buy out of the money puts on the SPX, but would it be correlated enough to do the job?

https://www.parcl.co/

long · Dec 28, 2023

schizo said:
https://www.parcl.co/

View attachment 330572

That sounded interesting until I saw “Coinbase” at the bottom….

schizo · Dec 28, 2023

long said:
That sounded interesting until I saw “Coinbase” at the bottom….

Well, I don't see what the problem is. They're like an exchange providing a platform for you to trade with other speculators. How else could you trade? Unless you're able to find and work with underwriters who are willing to draft a short hedge for you, which is very unlikely, this is about the best deal.

murray t turtle · Dec 28, 2023

long said:
That sounded interesting until I saw “Coinbase” at the bottom….

%%
SAME here.
NOT sure , even in a good market like Dallas/ that I would want ''an average ''LOL

I do like an average on 100or 500 stocks sometimes.
I do like above average RE.........

long · Dec 28, 2023

schizo said:
Well, I don't see what the problem is. They're like an exchange providing a platform for you to trade with other speculators. How else could you trade? Unless you're able to find and work with underwriters who are willing to draft a short hedge for you, which is very unlikely, this is about the best deal.

I’m leery of such a big operator in crypto. It’s so volatile that solvency problems are easy to imagine. I used them to buy my first BTC and the business comes across as a carnival. Lots of users accounts get locked for no reason. They have lottery giveaways (air drops) that encourage you to buy crypto. It’s the Wild West and I’m not interested in entering a long term deal associated with them even if it’s not crypto.

Also the markets listed probably wouldn’t correlate with rural property values. The scenario that started this thread would be a helluva black swan event that would definitely drop the SPX anyway. The easiest thing to do would be to use options like portfolio insurance and use a low correlation. Do it monthly and you wouldn’t be locked into a multi year butt plug of a premium. If the environment changes and you gain confidence you can just drop the options and go naked.

schizo · Dec 28, 2023

long said:
I’m leery of such a big operator in crypto. It’s so volatile that solvency problems are easy to imagine. I used them to buy my first BTC and the business comes across as a carnival. Lots of users accounts get locked for no reason. They have lottery giveaways (air drops) that encourage you to buy crypto. It’s the Wild West and I’m not interested in entering a long term deal associated with them even if it’s not crypto.

Also the markets listed probably wouldn’t correlate with rural property values. The scenario that started this thread would be a helluva black swan event that would definitely drop the SPX anyway. The easiest thing to do would be to use options like portfolio insurance and use a low correlation. Do it monthly and you wouldn’t be locked into a multi year butt plug of a premium. If the environment changes and you gain confidence you can just drop the options and go naked.

I wouldn't exactly count on SPX dropping in lockstep with your rural property. I see almost zero correlation between the two. Moreover, while portfolio insurance might work with a basket of equities and whatnot, it's hard for me to understand how it could work with your real estate. Anyway, that's about all from me. Good luck going forward.

long · Dec 28, 2023

schizo said:
I wouldn't exactly count on SPX dropping in lockstep with your rural property. I see almost zero correlation between the two. Moreover, while portfolio insurance might work with a basket of equities and whatnot, it's hard for me to understand how it could work with your real estate. Anyway, that's about all from me. Good luck going forward.

The black swan event the guy is trying to hedge against is the commercial credit squeeze that is supposed to start happening in force next year. Short term loans will be coming due and have to re-up at the new higher rates or sell out. That is an event that could definitely cause a drop in the market as it would hit banks pretty hard.