How to bet against the housing market?

kmiklas · Sep 11, 2021

Heya Peeps,

How can a trader profit from a housing crash?

What instruments can be bought or sold to bet against the housing market?

Maybe a publicly traded housing developer or REIT that's balls-deep in credit, depending on new home sales to service loans, and build new properties?

Thanks,
Keith

Retief · Sep 11, 2021

DRV Direxion Daily Real Estate Bear -3x
SRS ProShares UltraShort Real Estate -2x
REX ProShares Short Real Estate -1x

Why do you think housing is going to crash? The prediction is for increasing inflation, which makes houses more valuable relative to USD.

longandshort · Sep 11, 2021

I would take a look at mortgage reits especially those with exposure to speculative regions (Florida, Nevada, etc.).

kmiklas · Sep 12, 2021

Retief said:
DRV Direxion Daily Real Estate Bear -3x
SRS ProShares UltraShort Real Estate -2x
REX ProShares Short Real Estate -1x

Why do you think housing is going to crash? The prediction is for increasing inflation, which makes houses more valuable relative to USD.

I was reading the article screenshot below. It's paywalled; let me know if you want me to post the whole thing. The U.S. markets will feel this in about March of 2022.

My take is that tech and real estate have become a threat to Xi. He is a Machiavellian communist dictator, and wants to stay in power; everything else is secondary. This is the real motivation for his "Common Prosperity" movement: to slap down tech and real estate. They're raising an eyebrow.

That's why Alibaba gave 15.5B to the effort. If not, Xi was going to cut their balls off. He's doing the same thing with real estate.
https://www.reuters.com/world/china...155-bln-towards-common-prosperity-2021-09-02/

I'm still forming this thesis, especially how his actions will affect U.S. markets. My buddy says that the fallout will be confined to Chinese markets, but this article differs in opinion. Let me know if you want more thoughts.

NoahA · Sep 12, 2021

kmiklas said:
My take is that tech and real estate have become a threat to Xi.

Asset prices that are hyper inflated are a problem for the entire world. If he gets a head start on popping the balloon, maybe he will be able to let the air out slowly for that so called "soft landing".

Now I don't agree that governments should be micro managing the economy like this, but either way, the balloon is gonna burst. And since the money printing is what led to this asset bubble, then I'm all for them "trying" to prevent an uncontrolled meltdown.

Gravity will prevail in the end, but it will be China who I believe will come on top. The Western countries will not be able to control the population like China can, and when it comes time to navigating through a depression, you almost need some sort of central control. Chaos will be very difficult to control once it starts.

xandman · Sep 12, 2021

NoahA said:
Asset prices that are hyper inflated are a problem for the entire world. If he gets a head start on popping the balloon, maybe he will be able to let the air out slowly for that so called "soft landing".

Now I don't agree that governments should be micro managing the economy like this, but either way, the balloon is gonna burst. And since the money printing is what led to this asset bubble, then I'm all for them "trying" to prevent an uncontrolled meltdown.

Gravity will prevail in the end, but it will be China who I believe will come on top. The Western countries will not be able to control the population like China can, and when it comes time to navigating through a depression, you almost need some sort of central control. Chaos will be very difficult to control once it starts.

As much as we demonize China, I am sure Western governments are thinking about it too.

We have demonstrated many times how, collectively, people can act like a bunch of dumb animals.

JSOP · Sep 12, 2021

kmiklas said:
I was reading the article screenshot below. It's paywalled; let me know if you want me to post the whole thing. The U.S. markets will feel this in about March of 2022.

My take is that tech and real estate have become a threat to Xi. He is a Machiavellian communist dictator, and wants to stay in power; everything else is secondary. This is the real motivation for his "Common Prosperity" movement: to slap down tech and real estate. They're raising an eyebrow.

That's why Alibaba gave 15.5B to the effort. If not, Xi was going to cut their balls off. He's doing the same thing with real estate.
https://www.reuters.com/world/china...155-bln-towards-common-prosperity-2021-09-02/

I'm still forming this thesis, especially how his actions will affect U.S. markets. My buddy says that the fallout will be confined to Chinese markets, but this article differs in opinion. Let me know if you want more thoughts.

View attachment 267769

This article has already been discussed in length in this thread on ET: https://www.elitetrader.com/et/thre...t-financial-bubble.361325/page-3#post-5452093

Your buddy is right. The effects of whatever China does in its own country is pretty much going to be confined in China and is not going to affect US much as long as we buy local, invest local, none of whatever s*** Blackrock and Goldman Sachs are doing in China and we will be fine. If you can, try to reduce your existing holdings of those Chinese ADR's in Ali Baba, Tencent, JD and etc., wean yourself off China. Whatever the CCP is doing this time is not targetting the Chinese people or Chinese companies per se; it's targetting Chinese companies and/or individuals with foreign investments so in reality CCP is really targetting the West in retaliation for USA's efforts in balancing the trade. In other words, it's basically trying to make the West pay for its "common prosperity". Honestly the CCP doesn't dare touch the real estate market in China no matter how much they cry about it because the majority of the real estate market is still held in the hands of average Chinese people. You do not want to upset 1.4 billion people and have them uprise against you. This is also why the CCP is desperately scapegoating its problems on the West and stirring up blind nationalism. with its propaganda. But any Chinese real estate market is quite isolated from the US real estate market here since foreigners are not allowed to buy real estate in China so even something happens there is not going to affect anything here in the West.

Like I said before, buy local, invest local!

JSOP · Sep 12, 2021

xandman said:
As much as we demonize China, I am sure Western governments are thinking about it too.

We have demonstrated many times how, collectively, people can act like a bunch of dumb animals.

The West is not demonizing China. What CCP is doing is like a demon.

JSOP · Sep 12, 2021

NoahA said:
Asset prices that are hyper inflated are a problem for the entire world. If he gets a head start on popping the balloon, maybe he will be able to let the air out slowly for that so called "soft landing".

Now I don't agree that governments should be micro managing the economy like this, but either way, the balloon is gonna burst. And since the money printing is what led to this asset bubble, then I'm all for them "trying" to prevent an uncontrolled meltdown.

Gravity will prevail in the end, but it will be China who I believe will come on top. The Western countries will not be able to control the population like China can, and when it comes time to navigating through a depression, you almost need some sort of central control. Chaos will be very difficult to control once it starts.

CCP is not micromanaging the economy. It's short of money right now to pay for whatever it's undertaking including bailing out failing state-run enterprises like China Huarong. Instead of printing money that risks having inflation, it's expropriating whatever it can from the West through cracking down on the rich that has ties with the West. This is not micromanaging. This is political exploitation through economic means.