- quote -

Hedge against rate risks by locking in when rates are low. In your
case you have no rate (because you are renting) so I would suggest
buying while rates are low and locking the low rate in for a long
period of time.

If prices decline (with a rate rise) but you have already bought your
house, then there is little risk with this, assuming you will stay put
in house for 10-25 years.

If 10-25 years is not on your agenda, then ask yourself if you are
willing to do a 7/1 ARM or 10/1 ARM, locking rates in for 7 or 10
years before adjusting. More than likely the adjustment would be
upward, but the benefit is a lower rate now.

If you buy- either with a fixed rate loan or ARM product, you will be
building equity in your house, assuming the house itself does not
decline in value. The more time you give yourself in your first house
(say 15 years instead of 10), the more likely you will have
substantial equity when selling. More than likely it will take 4-8
years to see any reasonable equity from house purchase based on
closing costs and similar.

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On Apr 7, 9:49*am, "Gil Faver" <rowdy'sb...[at]xxyz.com> wrote:
- quote -


What I am saying is, there are professionals whose job it is to trade
the market on all kinds of things, including interest rate hedges. As
an individual, if you want to play that game, it's like going to a
casino and play poker against pros. It's more likely for you to lose
than to win.

But in this scenario, there is no need to hedge against interest
rates, aside from getting a fixed rate mortgage. It makes very little
difference in the price of the house you currently live in. And if
you are not trading houses, there is no impact on your own financial
situation.

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- quote -


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.

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On Apr 6, 8:15*am, "sinister" <sinis...[at]nospam.invalid> wrote:
- quote -

Long term interest rates don't vary as much as short-term rates.

- quote -

i agree with Peter L., buy as soon as possible. Rates won't move up
until the housing recession is done.

- quote -

Interest rates increases will also cause the stock market to fall, so
you would sell bonds or stocks short or buy puts.

- quote -

Start shopping for a house now and after you have looked at 20 places,
you will have a better idea of what's a good buy.

--
Ron

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On Apr 6, 6:15*am, "sinister" <sinis...[at]nospam.invalid> wrote:
- quote -


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.

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"sinister" <sinister[at]nospam.invalid> wrote

- quote -

Another simple thing to do is increase your downpayment.

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"sinister" <sinister[at]nospam.invalid> writes:

- quote -

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[at]rlcarr.com

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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).)

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