Brian O'Connor

speaker
46 appearances 1 recordings 1 series first heard May 2022 last heard May 2022

Brian O'Connor’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · How to Protect Your Home’s Value Now Against Future Declines · 20 May 2022 podcast
It can be, and everybody who's talked about this with me has stressed that you would really need to have a broad-based investment, and you would have to be holding it for the long term.
because you have to write out the volatility of the market and you still have to do the basic math, which is what's this money costing me?
What's my expected return?
And can I hold that for long enough to write out the ups and downs of the markets while also servicing that debt without having to take any of the money off the market?
If you're careful, you could make it work, but it's not a strategy for everybody.
Well, then you've got the same problem of, say, somebody who invests in company stock in their 401k.
You're doubly invested in housing at that point.
If the housing stocks go down and the value of your house goes down, you could be really taking a pretty good loss.
You've sort of increased your bet on the housing market more, and you're moving away from that idea of, if I am going to do that, let me diversify into something really broad-based that I can hold for a long time.
Well, there's 11 of those indexes that actually can be used to write a futures contract on the Chicago Mercantile Exchange, just like where people trade orange juice futures and pork billies.
But again, this is not the beginner's model of how to leverage your home equity.
But there are people who are making a market where you sell a futures contract based on one of those indexes or on a whole 10 city index.
The idea there is that your home value should also have gone up if it's correlated to that index.
So if you live in Chicago and the Chicago index went up, the value of your Chicago home should have gone up.
So yeah, you're out a little bit of cash, but you've also gained on your home equity.
The other side of that bargain is that if the index goes down, then the buyer is going to pay you more.
You're getting some cash that offsets the drop in the market value of your home.
And of course, the big question there is, how well does my individual home correlate with the index that I'm using?
It gets pretty complicated, and you're going to have trading fees.
Again, this isn't something you want to do with all of your home equity.
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