[rebel_yell2]

Did you mean to say: will your mortgage lender force you to "Hedge" against price declines in your market?

[Attention Surplus Disorder]

Yeah! It's another way of saying the same thing; one way is kind of using "betting" jargon, one way is using "insurance" jargon. In a sense, a fire insurance policy is your bet that your house WILL burn down; and unless you're an arsonist, you hope to lose the bet.

If you were concerned about a price drop in your own house; you would short these futures, appropriate for your area, and such a "bet" would increase in value if housing in your area declined in price. The decline in one instrument would be offset by the rise in the other, as your short bet would incr. in value as housing fell. Taken together, and put on in the proper proportions, the combination of the two items would maintain a constant value. A hedge, for sure, as you said. You wouldn't actually be shorting "your own house", of course, but a proxy index. I was being a little flippant, as I am wont to be.

[Attention Surplus Disorder]

And, it should be mentioned, one could very conceivably ratio the long and short bets to potential advantage; the caveat being that nobody can predict the future.

Suppose, for example, that you really really liked living in your house, but were strongly convinced it would decline in value. You could go more short than long, very much like overinsuring in the intended effect. These proposed futures would make such an exercise perfectly feasible and legal [which it currently is not!] If you were convinced your $500K home would fall in value to $400K, you could short double the number of futures contracts req'd to hedge a constant value in your home. Home falls to $400K, you cover half your short, pocket $100K, and the combination of home + short futures contract would still maintain a constant $500K value. Kewl?

[SAJ]

Not a chance in h*ll. The lender only wants his note to be paid. Couldn't care less whether you or I end up showing a capital gain or capital loss on the purchase of a home, or any other property, as long as you and I pay the note.

Talk about counter-productive, sheesh! The lender needs to move money. The more conditions on the loan, the less money is moved.

There just must be a ''DUH!'' in here, someplace.