In 1988 Michael Sklarz and I published a paper called “It’s Time for Some Options in Real Estate.” In 1995 David Geltner and I suggested that we needed a fourth asset class, Housing Equity Investment Trusts (HEITs), whereby an owner could sell part of their home price appreciation to investors and these units might be traded. This selling of potential future appreciation could be used to improve affordability by providing immediate capital assistance in less affordable housing markets. Now, some 35 years later, we once again broach the question of whether housing might become a more transparent and efficient market through the use of indices and real time valuation models?

What has changed since 1995?

While there are still some laggards among public agencies, housing price data is now widely available online. It has been aggregated by several large data vendors, like Black Knight, Core Logic, Attom Data, Warren, Zillow, Redfin, Trulia, CoStar, and many others. Such vendors have not only aggregated the public transaction data, but also mortgage data, property tax data with physical attributes, multiple listing data, and HOA data. All of this has been geocoded to locational addresses, parcels, and maps. Such data goes back in time anywhere from twenty to fifty years and some vendors update their data daily. The data is now available for near real time price trend indices.

Housing price trends remain uncertain, which creates more opportunity for trading future interests. As of late 2023, we are not certain if interest rates have peaked out and whether home prices will be going up or down, with a combination of pressures in both directions.

It is precisely when prices are uncertain that the market for hedging instruments and price insurance products is highest. The inability to sell short in the housing market is a major impediment to a more efficient market. Home price indices can overcome this impediment.