shorting houses...short a REIT? or the appropriate stocks / basket of stocks? could be difficult to get a precise enough exposure.

Since this thread has exploded all over whackydom, I add my observations (delusions) here:1) my house has a swimming pool, an indoor pool no less. 1a) the pool is a hole in the ground into which I pour $. 2) I would pay the same amount of money, even a slight premium, for the same house, WITHOUT the g****** pool.3) There is no way I can "put" the pool, I have to put the whole house.4) my wife loves the houseNo wisenheimers modeling this real option situation, please. Unrelated:I once lived in Washington DC and had an acquaintance who was a real estate agent. Her information system, closely approaching Bloomberg-like complexity, had a multiple metrics and screens for $/sq ft of homes/condos/townhouses priced by address weighted from the distance from downtown Washington, then weighted by the reputation of the school system. From this grid you could pick the "cheepest to deliver" maximum square footage for cheepest price in the best school system that was closest to downtown Washington (or any other location in the surrounding area...the commute metric). You also could weight the available real estate by a host of other metrics (per sq foot surrounding property, cable access, closest metro station, etc, etc.)When I observed her system, I recently had built a little plug in program to calculate cheepest to deliver bonds for exercised bond futures. I was humbled.I think with real estate "the heart has its reasons that reason does not know." But for all you bachelors, good luck with those real options approaches, but remeber to chuck them when you go shopping for a house with the missus.James

short a REIT? or the appropriate stocks / basket of stocks? could be difficult to get a precise enough exposure. >>There aren't any REITs that invest in Single Family Homes, at least in the US. I'm assuming that REITs are a US beast, because they are necessitated by the US tax code. Does anyone here that is more international than I know if there are any REITs domiciled outside of the US?? I know in Germany they have very complicated rules about investment in real estate that pretty much preclude REIT like formation there. As for shorting houses using REITs I would recommend as a proxy, going long some middle tier multifamily REITs. Camden Property Trust and United Dominion Realty are two favorites of mine. The logic behind this is that when the economy is doing poorly (and presumably housing prices are dropping) people substitute out of single family homes and into multifamily housing. Now there is the paradox that as the economy tanks and housing prices drop single family housing becomes more affordable and people substitue out of multifamily housing. Who the hell really knows, there are a lot of holes in the whole damn idea. I like JabairuStork's idea it seems to be pretty good. I'm going to cook one up over the weekend, I think that non-recourse special purpose entities are going to be a big part of my strategy. If only I can get housing lenders to go along with it.

<< <i>I think a benevolent dictator could design a system of rent control that assured an adequate supply of decent, affordable housing; with tenant choice and landlord profits. But I admit it has never been done.</i> >>Aaron, wasn't this attempted in the Soviet Union? Personally, I don't see how a rent control system, no matter how benevolent the dictator, could ever result in an equitable distribution of housing. >>And the benevolent guy was who? Joe Stalin?Rent control has been tried in many places, and always failed. You need not look at authoritarian countries, Sweden had rules that were at least as restrictive as Moscow.I am not advocating government control of housing or anything else. But the reason rent control could work is that so many other aspects of housing are already controlled by the government. There are zoning rules, complex property taxes, adequacy rules and the public pays for roads, schools, water, sewage and other things required by residences. As a result, real estate development is intensely political. In most localities, the biggest campaign contributors are real estate interests. This leads to highly non-optimal distribution of housing in most cities, both in terms of geography and economics. A smart, honest, benevolent dictator could do a better job without trying too hard.Imagine you were going to found a new city. You want to attract businesses that provide good jobs, and people who will do things to attract others: civic-minded people and creative, talented ones. There is positive feedback here, the better your city is, the better people and jobs you will attract, and the better your city gets. Of course, the more successful the city, the more valuable your real estate is.As a monopolist, you will want to maximize the value of all real estate. That means sensible planning: room for parks and views, easy transportation to work, schools and shopping, a variety of housing prices to accomodate all the economic levels your city needs. You don't really care whether you get your money from residence rents or business rents or taxes, you can balance one against the other. You can also decide whether to go with a high or low level of public services (Sim City anyone?).Does anyone think you would get more money auctioning off the real estate and letting each buyer develop at will? With your promise to pay for schools, roads and other infrastructure? And your offer to take bribes to set tax rates and other rules? The city would never get off the ground, no one would come, no one would pay anything for the real estate. The only way this would work at all would be if you took control of an existing city and ruined it. This is not a bad model for what has happened in many places. Look at how many cities huge areas of worthless real estate in what once was, and should be, prime areas. Look how many cities have seen their economic base leave. Look how much time and money is wasted commuting to and from work.

Does anyone here that is more international than I know if there are any REITs domiciled outside of the US >>There's a couple listed in Tokyo - non-residential though. Goldman has just pulled its REIT offering though for lack of demand apparently..