Are you looking into real estate but wary about purchasing a physical home? MacroShares recently introduced two new exchange traded funds (ETFs) that allow an investor to trade on the ups and downs of the housing market.
On June 30, investors were granted the opportunity to trade on price changes of ordinary homes with advent of two new ETFs, reports Jeff Brown for The New York Times. The MacroShares ETFs seek to reflect the changes in the S&P/Case-Shiller Composite-10 Home Price Index, tracking home prices in the 10 largest U.S. cities. The funds use leverage to triple the gains on index moves.
These are unique products. Investor money is put into Treasury securities and various cash holdings. The money is then shifted from one fund to another to mirror changes in the benchmark index. The funds’ prospectus warns that prices can be skewed by imbalances of demand as investors switch from one fund to the other.
The funds can be a convenient housing market gauge, since they track price changes of the same homes over time instead of following average sales prices in a region. The latest data shows prices have fallen 18% at the end of April year-over-year.
MacroShares Major Metro Housing Up (UMM): rises in value when the index goes up and falls when the index drops.
MacroShares Major Metro Housing Down (DMM): does the opposite of UUM – DMM rises when the index falls and falls as the index rises.
Real estate investment trusts and funds (REITs), like mutual funds, own properties. They specialize in a part of the markets, including office buildings, malls, apartment buildings and shopping centeres. Mutual funds also invest in REITs.
For more information on real estate, visit our real estate category.
Max Chen contributed to this article.