| Are Futures Being Bought or Sold? |
| Written by Jonathan Smoke | |
| 04.26.2007 | |
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Discuss this article on the forums. (0 posts) A very appropriate and pointed question was poised by Neal Elkin of Real Capital Analytics in the Wednesday afternoon session of the Real Estate Derivatives World. Are derivatives at a point that they are being bought or being sold?  For both commercial and residential real estate derivatives in the U.S. at least, the answer is decidedly that they are being sold. Or should I say they need to be sold.From my perspective there seems to be a bit of disappointment by market makers in the lack of growth in futures trading volume. Yes, they offer a potential liquid way for an investor to participate in real estate investments and therefore enjoy real estate's impact on the diversification of a portfolio. And, yes, with the proper intelligence to design an appropriate hedging strategy, housing futures offer an investor who's long on an actual property investment a chance to hedge their risk. But the problem is that this is a new innovation and one that is foreign to traditional property investors. At least as far as developers and builders go, they are not going to line up at the door and take numbers to buy these futures. They need to be sold on the benefits and they need to be convinced with data and real case studies. For those like us who are interested in the advancement of derivatives, we need to be part of the solution. The alphas and betas of Wall Street financial gurus need to be turned into price, risk, and return that main street speaks. The potential for improving real estate investment for the better is tremendous, but it's not going to to start on its own. 
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