My home is valued at 400k and I bought for 125k 2 years ago. If I believe that the value is going to decrease, is there a financial instrument that allows me to profit, basically short my own homes value?


2 Answers 2


Yes - you could sell your house right now. This 'locks in' the current valuation, and removes your further participation in the risk associated with your local real estate market.

Step 2 depends on your goals. Do you still want to live in the neighborhood? Then rent! If the price of homes drop in the next few years, then you will have cash reserves to take advantage [errr you did invest that sale price yes? hopefully in something low-risk?]. If the price stays flat... then oh well! If the price rises and you can no longer afford to live in your preferred neighborhood? Well... that's kind of the benefit you gave up by selling.

In a theoretical sense, you could sell to someone who would immediately rent it back to you - but they would want rent commensurate with their understanding of the house's value, so you might find that your new rental payment becomes higher than your old mortgage payment, albeit with you sitting on a tidy profit from the equity you built since purchase.

Basically this is one of the fundamental reasons people encourage you to not think of your house as an 'investment'; because you can't really access the value of it without throwing your life into disarray - a house is not at all liquid!

Outside of this most direct method, there are a couple of other hypothetical ideas you could pursue, but they aren't really practical and are certainly not low-risk. You could take out a line of credit against your house, for example, borrowing funds to invest them - and since you think the housing market will collapse, you could use those funds to do something like buy put options aligned with the real estate market. You could also get a 'reverse mortgage', which is kind of like pre-selling your home at a set price, when you are near retirement, but that comes with a whole host of complications.

  • A line of credit doesn’t really do anything in this scenario. A reverse mortgage would, but I’m not exactly near retirement Commented Jul 5, 2022 at 12:37
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    @DidIReallyWriteThat The theoretical aim of taking this moment to get a secured loan is that you would be able to get a higher valuation for purpose of securitization; if you waited 2 years to do this and a crash happened in the interim, then a lower home value would reduce the amount of HELOC possible to borrow. Of course, that highlights that this is a higher risk maneuver; it is not something I am actually recommending you do. Commented Jul 5, 2022 at 13:47
  • But it doesn’t actually benefit if the price falls, so it’s kind of the opposite of what I’m asking. It’s a good thing to do with current prices if needed, but not really useful. Outside of selling, is there another way? Commented Jul 5, 2022 at 16:30
  • @DidIReallyWriteThat The benefit for when the price falls is that you could in theory invest in things negatively correlated with the housing market - like buying put options on relevant companies. Again, this would be high risk, it is not actually something I am recommending, just something that might be possible. Not sure what you're looking for here - you want to make money if the housing market falls, keep your house either way, and not lose money if the housing market rises. What type of investment are you imagining? What person would just happily pay you money to not benefit themselves? Commented Jul 5, 2022 at 17:30

Don't forget that if you opt to sell your home (or were able to find such an instrument as you asked about) then you'll be subject to capital gains on the appreciation in value since you bought it. To me, that's not much different than seeing a 20% drop in your home's value (a difference without distinction), which isn't going to happen. Unless you REALLY BELIEVE your home is going to depreciate by more than 20%, your best bet is to simply sit tight and ride things out. IMHO, I don't think we're going to see a drop in home values overall on a national level, although it's certainly a possibility in some of the more overheated markets where it needs to happen. If anything we'll see a substantial slowdown in home value appreciation, because the reality is, the runup over the past several years was an unsustainable pace anyway. That will have an impact on people who've been living off the home equity loans they've been able to take as their homes rose in value, but I don't see much beyond that. Think about it this way - the rise in value of your home is an unrealized gain. If you aren't planning on moving anytime soon, just be okay with the fact that its value will rise and fall over time, but so does the value of ANY investment. Everyone panics as soon as their investments stop producing returns they become accustomed to, but it doesn't make sense to do that. Disciplined investors learn how to ride out the short-term peaks and valleys. You bought your home to live in, so live in it and relax. Any other alternative is either going to give you a rent bill, a tax bill, or a bigger mortgage payment, none of which make sense. You're still up more than 100%. What's to worry about?

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    Capital gains taxes are likely to be approximately zero given the numbers in the post, so describing it as a equivalent to a 20% drop in value is overblown. irs.gov/taxtopics/tc701 Commented Jul 5, 2022 at 12:15

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