Measuring the Housing Market

The proliferation of Exchange Traded Funds (ETF's) over the past 3 years has resulted in ways to measure the health of the industry that the ETF represents.

A new ETF will become available in September is a creation of RadarLogic and will track owner-occupied housing in 25 MSA's nationwide. There are indexes that do this now, however what makes the index (RPX) unique is that it will be updated daily and will be based on the price per square foot.

The data will come from public sources. A beta version is available at www.radarlogic.com. Morgan Stanley, Merrill Lynch, and Lehman Brothers will begin offering this to their instutional clients.

Why trade this ETF? If a homeowner wants to hedge against falling real estate prices, they could short the index (or buy puts if they are option traders). If an investor believes the market has bottomed and wants to get in, then they can buy the index rather than buy a rental house. The liquidity of buying the index, which will probably be marginable, is an excellent proxy for being in the real estate rental business.