Hedging Against a Real Estate Market Downturn


Keith Mestrich, president and CEO of Amalgamated Bank, believes that people should not have to worry about a real estate market collapse when they decide to stop renting and buy a home.  Therefore, his bank offers down payment insurance for homebuyers that want to hedge themselves against a market downturn.  Mestrich claims that if home price drop after someone with down payment insurance purchases  a new home, they will at least receive a portion of their down payment back.

According to the article, Amalgamated bank’s insurance plan is available at no cost in the bank’s First-Time Homebuyer +Plus program, covering down payments of up to 5 percent of the home’s purchase cost.  I suppose non first-time homebuyers will have to pay a premium based on how much coverage they want.

Just like any other investment, this is a gamble.  If you elect the coverage and the market value of your home never dips below the initial purchase price, your money obviously stays with the bank.  It’s kind of like shorting a stock, as you’re betting on the real estate market to go down.

I see this is being a good thing for two reasons.

  1.  It might make it easier for people thinking about buying a home to pull the trigger.
  2.  Homeowners may go ahead and decide to sell their home even if the market is down.

Please feel free to contact us with any questions or requests you may have.  You can submit your inquiries to us directly from our contact page, or you can email us at gilbertbocarealtors@gmail.com and call us at 001-561-445-1846.


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