Mark77 wrote: ↑Dec 13th, 2013 3:41 pmIt matters to the owner of the house that's going to lend it out. The short seller has to put the collateral up in exchange for borrowing the house.
Because I'd have to cough up the collateral if they want it. That could get expensive. The net effect of the whole thing is that a significant amount of money ends up being parked in risk-free collateral. Contrast this with futures where the performance bonds can be quite minimal, 5-10% of the notional value. Instead of 103%.
If you could actually create it then I might participate in it. As I, and other participants have pointed out, creating such is quite problematic in the form you suggest. The fact it is has been one (of many) contributing factors to keeping house prices high.
I just illustrated to you. Most brokerages require 50% collateral for short selling. I would presume real estate is more or less the same.
So on a 500K home, you would have to put up 250K collateral.
If you are right and real estate crash 50% in 3 years,
Well you would net 216K minus fees...lets say an even $150K (just to be safe)
250K investment turned you $400K
60% return in 3 years.
How is that a bad investment?