Without going into all the details of how it might work, just play make believe for a moment and consider this.
What if you could buy a home today, and know that if prices were down one year from now, that you'd be covered for a decline of up to 5%.
Let's say you buy a home for $500,000 today, July 17, 2008, and the AVERAGE SOLD PRICE INDEX as measured in your area is $550,000.
And one year from now when the SOLD PRICE INDEX is again computed, it's at $520,000. That's a 5.4% drop.
But instead of taking that entire loss, you now get 5% of your $500,000 purchase price or $25,000 back. And if prices fell just 2%, you'd get 2% back. And if prices went up rather than down, you wouldn't get anything.
Would getting up to 5% back if prices fell, make you more willing to go ahead and buy a home today?
Fear of declining prices is a major source of buyers reluctance to buy a home today. But if this could be worked out - and it's a big if with more than a few hurdles - do you think this type of price protection would get you and other home buyers off the fence.
I know it seems far-fetched, and maybe it is, but I'd like to hear your thoughts on this.
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