Robert Shiller has long advocated the use of derivative real estate instruments to manage home equity risk. While his Nobel idea discusses the benefits to homeowners, to date, practical issues of hedging have been largely unexplored. Starting with the 2006 listing of real estate futures...

This paper examines the anatomy of a real estate bubble. In the process, we identify three phases of the market’s evolution: in the first phase, a large percentage of transactions are speculative or “flips” causing prices to rapidly increase; in phase two, flipping loses its profitability;...