Real estate and home prices have risen strongly in almost all regions over the past decade. This is as a result of a combination of fortuitous reasons, and may continue for several more years. But then again, it may not. Your home is your most valuable asset. Your, and your family's, financial well-being is intrinsically tied to the value of your home. If house prices were to drop, how would that affect your long term financial position ?

In many cases, a drop in the value of your main asset would mean either an impecunious retirement (ie. not enough money) or that you cannot leave a nest egg for your children. So the need for a method of ensuring the value of your home, is obvious and overwhelming. Solutions do exist. For example in Syracuse, New York, where a specific problem existed, the Home Value Protection Scheme was inaugrated, and has protected local property values.

Sophisticated hedging techniques do exist and financial firms on Wall Street and in the City of London have developed complicated hedging mechanisms, based on indices of property prices relating to specific areas, enabling companies to offset the risk of rising and falling prices. But these are neither available to, nor suitable for, the average person.

Whilst it has been determined that the Syracuse Scheme is not technically an insurance product, Lloyds of London have long been known for their insurance products, and for being willing to insure all sorts of risks. In the UK private home owners who want to protect the value of their properties against fluctuating property values have been able to do so at www.livepropertyservices.com

Apparently, it is now available in the US as well. It is achieved by means of a put option agreement, whereby in return for a one time premium payment, the homeowner is granted the right, but not the obligation, to have their home purchased at an agreed value. Thus if, for example, your home is currently worth $300,000, and you do not want to sell it, but are concerned that it may drop in value, you take out an option. That gives you the peace of mind of knowing that for the next 10 years, should you want to sell your home for whatever reason, you will receive at least $300,000, even if prices of similar homes drop to $250,000. Of course, should prices continue to rise and when you sell, it is worth $400,000, the option would expire worthless.

But what price do you place on peace of mind ?

Alan G Thomas is a property professional involved in commercial real estate in the North East.