Barclays Capital has structured an investment which pays out if housing prices fall. The two-year notes are linked to the Philadelphia Stock Exchange Housing Sector Index, and investors receive 115% return on capital if after two years the index is below its starting level. If at maturity the index is equal to or above the starting level, investors' capital is returned.
Such investments, structured by combining options on the index with zero-coupon bonds, have become common in Europe. While several property growth notes have also been sold in the U.S., a bear note is rare. An official familiar with the deal said it came about following a request from a distributor.