Traders Bet That Home Prices Will Fall 10%

by Steve Crossland, REALTOR in Austin TX on October 4, 2007 · 4 comments

This is interesting. Traders can now bet on future housing index prices. I’m glad Austin isn’t on this list below of the 10 metro areas expected to see falling prices. And I’m not sure how much traders can be trusted to accurately predict the real estate market, but I found the article interesting nonetheless.

Traders are betting that home prices in 10 major cities will drop by 10 percent between mid-2007 and November 2011, according to an analysis of housing futures traded on the Chicago Mercantile Exchange.

The contracts have been trading since May 2006, but last month were modified so that traders could bet on prices as long as 60 months into the future. The trading, which has been fairly light so far, is based on expected movements in the S&P/Case-Shiller house price indexes.

Here are the expected four-year changes in average home prices for selected metro areas, based on the futures contracts:

All 10 metro areas: -10.2 percent
Chicago: -6.6
New York: -12.1
Washington, D.C.: -13.3
Boston: -13.8
Denver: -14.4
Los Angeles: -15.0
Las Vegas: -18.1
San Diego: -18.6
San Francisco: -25.9
Miami: -27.9
Source: The Wall Street Journal, James R. Hagerty (10/04/2007)

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