Back to the Futures: Investors See Four Years’ Worth of Housing Slump

Something I’ve been meaning to blog about for a few weeks now is the surprisingly unheralded arrival of extended listings to the CME housing futures — a reader from TFS Derivatives Corp. has been keeping me in the loop with relevant housing metrics and allowed me to share their weekly housing report with HW readers.

Here are some graphs you’d need to see to believe:

If you want to read the full report, I’ve provided it here with permission.

From the Housing Derivatives blog, a bit of background:

… the CME will list four - five years of housing futures and options trading. On Monday September 17th, investors will be to trade housing contracts that settle in 2009, 2010 and 2011. These CME housing contracts settle against the S&P/Case-Shiller Home Price Indexes.

These contracts will allow investors for the first time to express views on the US housing market using fungible, centrally-cleared contracts for several years forward. This transparency and visibility will create a dynamic, focused trading point for taking positions in US housing …

The simple fact that five year housing price curves are now going to be visible, accessible and tradable will alter the discussion of housing price direction forever. At some point when the discussion of these transparent housing markets becomes mainstream in the capital markets and publised in the business pages of newspapers, the housing forward prices may influence the buying and selling behavior in the spot housing market — the tail wagging the dog.

Investor sentiment on housing here is telling relative to the news today — hat tip here to Calculated Risk — from Moody’s Economy.com that says the think-tank expects to see 7.7 percent drop in housing prices nationally.