Residential Futures Market Based on NAR Data Set to Expand

The HedgeStreet exchange said today that it has expanded its home value markets to 10 major metropolitan areas. The markets, which HedgeStreet claims it pioneered two years ago, are benchmarked against the National Association of Realtors’ reported Median Sales Price of Existing Single-Family Homes in 10 metropolitan areas. The newest areas represented are Las Vegas, Denver and Washington D.C. They join the Chicago, Los Angeles, Miami, New York, San Diego, San Francisco and Boston markets, all of which have previously traded on HedgeStreet. Russell Andersson, vice president of HedgeStreet, said the housing contracts accurately predicted the relative median home values in each of the seven markets listed on HedgeStreet at the last settlement in November 2006.

As an example, he cited San Diego, where HedgeStreet members’ trading reflected a 89.5 percent likelihood that the NAR value would exceed $595,000, while only a 20.1 percent chance that it would exceed $615,000. The actual NAR-based settlement price was $601,900. HedgeStreet’s futures compete with the S&P/Case-Shiller futures currently traded on the Chicago Mercantile Exchange. The S&P/Case-Shiller futures are based on the Case-Shiller home price index, however, rather than benchmarking option contracts on data provided by the NAR. “HedgeStreet’s markets reflect the collective wisdom of real people and real traders,â€? Andersson said. “The predictive value of these markets will prove to be of benefit to home buyers, sellers, speculators, and real estate brokers and lenders.”

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