A Tale of Two Coasts

The CME has housing futures that track the S&P/Case-Shiller home price indices.  These futures allow big investors to trade or hedge against real estate prices nationwide.  Since last September, the Composite 10-City futures contract that expires in February 2009 has fallen 12.56%, meaning investors have gotten more bearish on the outlook for real estate prices early next year.  There is a big discrepancy between the outlook for Los Angeles and New York, however.  As shown, the February '09 contract for median home prices in Los Angeles has fallen nearly 28% over the last seven months, while the contract for New York has barely budged.

The actual change in home prices from their peaks also shows that the West Coast is struggling much more than the Northeast.  The Composite 10-City index has fallen 13.36% from its peak, while Los Angeles has fallen 18% and New York has fallen 7%.  The current price of the February '09 Composite 10-City contract is forecasting that from current levels, prices will fall by as much as they already have from their peaks.  The contracts for Los Angeles are suggesting another 23.35% decline from current levels, while New York is expected to fall just 5%.

 

Comments

[Lintel]

check out www.housingderivatives.typepad.com they follow the SPCS and CME data closely.

[Lord]

I think a lot of this is the result of a great many corporate headquarters in NY, and hardly any in LA.