This week Standard & Poor's released its S&P/Case-Shiller U.S. National Home Price Index for November 2007 and all 20 markets tracked by the index showed price declines from the previous month. Investors see more of the same ahead with declines expected through 2010. Investor expectations are reflected in housing-price futures and options traded on the Chicago Mercantile Exchange, which are based on a 10-market subset of the S&P/Case-Shiller U.S. National Home Price Indices. Expectations of future price changes are implied by the percentage difference in the index value for the relevant market (most recently published on Jan. 29, 2008, for the November 2007 period) and the current price of traded futures contracts expiring on future dates. Investors are predicting a decline in the 10-city composite index of 7.5 percent by September 2008 (the futures contract expiring in November 2008 settles based on that period). They are betting the downturn will continue to worsen in...
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