The CBOE Futures Exchange, a subsidiary of the Chicago Board Options Exchange Inc., plans to launch futures contracts based upon National Association of Realtors data on median existing-home prices.

Through a licensing agreement with the Realtor trade group, CFE has created five new futures contracts designed to track the median price of existing-home sales nationally and in four distinct regions within the United States, according to a NAR announcement. CFE plans to launch the new contracts in the second quarter of 2006, pending regulatory approval.

“With the U.S. housing market valued at nearly $20 trillion, real estate is not only the hottest topic of conversation, it is an asset class unto itself that is arguably one of the most important segments of the U.S. economy,” said CBOE Chairman and CEO William J. Brodsky, in a statement. “CBOE gave careful consideration to the development of this contract to ensure that it had practical application for hedging as well as speculating, offering a chance to participate in the real estate market to a wide range of investors – whether your outlook is regional or national, bullish or bearish.”

Thomas M. Stevens, NAR president, said in a statement that the launch of the futures contracts “marks an important milestone in the evolution of housing as an investment. Now investors, including homeowners, real estate professionals and companies in the real estate business, have a new way to participate in the housing market,” he said.

And David Lereah, NAR chief economist, added, “Investors in the new futures contracts can be confident that the monthly series will report what is actually happening in the marketplace as accurately as possible.”

The NAR existing-home sales median price indicators are based on a large representative sample by local Realtor associations, boards and multiple listing services across the nation that captures about 40 percent of all existing-home closing transactions. The association reports this data on a monthly basis.

CFE has created five NAR Existing-Home Sales Median Price futures contracts that track the median sales prices in the United States overall, and in four regions: the Northeast, South, Midwest and West. These contracts will settle monthly. An additional 10 contracts based on various metropolitan area markets will also be launched, according to the announcement, and those contracts will settle quarterly.

Futures quotes will be based on 1/1000th of the respective NAR Regional Existing-Home Sales Median Price levels. For example, as of January 2006, the national median sales price was $211,000, so the futures index level for this contract would be 211.00.

The new contracts will be traded electronically, via CBOEdirect, and will be cleared through Options Clearing Corp. At expiration, the futures contracts will be cash-settled, meaning settlement will result in the delivery of a cash amount based on the final settlement price, determined by the surveys conducted by NAR, the announcement states.

In general, there will be at least two near-term months and two months in the February quarterly cycle for the Regional NAR Existing-Home Sales Median Price futures and two months in the February quarterly cycle for the Metro Area NAR Existing-Home Sales Median Price futures. Price quotations will be in minimum ticks equivalent to $50 per contract. Trading hours will be 8:30 a.m. to 3:15 p.m., Central Time. More details and contract specifications are available online at

Inman News has also reported on other futures markets that relate to real estate., for example, has allowed visitors to speculate on real estate price appreciation, for example.


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