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 2009 and 2010 with the composite index declining 12.8 percent by September 2010.

The most dramatic declines are expected in Miami with a fall of more than 23 percent and in San Francisco with a decline of more than 16 percent by 2010. Markets falling the least are Chicago, down just an additional 5.9 percent, and San Diego down 9.4 percent by September 2010.

As always, remember that these contracts are new and thinly traded relative to well-established foreign exchange or commodities contracts, and that means they are reflective of the collective wisdom of fewer investors.

This limited 10-city composite is also heavily weighted toward the same major metro markets that experienced the biggest run-ups. Smaller and less frothy markets are likely to have milder corrections.

Stephen Bedikian is a partner at Real IQ, which provides consulting and housing market analysis. He can be reached by phone at: (310) 871-3737 or by e-mail: Or contact him via his blog at

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription