Property futures?

Discussion in 'Economics' started by just21, Jun 10, 2008.

  1. just21


    I didn't see any volume for the CME miami market. Are there any internet betting exchanges with a property futures market? Particuarly interested in Florida, Miami and Cape Coral. thx
  2. It appears the August-08 has open interest of ~40 contracts and the November-08 has open interest of ~12 contracts. You're better off not trading them at all. The open interest may not roll forward and that should be THE END of those contracts. You could get raped badly getting into and out of a position because of the illiquidity. Look for REIT's that have a lot of Florida exposure instead.
  3. just21


    Any us betting exchanges have real estate contracts?
  4. There is a credible argument that housing futures are a scam. For example, if you look at a given market sometime in the future (hence, futures) it's already marked below current prices. So if you short that future, you're not betting that it will go down from today's prices; you're betting that it will go down more then what it is already expected to go down according to the futures market.

    So if you look one year out and the futures are trading 12% below today's prices, and you go short, and when we get there a year from now find out prices are down 9% from today's prices, you missed by 3% and you pay.

    And the data comes out suddenly and everything gets marked to market at once, so it's not like a trend will be indicating that you're getting pushed out as would happen in oil, ES, etc.

    And this Schiller guy gets a comission on every trade. He was on CNBC last year telling people they could buy puts on their real property holdings. CNBC was diligent enough to have someone argue the other side of the trade and the above is what that person argued.

    The market for these futures does not seem very liquid; that's why I stayed out of it when I first found them.
  5. just21


    If you go long when the futures are at a large discount and the cash market goes sideways you make a profit. If you had bought property you would be down the six percent brokers fee.

    Traders predict house prices will fall by 50% in four years

    · Investments based on property 'fall off a cliff'
    · Job losses hit estate agents and mortgage firms

    * Phillip Inman
    * The Guardian,
    * Monday June 9 2008
    * Article history

    The slide in house prices will continue for at least three years and crush the value of a home by almost 50% in real terms, according to a key index of property price futures. Indications from futures trading on long term property prices shows that the average UK home will recover its current value only in 2017.

    By the end of this year prices will be down by 10% and by a further 10.5% in 2009, according to the index. Prices will keep dropping through 2010 and cut values by 23.5% when they hit rock bottom in 2011. House prices will then begin a slow climb back to current market values over a period of about six years.

    If an average retail price inflation rate of 4% is included in the calculation and in addition the 8% drop in prices over the last eight months already registered by the Halifax index, the fall in values over almost four years will reach 47.5% in real terms.

    The Liberal Democrat Treasury spokesman, Lord Oakeshott, said the figures revealed that property investors had little confidence in the market and were predicting steep and prolonged falls in prices.

    "This government says this housing depression will be different from the early 1990s. Yes, that's right. It will be worse."

    When not attacking government policy in the Lords, Oakeshott invests in property on behalf of pension funds through his investment vehicle Olim. He says he has watched the index steadily fall over recent weeks. On Friday it "fell off a cliff" after the Halifax published its latest house price survey.

    Halifax said the value of a home fell by 2.4% in May, the seventh month in the past eight when prices have fallen.

    The May figure spooked investors, who said prices were now falling more rapidly than at any time since the early 90s property crash. House buyers benefited from low prices until 1995 when values began to pick up.

    Last week an economic consultancy, the Centre for Economics and Business Research, predicted that in 2008 almost 15,000 estate agents would lose their jobs. It said real estate output will also decline during the year by 3% in real terms, as the drop in mortgage approvals and housing transactions take its toll.

    The slide is also hitting mortgage brokers, illustrated by John Charcol, which last week announced job cuts and made Katie Tucker, product specialist and one of the public faces of the broker, redundant.

    The firm's chief executive, Ian Kennedy, is also reported to be in discussion with chairman John Garfield - one of the founders of the business - about his future. In January, the broker announced it was putting itself up for sale. But no buyer turned up and instead its founders were expected to inject more funds into the business.

    The residential property futures market is based on the Halifax monthly house price index, published by the bank. It is an-over-the-counter market designed for banks, pension funds, insurance companies and housebuilders to trade on the future values of property. Tradition Property, a City-based property broker, operates a derivatives futures index based on the Halifax figures.