Housing Futures Are New Risk Tool

The CBOE Futures Exchange plans to launch futures contracts based upon median prices in the National Association of Realtors existing home price data.

Through a licensing agreement with the NAR, the Futures Exchange has created five futures contracts designed to track the median price of existing homes nationally and in four regions within the U.S. The Futures Exchange said it 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 Brodsky in a news release.

"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 Stevens, NAR's president, said the launch of the NAR existing home sales median price futures "marks an important milestone in the evolution of housing as an investment."

He said the futures contracts give investors and companies in the real estate business a new way of participating in the housing market. In addition, NAR chief economist David Lereah said the decision to offer futures contracts based on the NAR research demonstrates confidence in the quality of the NAR's data and the significant role that NAR's monthly series on housing prices plays in tracking critical trends in markets.

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