Housing Futures Market Expects New York to Decline by 10%
Started by alpine292
over 17 years ago
Posts: 2771
Member since: Jun 2008
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New York Expected housing price change by Aug. 9, 2009 -10.7% http://images.businessweek.com/ss/08/06/0626_housing_markets/8.htm A Slightly Better Outlook Here's a small glimmer of hope on the housing front: Futures traders are betting that home prices in San Francisco will start soaring again by next year—as much as 10.8% by August 2009. Of course, in this market everything is relative. Any... [more]
New York
Expected housing price change by Aug. 9, 2009
-10.7%
http://images.businessweek.com/ss/08/06/0626_housing_markets/8.htm
A Slightly Better Outlook
Here's a small glimmer of hope on the housing front: Futures traders are betting that home prices in San Francisco will start soaring again by next year—as much as 10.8% by August 2009. Of course, in this market everything is relative. Any increase would follow a 22.9% drop in San Francisco home prices over the past 12 months, according to the S&P/Case-Shiller Home Prices Index released July 29. The projected increase might have to do with the resilience that some high-tech companies in the area are demonstrating. However, other real estate markets apparently still have some catching up to do: The futures markets expect New York home prices to fall as much as 10.7% by next August, after falling by 7.9% in the last 12 months. Traders also see prices climbing in Washington, D.C., and Chicago.
The following slides show what traders, betting on housing futures on the Chicago Mercantile Exchange, expect for the 10 largest metropolitan markets. To get the numbers, we start with the S&P/Case-Shiller index of current home prices. This index was developed by professors Robert Shiller and Karl Case in conjunction with Standard & Poor's, which, like BusinessWeek, is part of The McGraw-Hill Companies (MHP). The index for each market is based on the change in price for homes that have sold at least twice. In its latest report, the S&P/Case-Shiller index showed that prices in U.S. metropolitan cities overall declined 16.9% in the 12 months through May 2008.
The Chicago Merc allows investors to trade futures contracts based on the indexes. The following numbers are based on traders' bets on how much housing prices in the 10 markets will fall or rise by Aug. 9, 2009. Of course, investors' predictions about these markets are not guaranteed to be accurate. But they do provide insights into what people with skin in the game think lies ahead.
http://images.businessweek.com/ss/08/06/0626_housing_markets/index.htm[less]
Response by 80sMan
over 17 years ago
Posts: 633
Member since: Jun 2008
These futures are uncorrelated to the housing market for reasons I have already given. Besides, the scant volume on these contracts means no price discovery so the data isn't very helpful. Nail in the coffin is: what percentage of the total notional value of the housing market do you think is represented by housing futures? Each contract is $250 x Case/Shiller. Total open interest is about 450 contracts... about $17MM in bets. That about covers a townhouse and a half in Manhattan.
While we're on the subject, the same principle applies to actual (physical) housing. Low volume. Prices are up. Sez the papers. Yawn. Show me where prices are when volume heats up. Then we'll know where the market really is.
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Response by ritchi
over 17 years ago
Posts: 61
Member since: Aug 2008
Wow, this is less meaningful than the daily swings on a pink sheets stock which is ruled by morons who spend their buying 500 shares and insulting anyone opposite to their position.
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Response by will
over 17 years ago
Posts: 480
Member since: Dec 2007
I think the Business Week article from last year was even more pessimistic. Also, it is based on NYC, which would include areas in Staten Island and the Bronx that have come down a bit. They tend to never separate out Manhattan. Which yeah, is different.
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Response by zizizi
over 17 years ago
Posts: 371
Member since: Apr 2007
80sMan -- look at what's going on in the OTC contracts, those cover quite a bit more notional than the C/S futures...
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Response by dco
over 17 years ago
Posts: 1319
Member since: Mar 2008
I actually think that this is a meaningless indicator. And most know my views on NTC RE and Economy.
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Response by julia
over 17 years ago
Posts: 2841
Member since: Feb 2007
the market is up 300% so what does a 10% reduction mean. On a $700k one bedroom that's only $70k. Not much help for me...
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Response by dco
over 17 years ago
Posts: 1319
Member since: Mar 2008
julia "the market is up 300% so what does a 10% reduction mean. On a $700k one bedroom that's only $70k. Not much help for me..."
That's a poor attitude. Is that what you tell you clients. it's only $70K. Great sales pitch. I would fire you on the spot.
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Response by EddieWilson
over 17 years ago
Posts: 1112
Member since: Feb 2008
> the market is up 300% so what does a 10% reduction mean. On a $700k one bedroom
> that's only $70k. Not much help for me...
Thats the projected future drop, its already noting 7.9% decline to date, thats almost 19%.... which would be more like $130k if Manhattan follows the metro trend.
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Response by EddieWilson
over 17 years ago
Posts: 1112
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> That's a poor attitude. Is that what you tell you clients. it's only $70K.
> Great sales pitch. I would fire you on the spot.
With 10 to 1 leverage, its your ENTIRE INVESTMENT.
Some people just don't get it...
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Response by 80sMan
over 17 years ago
Posts: 633
Member since: Jun 2008
I think Julia is saying that she can't afford a $630K 1BR any more than a $700K 1BR. Where would that $700K price have to go for you to pick up a 1BR Julia?
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Response by julia
over 17 years ago
Posts: 2841
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80sMan...I stopped looking and signed a one bedroom rental. I could afford $630k but it depends on the condition of the apart....$50k in renovations, etc.....ouch!
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Response by alpine292
over 17 years ago
Posts: 2771
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julia,
That is why I recommend that, if you buy a fixer, do the work GRADUALLY. Unless you have a mountain of cash, NEVER do all the work at once. Do the unit over the course of several years, and it will be much more affordable for you since you will be able to save money rather than dump it all into a renovation.
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Response by bugelrex
over 17 years ago
Posts: 499
Member since: Apr 2007
For Europeans and Brits holding manhattan RE have already lost 6 pct the last 2 wks!!
These futures are uncorrelated to the housing market for reasons I have already given. Besides, the scant volume on these contracts means no price discovery so the data isn't very helpful. Nail in the coffin is: what percentage of the total notional value of the housing market do you think is represented by housing futures? Each contract is $250 x Case/Shiller. Total open interest is about 450 contracts... about $17MM in bets. That about covers a townhouse and a half in Manhattan.
While we're on the subject, the same principle applies to actual (physical) housing. Low volume. Prices are up. Sez the papers. Yawn. Show me where prices are when volume heats up. Then we'll know where the market really is.
Wow, this is less meaningful than the daily swings on a pink sheets stock which is ruled by morons who spend their buying 500 shares and insulting anyone opposite to their position.
I think the Business Week article from last year was even more pessimistic. Also, it is based on NYC, which would include areas in Staten Island and the Bronx that have come down a bit. They tend to never separate out Manhattan. Which yeah, is different.
80sMan -- look at what's going on in the OTC contracts, those cover quite a bit more notional than the C/S futures...
I actually think that this is a meaningless indicator. And most know my views on NTC RE and Economy.
the market is up 300% so what does a 10% reduction mean. On a $700k one bedroom that's only $70k. Not much help for me...
julia "the market is up 300% so what does a 10% reduction mean. On a $700k one bedroom that's only $70k. Not much help for me..."
That's a poor attitude. Is that what you tell you clients. it's only $70K. Great sales pitch. I would fire you on the spot.
> the market is up 300% so what does a 10% reduction mean. On a $700k one bedroom
> that's only $70k. Not much help for me...
Thats the projected future drop, its already noting 7.9% decline to date, thats almost 19%.... which would be more like $130k if Manhattan follows the metro trend.
> That's a poor attitude. Is that what you tell you clients. it's only $70K.
> Great sales pitch. I would fire you on the spot.
With 10 to 1 leverage, its your ENTIRE INVESTMENT.
Some people just don't get it...
I think Julia is saying that she can't afford a $630K 1BR any more than a $700K 1BR. Where would that $700K price have to go for you to pick up a 1BR Julia?
80sMan...I stopped looking and signed a one bedroom rental. I could afford $630k but it depends on the condition of the apart....$50k in renovations, etc.....ouch!
julia,
That is why I recommend that, if you buy a fixer, do the work GRADUALLY. Unless you have a mountain of cash, NEVER do all the work at once. Do the unit over the course of several years, and it will be much more affordable for you since you will be able to save money rather than dump it all into a renovation.
For Europeans and Brits holding manhattan RE have already lost 6 pct the last 2 wks!!
yawn.