CME Futures Contracts – Weekly Update

Below are closing prices for CME Futures contracts as of Friday September 7.  Longer duration contracts for only two markets – Chicago and Las Vegas – have traded so far.  Investors continue to take a very pessimistic view of these markets, expecting all to decline by the August 2008 expirations.

The worst is a 10% decline expected in Miami.  This is pretty dramatic when you think about it.  The median home price for the Miami market published by NAR for the 2nd quarter was $384,400. Most home buyers put down 20% or less to purchase a home.  A decline of 10% would wipe out about $38,000 in equity.  If you did an 80/10/10 mortgage program, all of your equity would be gone within 12 months and, with closing costs, you would be upside down on your financing.

 The only way for home buyers to protect themselves would be to buy at a very deep discount to the current market price. And of course that kind of mindset, if held widely, would only add downward pressure on prices.

Implied Prices Table 9-7-07

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