What are CME Home Price futures telling us? (And what they are not)

While the monthly release of the S&P Case-Shiller(CS) Home Price indices always results in a tremendous amount of number crunching of what has happened (with a two month delay), there is often little quantitative review of where “the market” says home prices
are going to be over the next three months or even three years. Sure there are talking heads who note that inventory levels are high, housing is more affordable, and the home prices might rise or fall if the GSEs lend (or not), or if modification programs are implemented (or not), but none if this information is pulled together into a collective market view on what “the market” thinks home prices will be. 

Such information –a set of market based forward home prices –might be tremendously useful to investors, model builders, regulators, policy makers, rating agencies, potential home buyers, RMBS traders, lenders, mortgage servicing companies, and entities that guarantee such exposures.

Such information, if traded in a public fashion, would be a much more direct inference on home
price expectations that builder and bank stocks, or losses implied by the level of ABX trading.

I would submit that such a forum m already exists -the CME Home Price futures mmarket. (See
http://www.cmegroup.com/trading/real-estate/index.html for more information.) *