Economist & Traders Square Off on Housing

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Where Housing Prices Will Fall the Most [Business Week]

Summary: Moody’s Economy.com’s chief economist and Chicago Mercantile Exchange [CME] traders have different opinions about which housing markets will suffer the steepest declines. Based on intensive research on housing supply/demand, new housing constructions, the job market, and mortgage rates, Moody’s Mark Zandi predicts that house prices will decline in 2007 for the first time since the Great Depression. Of the 379 markets he analyzed, Zandi predicts that Cape Coral [FL], Reno [NV] and Stockton [CA] will be hit the worst. In contrast to Zandi’s extensive research, CME traders are using their well honed trading skills for their predictions. A few months ago they actually started trading futures and options contracts on ten U.S. housing markets. Their “composite index” expects housing to fall by 6.8%, with declines in the San Diego [CA], Las Vegas [NV], Los Angeles [CA], Washington [DC], Boston [MA] and New York [NY] markets.
Related links: Soft Housing Market, Falling Commodities Prices Are Lowering Developer Costs • Housing Stocks' Recent Runup -- Sustainable? • Mortgage Buyers Finding More Bad Loans • Don't Believe Advocates of a Soft-Landing for Housing • Moody's Forecasts 3.6% Median House Price Decline in 2007 • BusinessWeek: Slideshow of 10 Housing Markets Headed For Decline
Potentially impacted stocks and ETFs: ETF: iShares Dow Jones US Real Estate (IYR)

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