Home Price Indices Futures

Real Estate Issues, Spring 2008 by Tokic, Damir, Tokic, Stijepko

Although CME housing futures have not attracted significant volumes, it is still comforting to know there is a tool that could prevent a sharp drop in housing values and potentially bail out the U.S. economy. In a low probability scenario where panic liquidation of home inventory would crash home values nationally, an "invisible hand" could intervene by buying housing futures, thus preventing housing prices from dropping further-at least temporarily-until a better solution is available.

It is still unclear how such a mechanism would work in reality. Perhaps, a sort of arbitrage opportunity could arise between the price of real houses and housing futures. However, these opportunities would be limited strictly to institutional investors and private equity investors.

BY DAMIR TOKIC, PH.D., AND STIJEPKO TOKIC, J.D.

About the Authors

Stijepko Tokic, J.D., is an LL.M. candidate at the New York University School of Law, specializing in trade regulation issues. He currently serves as a graduate editor on the NYU's Journal of International Law and Politics. Following the completion of his studies at NYU, Mr. Tokic will join Northeastern Illinois University as an assistant professor of business law.

Damir Tokic, Ph.D., is an assistant professor of finance at the University of Houston-Downtown and an active futures trader. He has published articles in the Journal of Trading, the Journal of Investing, the Journal of Asset Management, and others.