Economists were provided with a new tool to assess the cooling US housing market yesterday with the launch by the Chicago Mercantile Exchange (CME) of futures and options tied to changes in residential real estate prices.
The prolonged boom in house prices, alongside the rise of more complex mortgage products, has raised concerns about the severity of an emerging slowdown and its impact on spending.
The CME hopes to attract institutional clients such as builders and mortgage investors seeking to manage their exposure to an asset class that grew to $21.6 billion (€18 billion) last year, larger than the US equity market and approaching the scale of outstanding corporate bonds.
The importance of the housing market's fortunes saw Ben Bernanke, chairman of the Federal Reserve, weigh into the debate for the first time last week. He said recent data suggested a very moderate cooling, providing reassurance to homeowners and reflecting recent comments from housebuilders, who expect a soft landing similar to the corrections seen in 1994-95 and 2001.
"There is plenty of evidence that the US housing market is starting to flag," said Nigel Gault, director of US research at Global Insight, an economic consultancy.
Mr Bernanke noted last week that new home prices had started to moderate, while the latest official data showed an 11.1 per cent drop in housing starts in the year to April. New permits fell 8 per cent, though both measures displayed large regional differences.
The key spring selling season has also seen a rise from four months to five-and-a-half months over the past year in the time it would take to sell the stock of existing homes.
