OFHEO Releases Real Estate Futures Paper

The Office of Federal Housing Enterprise Oversight (OFHEO) announced the release of Working Paper 08-01 entitled "Real Estate Futures Prices as Predictors of Price Trends". This release addresses the following issues:

"To gauge market 'expectations,' real estate industry observers have increasingly referenced the Chicago Mercantile Exchange's nascent real estate futures market. This paper tests whether prices on that exchange have proved to be unbiased predictors of real estate prices. Empirical evidence suggests that prices for more distant contracts (futures contracts that expire in six months or more) have tended to predict larger home price declines than ultimately occurred. Prices for contracts that were closer to expiration, by contrast, were less susceptible to such bias."

OFHEO Working Papers are preliminary products circulated to stimulate discussion and critical comment. The analysis and conclusions are those of the authors and do not imply concurrence by other staff at the Office of Federal Housing Enterprise Oversight or its Director. Single copies of the paper will be provided upon request. References to OFHEO Working Papers (other than an acknowledgment by a writer that he or she has had access to such working paper) should be cleared with the author to protect the tentative character of these papers.

The Office of Federal Housing Enterprise Oversight (OFHEO) was established as an independent entity within the Department of Housing and Urban Development by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.). The Office is headed by a Director appointed by the President for a five-year term. James B. Lockhart III was nominated by President George W. Bush to become the Director of OFHEO, and was confirmed by the U.S. Senate on June 15, 2006. OFHEO's mission is to promote housing and a strong national housing finance system by ensuring the safety and soundness of Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). OFHEO works to ensure the capital adequacy and financial safety and soundness of two housing government-sponsored enterprises (GSEs) -- Fannie Mae and Freddie Mac. OFHEO is funded through assessments of Fannie Mae and Freddie Mac. OFHEO's operations represent no direct cost to the taxpayer.

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