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The CSW indexes are widely recognized as the most authoritative Home Price Indexes for tracking home price trends, and are used by some of the country’s largest lenders for loan originations as well as various types of mortgage analysis. MSR owns the exclusive rights to develop financial products based on the CSW Indexes.
As the largest domestic asset class, U.S. single family homes represent a $22.3 trillion market, according to the US Census Bureau and the Mortgage Bankers Association’s Mortgage Finance Forecast. Given all of the participants in the U.S. housing sector, including insurance companies, pension funds, hedge funds, homebuyers, mortgage banks and insurers as well as developers, construction suppliers and homeowners, this type of product could appeal to a large number of potential market users.
“Given the volatility in home prices, which have advanced more significantly in the past 12 months than they have in the last ten years, we believe our timing is particularly relevant to fulfill the need to provide risk management tools for this market,” said Rick Redding, CME Managing Director, Products & Services. “Innovation has been a key to our history and exploring the potential development of a CSW housing price index fits into our ongoing business strategy.”
Sam Masucci, COO of MSR said “We are looking forward to working with the CME on these financial innovations in residential home prices. Individuals and institutions alike will benefit greatly from products that will offer better risk management and add liquidity to the largest illiquid asset class in the world, housing."
CSW’s Senior Vice President Terry Loebs added "Since the founding of CSW, Inc. well over a decade ago, our organization has consistently strived to produce the most credible home price information. Along with institutional investors and risk managers, we have been anxious to play a role in facilitating capital flows between stakeholders in this huge asset class.”
Robert Shiller, Chief Economist of MSR, Stanley B. Resor Professor of Economics at Yale and author of the New York Times best seller Irrational Exuberance, which correctly predicted the bursting of the Stock Market Bubble of 2000 adds “Creating futures and options markets for owner-occupied homes will be a truly historic breakthrough, since our homes are a major asset class for which there has never been a liquid market. The gains in economic efficiency from hedging real estate risks will benefit all households, industrial and service firms and financial entities. The price discovery that will come from new liquid real estate markets will dramatically improve the allocation of resources and lead to a more stable and efficient economy.”
Chicago Mercantile Exchange Inc. (www.cme.com) is the largest futures exchange in the United States. As an international marketplace, CME brings together buyers and sellers on its trading floors and CME Globex® electronic trading platform. CME offers futures and options on futures primarily in four product areas: interest rates, stock indexes, foreign exchange and commodities. The exchange moved approximately $1.5 billion per day in settlement payments in the first nine months of 2004 and managed $39.8 billion in collateral deposits as of September 30, 2004. CME is a wholly owned subsidiary of Chicago Mercantile Exchange Holdings Inc. (NYSE: CME), which is part of the Russell 1000® Index.
Macro Securities Research, LLC is a boutique financial firm focused on the creation of global product and market innovations in risk management. For more information on MSR, visit their website at www.macromarkets.com.
