Delighted in Denver, if Nowhere Else

Investors hoping for good news on the housing front received the opposite this morning, as housing prices suffered their worst decline in 20 years.

The S&P/Case-Shiller index of single family home prices showed a 3.2 percent decline in the second quarter of 2007, the largest since the index was created in 1987.

But did someone leave a light on in Denver? Bespoke Investment Group issued a subsequent research bulletin that looked forward, not backward, at the expected changes in home prices suggested by CME housing futures that track the regional housing indices.

While it's largely more of the same, with further price declines expected in all major markets in the year ended May 2008—from a 5.6 percent decline in Las Vegas to a 2.6 percent decline in New York—there was a single data point that probably brought a smile to a Coloradan or two.

According to Bespoke, if you're looking for a bottom in prices, you want a forward contract that costs more than the one expiring before it. There's nary a one on the East Coast or the West. In Denver, though, the May 2008 contract is floating miraculously above that expiring in February, three months before.

Great news? Nothing of the sort.

Still, even a single positive data point is better than none.

by Duff McDonald

To download the Bespoke Investment Group report, click here.