Yes, the volume is quite pathetic. But that may change in the future, who knows.
Regarding the CME housing futures, I have a couple of tough questions regarding the index calculation: first, can they take into account rebates (such as help with closing costs)? Based on my personal observations, these average about 2% of purchase prices right now in SD, up from nil the years before. Second, how in the world can they account for improvements? I know they do all sorts of analyses and outlier elimination to weed those out, but I think it’s next to impossible to come up with an accurate picture. Say I buy a $500K house, I put $100K of improvements on it, then sell it for $580K. For the purpose of the index, did the house increase in value by $80K? Did it decrease in value by $20K? Somewhere in between? It’s a hard question; I have no idea what the correct answer would be.
I’m sure they do the best work they can to come up with an index that is as accurate as possible. I’m just not sure that even the best effort could capture all features of the market.
