Today’s WSJ had an editorial (click here) highlighting how home prices have rebounded slower, over the last few years, in those states requiring a judicial foreclosure process, than those states that don’t (the “non-judicial” states). The Journal cited home price indices from New York and Chicago as examples of the “judicial” states and California as the poster child for “non-judicial” foreclosures.
Let me add two important contributions to their work. First, the divide between judicial and non-judicial states begs the question as to how we got here, and why the legal practices in some states evolved differently that those in others. Andra Ghent has written one of the best academic pieces that covers the history of foreclosures in American and English law. It’s available on SSRN or you can link here
Second, not only is the Journal correct that home 
prices in in the judicial states have been relatively weaker over the last few years, but when one looks at mid-market prices for the Case Shiller (home price index) futures that are traded on the CME, one can see that forward prices are consistent with further under-performance in the CHI and NYM areas (the blue and green lines), relative to LA and San Diego the red and orange lines). I leave it to others to argue whether the historical indices mentioned in the Journal and the current CME prices for contracts expiring between now and Nov. 2015 are picking up other factors (e.g. weather, population trends) but merely highlight a) that the forward price trends mirror those from the past, and b) that if anyone disagrees with the forward prices, that there’s a platform (the CME) for expressing that view.
As market maker, I’m agnostic on where home prices are headed and am just reflecting the market prices (and possible implications). I would caveat any conclusions by noting that trading on this contract is very thin, with small values. That said, the CME platform does seems to be the purest way for one to express a financial view on issues related to debates related to forward home prices. Please get in touch (johnhdolan@homepricefutures.com) if you have any views you’d like to share, or if you’d like to see any inter-city spread quotes, on combinations of these four cities, or any other.