Well its the day after the midterm elections and there were quite a few changes in office. The New York Times has a very [cool interactive map](http://www.nytimes.com/ref/elections/2006/House.html) on the election results. I spent the past few evenings getting some of my election coverage information from [John Stewart’s Daily Show “Midterm Midtacular”](http://www.comedycentral.com/shows/the_daily_show/videos/indecision2006/index.jhtml) which was hilarious (and pretty informative) and then I succumbed to [mainstream coverage](http://www.cnn.com/ELECTION/2006/) last night, which was pretty good, actually.

In terms of the housing market, a [Congress without the same party controlling both chambers](http://matrix.millersamuelv2.wpenginepowered.com/?p=940) is probably a good thing for the economy. I explored this a few days ago.

_but I digress…_

The [Federal Reserve recently published a study discussing CME housing futures [pdf]](http://www.federalreserve.gov/pubs/feds/2006/200632/200632pap.pdf) (hat tip to [Housing Derivatives](http://housingderivatives.typepad.com/housing_derivatives/2006/10/federal_reserve.html)) and what futures are telling us about the housing market. [Here’s the synopsis](http://www.realestatejournal.com/buysell/markettrends/20061023-blackstone.html?refresh=on). I have been of the opinion that its probably too early to get any real guidance from the futures until there is more volume. I worry that the investors looking to purchase these futures are already in a higher risk position or are more risk sensitive than the typical consumer (thats not necessarily a bad thing but it probably doesn’t reflect overall market psychology).

> Based on an analysis of housing futures and options and derivatives of housing-related company shares, “market participants expect home prices to decelerate sharply or actually decline a little within the next year,” wrote J. Benson Durham, an economist with the Fed’s monetary affairs division. However, the anticipated drop in prices “is mild compared to some estimates of the purported overvaluation of the housing market,” he added.

>…implied volatility on CME housing options are greater than the historical average, “which suggests that investors see more risks to home prices going forward,” he wrote. That higher uncertainty, however, is “generally inconsistent with the perception of a “bubble,'” he added.

The Federal Reserve doesn’t see a housing bubble, much to the dismay of some. However, their financial policy is what is brought the bubble discussion to the table to begin with.