The outlook for house prices is getting even gloomier as traders on the Chicago Mercantile Exchange bet on steep price declines and the number of homes for sale grows, the Wall Street Journal reports.

Traders on the CME expect home prices in 10 major cities to drop an average of about 10% from mid-2007 to November 2011, according to an analysis by Tradition Financial Services Inc., New York, of prices for housing futures traded on the exchange.

The contracts have been trading since May 2006 but last month were adapted so that traders could bet on prices as long as 60 months into the future. The trading is based on expected movements in the S & P;/Case-Shiller house price indexes.

Trading is very light so far — about 20 contracts a day, a CME spokeswoman says. That means the contract values provide only a rough idea of the expectations of speculators and people hedging against house-price risks, says Anthony B. Sanders, a professor of finance at Arizona State University. But Dr. Sanders says the contracts are a useful signal, and he expects house prices generally to fall in the next couple of years.

“There are too many houses coming onto the market [in many areas], and the demand is just not there at current price levels,” he says.

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