While the focus for those looking at home price numbers might be next Tuesday expected strong results in the Case Shiller indices, here’s a table that gives a sense of how much more in home prices might already be priced into the CME futures.
The table to the right shows the current spot index for each of the 11 traded contracts, the CME Nov ’13 (X13) markets, and the percent that each of the bid, mid and ask is above current spot levels. Referring to the mid, markets have already priced in further gains of ~8-14% over the next five months. As with most Case Shiller observations, SFR prices reflect the greatest further appreciation while NYM is the laggard.
While one’s reliance on mid-market observations is subject to the size of bid/ask spread in the Nov ’13 markets (shown in yellow), even the bid sides of the CHI, LAX and SFR Nov ’13 markets are consistent with gains of >10% by November.
Traders can express views on their expectations for gains on either side of the outright Nov ’13 markets, or the Aug/Nov calendar spreads (not shown). The limited trading in July has mostly focused on these calendar spreads with trades occurring in DEN, SDG and WDC contracts.
As always if anyone has any questions on the topics raised in this blog or any other issue related to housing derivatives, please feel free to contact me (firstname.lastname@example.org)