Stock Market and Home Price Expectations -Update

I want to update one key graph from Jan 22 blog and Jan recap that shows the movement in the closes of the stock market vs. the market in forward home prices, and one key “chord” graph to show changes to the forward housing price markets over the last few months.

I’ve formatted the first graph (below) such that the vertical axes are proportional.  There have been monstrous moves in the stock market (and this graph doesn’t pick up intra-day swings) and yet only a small reaction to CUSX16 (10-city index futures for Nov 2016).

While the CUSX16 contract has been my benchmark for the last year, I concede that stock market moves might have a longer-term, delayed impact, and so I’ll start switching to Nov ’17 for illustrations going forward.

SP500 v CUSX16

The second set ofNew Picture (2) graphs shows how forward curves have shifted lower over the last six months.  This also makes sense is that any wealth effect from lower stock market prices is touted as having a delayed impact on home purchase decisions.

While there’s been a few trades early this month (+/- 50 points in the S&P is great for changing expectations), I suspect that there may still be some large price adjustments ahead (possibly in shape of forward curve).

Please feel free to contact me (johnhdolan@homepricefutures.com)  if you’d care to discuss these graphs or any aspect of home price hedging.